August 28, 2024 • 1hr 10min

BTC197: What are Bitcoin Fedimints w/ Obi Nwosu and Renata Rodrigues (Bitcoin Podcast)

We Study Billionaires - The Investor’s Podcast Network

In this episode, Preston Pysh interviews Obi Nwosu, CEO and founder of Fedi, and Renata Rodrigues, head of community at Fedi. They discuss how Fedi is working to bring bitcoin payments, messaging, and other features to communities around the world through their "super app" and the Fedimint protocol. The conversation covers the technical aspects of how Fedi works, as well as on-the-ground experiences implementing it in developing countries.

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Key Takeaways

Fedi is a "super app" that combines bitcoin payments, messaging, and other features into one platform designed for communities, especially in developing countries
The Fedimint protocol allows communities to create their own federated custody system for bitcoin, providing an alternative to centralized exchanges or complex self-custody
Stable channels enable users to peg their bitcoin to local currencies, addressing volatility concerns while still using bitcoin under the hood
Fedi is partnering with organizations like Save the Children to enable more efficient distribution of aid funds to communities
The app and protocol leverage existing community trust networks rather than requiring trust in centralized institutions
Fedi is moving towards full open source code to increase transparency and allow community auditing
On-the-ground experience in Africa and other regions has shaped the development of Fedi to meet real user needs

Introduction

In this episode, Preston Pysh interviews Obi Nwosu, CEO and founder of Fedi, and Renata Rodrigues, head of community at Fedi. They discuss how Fedi is working to bring bitcoin payments, messaging, and other features to communities around the world through their "super app" and the Fedimint protocol. The conversation covers the technical aspects of how Fedi works, as well as on-the-ground experiences implementing it in developing countries.

Topics Discussed

What is Fedi and Fedimint? (3:16)

Obi explains that Fedi has evolved into a "community super app" built on bitcoin and other decentralized technologies:

Fedimint is the underlying protocol that enables community custody of bitcoin
The Fedi app combines Fedimint with other technologies like Lightning Network, Matrix for chat, and Nostr for identity
It aims to bring together the best "freedom technologies" into one user-friendly interface
The Fedi Order provides on-the-ground support to help communities adopt and use the technology

Renata adds that Fedi is a new concept that can be difficult to explain, but new users often grasp it quickly once they experience it firsthand.

The Problem Fedi Solves (12:06)

Preston outlines how Fedi addresses key challenges with bitcoin adoption:

Running a bitcoin node and managing channels is too technical for most users
Fedi makes it more accessible by allowing communities to set up a "turnkey bank" for their members
It enables bitcoin use without requiring deep technical knowledge from every individual

Obi agrees and expands on how Fedi leverages community trust and specialization:

Humans excel at forming complex societies with specialized roles
Fedi allows communities to designate trusted, technical members as "guardians" to manage the system
This provides a middle ground between fully centralized services and every individual managing their own node

Setting Up a Fedimint (21:58)

Obi explains the process of setting up a Fedimint:

Minimum recommended size is 4 members, but can range from 3 to 400,000+
Technical users can set it up manually in about half a day
Partners like Clover offer one-click setup that takes minutes
Assisted setup options are also available for non-technical users

On-the-Ground Experiences in Africa (29:05)

Renata shares insights from introducing Fedi in African communities:

She avoids technical explanations, instead demonstrating the app's functionality
Users quickly grasp that it allows them to send and receive money easily
Many are surprised to learn it uses bitcoin, as it's different from scams they've encountered

Stable Channels (31:47)

Obi explains the concept of stable channels, which allow users to peg their bitcoin to local currencies:

Uses discrete log contracts to create bitcoin derivatives pegged to fiat currencies
Provides short-term price stability while still using bitcoin under the hood
Especially important for users with little disposable income who can't afford volatility
Can be pegged to local currencies, not just major ones like USD

He emphasizes that while perfect long-term stability is impossible, short-term stability is crucial for practical use as a medium of exchange.

Save the Children Partnership (50:02)

Renata discusses Fedi's partnership with Save the Children:

Aims to improve efficiency of distributing aid funds to beneficiaries
Allows sending funds to community groups rather than individuals
Provides faster, more traceable transfers than traditional methods
Sets up infrastructure that can be used for emergency response

Obi adds that this model leverages existing community structures in the Global South, which are often more advanced in community custody of value than Western systems.

Moving Towards Open Source (57:16)

Obi explains Fedi's commitment to open sourcing their code:

Source code is currently available for review
Will be fully open source under AGPL license by January 3, 2026 at the latest
Allows users to verify there are no backdoors or hidden features
Enables community contributions and auditing

He notes this was only possible due to alignment between the team and investors on the importance of transparency and decentralization.

Cultural Differences in Trust (55:09)

Renata reflects on cultural differences in trust between Brazil and Western countries:

In Brazil, people trust neighbors and community more than institutions
In Western countries, there's more trust in banks and government
Loss of community trust in the West has led to vulnerability when institutions fail
Bitcoin and projects like Fedi are driving a "bottom-up revolution" in rebuilding community trust

Conclusion

Fedi represents an innovative approach to scaling bitcoin adoption by leveraging community trust networks and combining multiple decentralized technologies into a user-friendly "super app". By addressing key challenges like technical complexity, volatility, and the need for trusted custody options, Fedi aims to make bitcoin more accessible and useful for communities around the world, particularly in developing countries.

The project's commitment to open source development and on-the-ground community engagement demonstrates a focus on transparency and meeting real user needs. Partnerships with organizations like Save the Children highlight the potential for Fedi to improve financial inclusion and aid distribution.

As Fedi continues to develop and expand, it will be interesting to see how communities adopt and adapt the technology to their specific needs and cultural contexts. The project's success could have significant implications for the future of bitcoin adoption and community-based financial systems.