Are more Bitcoins circulating than in existence?

Brennus101

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Quote from: Thirdspace on January 26, 2018, 04:25:01 PM

Quote from: Brennus101 on January 26, 2018, 03:35:23 PM

Banks and fiat are completely different. Banks use something called fractional reserve banking, which means they lend more money than what is deposited by customers in their accounts. This means that if all customers were to attempt to withdraw their funds, the bank would collapse. An exchange is not supposed to work like this, although in principle it could. However, I would regard an exchange which operates like this as a scam. It would be like a stock exchange selling you stock they don't actually have!

https://en.wikipedia.org/wiki/Fractional-reserve_banking
it doesn't mean they lend > deposited amount... how could that be logically?
but at any given time, bank holds cash currency < total deposited amount
fractional reserve banking means the bank is required by law
to hold only fractional (% amount) of total deposited amount in cash in the bank
which most of the deposited amount would be used for lending or investment fund
so basic equation (excluding cost, profit and etc) roughly the bank would hold
the total deposited amount = available cash amount for transactional + outstanding loan amount

Yes, you're right. My apologies.

Thirdspace

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Quote from: jimmywh on January 26, 2018, 03:26:05 AM

what would happen if people were to convert their currencies to Bitcoin and withdraw them from the exchanges simultaneously? Or let's say that nobody withdrew the Bitcoins from the exchanges, would it not be an extremely volatile situation for both exchanges and Bitcoin in general that there were more Bitcoins in theoretical circulation than actual existence?

pre-condition: userA deposited BTC and placed sell BTC order (seller)
you (buyer) convert your fiat to Bitcoin in exchange = buying BTC, deposit/inflow of fiat to exchange
userA withdraws his fiat from exchange, after he sold his BTC to you, withdraw/outflow fiat from exchange
in what normal case would be "there were more Bitcoins in theoretical circulation than actual existence?"
it would ONLY be the case if the exchange lied/cheated about the bitcoin amount he has for trade

exchange = swap , there could be no more/extra bitcoin amount in exchange than the actual existence
the same thing applied in general terms, trade outside exchange can happen based on actual bitcoin and fiat in existence
in the case for bank, Brennus101 explained it well except small mistake

Quote from: Brennus101 on January 26, 2018, 03:35:23 PM

Banks and fiat are completely different. Banks use something called fractional reserve banking, which means they lend more money than what is deposited by customers in their accounts. This means that if all customers were to attempt to withdraw their funds, the bank would collapse. An exchange is not supposed to work like this, although in principle it could. However, I would regard an exchange which operates like this as a scam. It would be like a stock exchange selling you stock they don't actually have!

https://en.wikipedia.org/wiki/Fractional-reserve_banking
it doesn't mean they lend > deposited amount... how could that be logically?
but at any given time, bank holds cash currency < total deposited amount
fractional reserve banking means the bank is required by law
to hold only fractional (% amount) of total deposited amount in cash in the bank
which most of the deposited amount would be used for lending or investment fund
so basic equation (excluding cost, profit and etc) roughly the bank would hold
the total deposited amount = available cash amount for transactional + outstanding loan amount

Brennus101

jr. member

Activity: 32

Merit: 4

Quote from: jimmywh on January 26, 2018, 04:13:43 AM

Quote from: Brennus101 on January 26, 2018, 03:55:23 AM

You don't convert your money or altcoins to bitcoin on an exchange, you buy it. An exchange is simply a forum that matches buyers an sellers. Unless the exchange is a scam, you cannot buy more bitcoin that the exchange has stored in their hot wallet and cold wallet. Certainly, you could never withdraw more than that, so there is no way the bitcoin supply can increase by buying from exchanges and then withdrawing. I hope that answers your question.

I think you mistunderstand my topic. I know the amount of Bitcoins are fixed, and that is exactly my point.
Take Binance or any other big exchange. Your altcoins and Bitcoins combined represents an estimated Bitcoin value of your portfolio. You can convert the amount from your portfolio to Bitcoin and withdraw it to your personal wallet.
Regarding whether an exchange is a scam or not if they don't a Bitcoin reserve equal to the complete amount of funds deposited to the exchange, I am not sure you are right.
If all people were to withdraw fiat from their bank, the bank most likely wouldn't be able to service all clients. That doesn't necessarily make the bank a scam. The amount of "fictional" money floating around on the stock market etc., is far bigger than the actual circulation of psysical money and other material assets combined.

Does it make sense?

Thanks for the merit! Again, "converting" is not a good choice of word. Of course your portfolio can be valued in a certain amount of bitcoin, and it is possible (perhaps even likely) that the combined portfolio value of all exchange accounts in bitcoin exceeds the amount of bitcoin. We could do a similar exercise and ask ourselves how much saffron are all bitcoins and altcoins worth. Probably the amount exceeds the available amount of saffron. This is not a problem, because no one says you can convert your coins to saffron. The "conversion" amounts to selling, and in such a transaction the total amount of bitcoins stays the same.

