The Future of Bitcoin Banking with Eric Yakes - WBD625

Eric Yakes is the author of ‘The 7th Property’. In this
interview, we discuss how a Bitcoin native banking system could
evolve, predicated on a practical vision where not everyone will
be able or willing to self-custody. Eric has theorised how
Fedimints may form the basis for a new digital age of free
banking, and the risks and opportunities this would present.


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As Bitcoin is a new form of money, then it stands to reason that
it could become the basis for a new global monetary system. Yet,
it is not a certainty that this will happen. And how it may
manifest is far from settled. Eric Yakes is one of the leading
thinkers on this topic. His ideas around how Bitcoin banking may
develop are evolving to respect the central tenets of Bitcoin’s
ideology, whilst making pragmatic allowances for real-world
constraints.


The principal issue for Bitcoin banking is the provision of
custody. 2022 gave everyone clear grounds to promote cold
storage. However, with widescale adoption, there will still be
significant demand for third-party custody solutions. Therefore,
one must consider which custody solutions maximise trust.
Fedimint provides such an alternative where trust is federated,
with the intention that this federation is a known community.


Fedimint is not only a custody solution, it is also a means for
issuing value. A Fedimint can issue Ecash against the held
Bitcoin. This Ecash acts as a bearer instrument that can be
stored on mobile phones, with the privacy characteristics of
physical cash. Ecash could also be transferred via the Lightning
Network. This opens up the possibility of a quantum of
decentralized federations developing and operating akin to the
free banking era of the 19th century.


There are issues. Third-party custody in any form involves risk.
There will be occasions when trust is broken, Bitcoin is lost and
innocent people are affected. There are also risks associated
with a rise in fractional reserve banking, and questions over the
issuance of credit through such systems. However, as Eric Yakes
asserts, if Bitcoin is to be more than Gold 2.0 and become the
basis for a global monetary system, then these are risks that
need to be faced.