Topic: [2014-08-25] Why There Should Be A Bitcoin Central Bank (Read 2203 times)

I completely agree with you.

Economic growth and second law of thermodynamics causes planet destruction in less than 500 years even if we used only clean sources of energy. I hope that Bitcoin can stop that insanity. Fractional Reserve Banking would be counterproductive, but it won't work with Bitcoin anyway.

I like the similarity:

The fun part: Bitcoin does not care about someone's wish for a central authority.

the real skeleton in the closet is explained here https://www.youtube.com/watch?v=iFDe5kUUyT0&t=12m30s
Inflationairy currency's need to grow to keep in exesistence but this is not possible against earth resource's that are finite.
So we need a Deflationary system that does not need growth so we can go to a resource based economy , we can not spend more resource's then this planet has , it can not grow endlessly as we try's to do now.
When Bitcoin is in place a inflationary system can safely fail , without  the changes of ending in world war over the last resources.

I completely agree.

What I meant by "technical concept" is fractional reserve banking, and that doesn't change those economics.

The concept is simply not applicable to Bitcoin, due to it's highly deflationary nature.

Yes it does it is the first time in history that you can see the availble number of "gold" availble in the system!
at this time https://blockchain.info/charts
is never done before , so this DOES change underlying economics.

Nominal positive interest rates on Bitcoin loans are not economically sustainable when inflation measured in Bitcoin is negative.  Credit would be too expensive. Negative interest rates could solve this, but who would deposit Bitcoins at negative interest rates? Central banks can print their way out of a deflation or ban cash (forced deposits which allow negative rates), but I doubt that the crowd will ever allow that to happen to Bitcoin.


You can't go backwards in the evolution of money. There are many reasons why IOUs replaced gold.


Simply the technical concept doesn't change the underlaying economics.

I seems like you believe that borrowing is never good. Suppose you need a mortgage to buy a farm. You can't afford to buy it with the bitcoins in your wallet so you get a mortgage and the income from the farm is used to feed your family and pay off the debt.


What do you mean by "lacking the economics"? I would like to point out to all the skeptics that fractional reserve banking existed while the dollar was on the gold standard. There is no reason why it couldn't also be applied to Bitcoin in the same way.

Bitcoin is simply lacking the economics enabling fractional reserve banking, which is a good thing.

proof of reserve proofs that you have the reserve to lend.
https://iwilcox.me.uk/2014/proving-bitcoin-reserves no fractional reserve needed , mortgage  implies that prices are NOT marked compatible , if prices are that high you need one , it means that there is a bubble and that is non sustainible it creates inflation , in a defaltaionarry currency it is also not needed , since vaulue will increase over time
 

I don't know what you mean by "prove of reserve", but a bank can't loan bitcoins it doesn't have, so it borrows bitcoins from its depositors and loans them out. That's fractional reserve banking.


If you want a mortgage and there are no banks, where will you get it?

there shouldnt be any BTC banks, its against BTC own ideals

This reminds me of another hilarious article
http://cointelegraph.com/news/111686/citi_wants_to_tie_bitcoin_blockchain_to_fiat

Fractionakl reserve is not needed in bitcoin , you only need prove of reserve , thats it.
You only need to prove you have the money , if you borrow the lender needs to prove it has the reserves to the seller and buys it for the borrower.
It is not creating money out of notting like fiat , but thats a good thing to stop annyway , we waste way to match resources because of this.

Banning bitcoin is like banning tor or piratebay , simply not passible.

The article is fairly interesting, despite the dull thump of a title.

The author demonizes libertarians a bit to set the stage, then cites Gox as a justification for future centralized "protection" (be afraid, be very afraid).

Many people will be tempted by that argument, I imagine, especially in this era's "no risk, regardless of cost" political climate.

It's good practice to see whether you can come up with counterarguments. Mine are:

1. It's foolish to keep funds in exchanges. Exchanges are not banks. Gox was a very predictable calamity - the only doubt was when and how it would have a serious setback. It may or may not be foolish to keep money in banks, but that is a separate issue.

2. It is widely felt that in the present system the bank "watchers" are corrupt and/or in collusion with the watched banks, leading to moral hazard issues such as "who watches the watchers?". The author proposes new and different watchers for his central bank, but the issues remain the same. If central, then corruptible (or corrupt from the outset).

3. As others have suggested, any version of BTC that has a centralized choke-point is not BTC. If such a thing emerges it will have its own life cycle, separate from that of BTC.

Forbes of course has a stake in the existing systems - it is still good practice to refute the arguments though. More subtle "trust us" proposals are bound to be in the pipeline as BTC evolves - I hope we never fall for them.

Fractional reserve banking with bitcoin is very likely. As Bitcoin becomes mainstream (or perhaps in order for Bitcoin to become mainstream), people will want to borrow bitcoins. Unless you believe that crowdlending (ala Prosper and LendingTree) will replace bank loans, then people will borrow bitcoins from Bitcoin "banks", such as Coinbase. The banks will get the bitcoins from depositors. That's classic fractional reserve banking.

As the article points out, some protection against bank runs will be necessary; however, I think it is more likely that Bitcoin banks will form groups that agree to back each other, and a central bank like the Federal Reserve will be unnecessary. On the other hand, governments could change that by requiring Bitcoins banks to be regulated by their central banks.

Rediculous title this thread has, I don't even read article.

Forbes........

Can't......... Breathe.........

I don't get the article either. They say their should be a central bitcoin bank then their first paragraph goes on to explain how and why banks are bad. We don't need them. Bitcoin is for people who can and like to hold onto their own money.

forbes still dont get it.

I'm sure we all look forward to seeing this alt FedCoin once it is forked from bitcoin. It will be an interesting experiment and demonstration to show what people prefer when they have a choice.