Banks and fiat are completely different. Banks use something called fractional reserve banking, which means they lend more money than what is deposited by customers in their accounts. This means that if all customers were to attempt to withdraw their funds, the bank would collapse. An exchange is not supposed to work like this, although in principle it could. However, I would regard an exchange which operates like this as a scam. It would be like a stock exchange selling you stock they don't actually have!

jimmywh

member

Activity: 140

Merit: 22

I have no idea why I didn't think of this - still learning I guess.. Makes perfect sense. Thanks guys!
I have dropped merits as thanks. (not for the legendaries though Wink

)

Lpim01

full member

Activity: 700

Merit: 117

They are totally equal, we base on the circulating supply which is currently mined. Though people are currently holding their bitcoin nor selling it, doesn't mean that it decrease the total circulating supply of bitcoin. They are totally counted, how much are going out or sold is equal to the amount to filled.

Pursuer

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Where is my ring of blades...

Quote from: jimmywh on January 26, 2018, 03:26:05 AM

However, as Bitcoin only have around 35% market dominance,

this has nothing to do with anything.
and that percentage is not "market dominance". that is a wrong word invented by altcoin advertisers.

it is the percentage of bitcoin's market capitalization from the total market capitalization.
and market cap is supply * price. bitcoin has ~16.8 million coins while altcoins usually have 100 million to 100 billion coins. and there are 1700 altcoins available out there. which is why it is 35% (assuming your percentage is accurate)

Quote

and 10-20% of these either lost or locked away, what would happen if people were to convert their currencies to Bitcoin and withdraw them from the exchanges simultaneously?

when you convert something to bitcoin, you don't magically do it on an exchange! you buy it from an already open order. meaning someone else has X amount of bitcoin which you buy.
in other words everyone can not and will not ever convert all their money to bitcoin. there is always someone selling so that others can buy.

and that is how the balance is restored. if you buy 100BTC someone else is selling you 100BTC or 10 person sell you a total of 100BTC....

as long as exchanges are honest and don't have fake orders (which is true 90% of the time) this balance is always there.

Simple_Man

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Merit: 11

Quote from: jimmywh on January 26, 2018, 03:26:05 AM

I was wondering about something.

You have a lot of exchanges that mainly deals in trading between Bitcoin and alts. People can deposit a lot of different alts, and on the exchange convert it to Bitcoin. However, as Bitcoin only have around 35% market dominance, and 10-20% of these either lost or locked away, what would happen if people were to convert their currencies to Bitcoin and withdraw them from the exchanges simultaneously? Or let's say that nobody withdrew the Bitcoins from the exchanges, would it not be an extremely volatile situation for both exchanges and Bitcoin in general that there were more Bitcoins in theoretical circulation than actual existence?

Thoughts?

You have misunderstood the whole thing. Bitcoin is limited to only 21 million and out of which 16,827,050 is mined and circulated in the market. It is technically not possible to have more bitcoins than the highest cap of 21 million.

However, you need to understand how a trade system works. A trade actually happens only when there is an interested party. When a deal is executed, you receive bitcoin and the other party receive the other coin of the pair. It is just a shift of fund from one person to another. New coin is not getting generated here. So no matter whatever is happening in the exchanges, it is done using existing bitcoins only.

jimmywh

member

Activity: 140

Merit: 22

Quote from: Brennus101 on January 26, 2018, 03:55:23 AM

You don't convert your money or altcoins to bitcoin on an exchange, you buy it. An exchange is simply a forum that matches buyers an sellers. Unless the exchange is a scam, you cannot buy more bitcoin that the exchange has stored in their hot wallet and cold wallet. Certainly, you could never withdraw more than that, so there is no way the bitcoin supply can increase by buying from exchanges and then withdrawing. I hope that answers your question.

I think you mistunderstand my topic. I know the amount of Bitcoins are fixed, and that is exactly my point.
Take Binance or any other big exchange. Your altcoins and Bitcoins combined represents an estimated Bitcoin value of your portfolio. You can convert the amount from your portfolio to Bitcoin and withdraw it to your personal wallet.
Regarding whether an exchange is a scam or not if they don't a Bitcoin reserve equal to the complete amount of funds deposited to the exchange, I am not sure you are right.
If all people were to withdraw fiat from their bank, the bank most likely wouldn't be able to service all clients. That doesn't necessarily make the bank a scam. The amount of "fictional" money floating around on the stock market etc., is far bigger than the actual circulation of psysical money and other material assets combined.

Does it make sense?

Brennus101

jr. member

Activity: 32

Merit: 4

You don't convert your money or altcoins to bitcoin on an exchange, you buy it. An exchange is simply a forum that matches buyers an sellers. Unless the exchange is a scam, you cannot buy more bitcoin that the exchange has stored in their hot wallet and cold wallet. Certainly, you could never withdraw more than that, so there is no way the bitcoin supply can increase by buying from exchanges and then withdrawing. I hope that answers your question.

jimmywh

member

Activity: 140

Merit: 22

I was wondering about something.

You have a lot of exchanges that mainly deals in trading between Bitcoin and alts. People can deposit a lot of different alts, and on the exchange convert it to Bitcoin. However, as Bitcoin only have around 35% market dominance, and 10-20% of these either lost or locked away, what would happen if people were to convert their currencies to Bitcoin and withdraw them from the exchanges simultaneously? Or let's say that nobody withdrew the Bitcoins from the exchanges, would it not be an extremely volatile situation for both exchanges and Bitcoin in general that there were more Bitcoins in theoretical circulation than actual existence?

Thoughts?

Topic: Are more Bitcoins circulating than in existence? (Read 212 times)