@waxwing curious if you have any thoughts on the challenges of doing this

Would there be a privacy derogation for the taker?

You would need to stake some funds. Not a big deal. The "yield" would probably be quite small so you would need to make that up with volume. Might be tough to achieve that kind of volume at first. Fragmented UTXOs are another problem. You give away their privacy if you consolidate them. Could be used to do fedimint pegouts, though. You can get most of these privacy benefits for fedimint users by implementing payjoin.

Would this require replacing pegouts with “pegout requests” since funds may be in use? The trade-off for an average joe federation user being that they can transact with lower fees if they are willing to forego the ability to withdraw large sums of money at once

Initially I thought no, but I think you’re right. As a peg out may need a portion of the UTXO that is in an JM offer.

All valid points!

Is it a form of fractional reserve banking? Funds meant to be backing one thing used for another? Or not, because they're still there, just slower to free up?

I wouldn’t think of it as that. The funds wouldn’t leave the mint’s control. Course funds in the maker offer, while waiting for a taker wouldn’t be available for immediate withdrawal. So a mint would likely have to keep a reserve of UTXOs not offered for coin joins. I think withdrawals could be handled by withdrawing non offered funds first, and then rescinding the offered funds if needed. Keep the questions coming! We were just spit balling over lunch.