Cashu explained!

Two years ago, the eCash protocol 'Cashu' was launched and is now gaining traction within the Bitcoin community. But what exactly is eCash, and what makes Cashu unique? In this guest article, Egge, a Cashu contributor, elucidates the protocol's background, origin, and intriguing features.

ECash is an electronic means of payment which, thanks to sophisticated cryptography, offers a payment method that is comparable to or even better than cash. Similar to cash, eCash is issued by an institution (e.g. a bank, referred to as 'Mint' in Cashu) as a kind of promissory bill and can be redeemed at any time. The core of eCash consists of blind signatures and asymmetric keys, which together ensure a high degree of financial privacy - even from the issuing bank.

ECash is not a new invention. The idea of eCash existed many years before the tweet was published that first introduced the Cashu protocol. In fact, the seminal paper Blind Signatures for Untraceable Payments was published four decades ago. At the time, David Chaum was working on a digital form of cash that would be at least as private, but could be used seamlessly on the emerging internet.

Chaum founded the company DigiCash, which dedicated itself to this task and developed a currency based on his cryptography. This was not based on a blockchain as we know it today, but was a digital representation of 'normal' cash. In order to realize this idea, contracts had to be concluded with banks so that people could exchange their fiat money for eCash.

The world was enthusiastic about this idea, and less than two years passed between the first test transfer of eCash and the conclusion of a test partnership between DigiCash and Deutsche Bank. Other well-known banks such as Credit Suisse, Bank Austria and Den Norske Bank were also enthusiastic about DigiCash's eCash. Exciting potential partnerships also developed on the consumer side: Netscape, the most relevant browser at the time, planned an integration, and even Bill Gates made an offer to be able to offer the currency natively in Windows 95.

Why is hardly anyone still familiar with DigiCash's eCash, and why is there no native wallet in Windows? Unfortunately, many of these promising partnerships got stuck at the negotiation stage. The reasons for this are many and varied, depending on the source. But they all have one thing in common: David Chaum. The CEO of DigiCash was the single point of failure. When he finally stepped down, the gap in the market into which eCash would have fitted was closed and interest waned.

Today, with protocols like Cashu, Chaum's vision is experiencing a revival. By integrating into the Bitcoin infrastructure, Cashu offers a promising future for digital cash on the Internet. Without a single point of failure and as an open protocol for everyone.

Cashu is a Chaumian eCash, a type of digital cash that builds on Bitcoin and Lightning and is fully compatible with both. David Chaum's blind signatures are still a central part of the protocol. The cryptography behind these signatures is complex and beyond the scope of this post, but if you want to delve deeper, you can find the details in the Cashu protocol specifications.

In most cases, a digital signature confirms the authenticity and integrity of data. If you find a text from me that is signed with my public key, you can be sure that I really wrote this text. Cashu uses this process to create promissory bills or tokens. Mint receives one BTC from us and gives us a "1 Bitcoin" Cashu token in return. In order to be able to prove later that the mint actually created this token, it also signs it. Normally, the mint could track the token as it knows exactly which token belongs to which signature. This is where the blind signature comes into play. With the blind signature, Mint creates its signature on an encrypted form of the token. Thanks to sophisticated cryptography, it can verify the signature later when we present it with the unencrypted token and the signature.

A popular example to illustrate this concept is an envelope containing a piece of paper and a sheet of carbon paper. The piece of paper in this case is our token and contains all the information, such as the value of the token. We seal the letter and send it to the Mint together with the amount of money to be exchanged. The mint cannot open the envelope, but simply writes on it that it has received the necessary money from us and puts its signature underneath. It then sends the envelope back to us. We receive the envelope, still sealed, and can take out our token. The Mint's signature, which was written on the outside of the envelope, has been transferred to our token with the help of the carbon paper. This now contains all the information and the mint's signature without the mint ever having seen the contents.

Blind signatures offer significant advantages for eCash, particularly in terms of data protection and security. They ensure a high level of anonymity and prevent transactions from being tracked or linked to specific individuals. Even Mint does not receive any information about the transaction history. Blind signatures allow eCash to be used securely and anonymously, making it an ideal solution for digital means of payment.

As Cashu always requires a mint to manage the funds and issue tokens in return, it is a custody concept. However, there are significant differences and advantages compared to Custodial Lightning, as we know it from Wallet of Satoshi, for example.

Permissionless

There are no accounts with Cashu. As a rule, you do not have to register with a mint and therefore cannot be locked out. This enables open access without barriers.

Sovereignty

Although a Cashu Mint manages the funds, there is no central database or accounts that determine the account balance. Your account balance is the sum of the tokens you own, and the mint cannot change it or take tokens away from you.

Anonymity

As explained in the section on blind signatures, Mint learns very little about its users and their transactions. While a normal Lightning Custodian has comprehensive information about your wallet and your spending, Mint remains largely in the dark when it comes to eCash transactions.

Interoperability

Cashu is an open protocol that anyone can participate in. In contrast to David Chaum's DigiCash, there are no central authorities that dictate the way. Furthermore, all mints and their users are connected through the Lightning Network, which enables seamless interoperability.

The Cashu protocol brings the vision of eCash, formulated decades ago by David Chaum, back into the spotlight. With a combination of cryptography and integration into the Bitcoin ecosystem, Cashu offers a promising solution for digital cash on the internet. If you're interested in learning more about it, check out the protocol's homepage first. Here you can find lots more resources about Cashu. You can try out Cashu simply by downloading one of the available wallets (I personally currently use eNuts and macadamia) or using a web wallet such as cashu.me.

For all those who are just as crazy about cashu as I am, this year's btc++ in Berlin is the place to be. If you have any questions, you can of course ask them in the Blocktrainer forum.