Do banks have and advantage over cryptos because of the multiplier?

Daemon_Hell

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Quote from: francojon on January 10, 2018, 06:15:58 PM

Quote from: Daemon_Hell on January 09, 2018, 05:18:22 PM

Quote from: francojon on January 09, 2018, 04:55:07 PM

As you know, banks can lend more money than they have in deposits, however you currently cannot do that with cryptos. Do you think that it is a decisive advantage or it could be somehow countered?

You can actually create a crypto bank and lend/deposit in crypto. Only catch - you need to store crypto inside this bank, just like the regular one.

But you cannot really multiply the crypto. You see, if you have 10 dollars in deposits all you need to do to create 30 dollars is make a note on an account. You cannot create crypto out of nothing like banks do.

You do not need to create a new crypto, just records about ownage of said crypto.
Imagine this situation - whatever_coin have a total supply of 100 coins. You're the owner of the whole 100 and you are depositing these coins to 'coinbank'.
Now this bank would be able to lend me 100 whatever_coins (which I'd like to spend on some services you provide)
So now you have 100 your initial coins and 100 coins on your deposit.

kimochidesh

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In my opinion, This multiplier technique is a mirage and created a bubble in the economy. If 20% of the people who have deposited their money in bank want to cash out immediately, banks can't really able to do it as they don't have that much with them. So in other words, if bank go bankrupt than your money will also also turn into ashes.

Hydrogen

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Quote from: francojon on January 09, 2018, 04:55:07 PM

As you know, banks can lend more money than they have in deposits, however you currently cannot do that with cryptos. Do you think that it is a decisive advantage or it could be somehow countered?

....

It should be mentioned there can be massive disadvantages to banks utilizing leverage. One example of this are subprime mortgages which were leveraged and contributed towards the 2008 economic crisis. Leverage does carry an advantage of amplifying gains. The disadvantage is its tendency to also amplify losses. Nietzsche said women make the highs higher and the lows lower. Leverage could have a similar effect.

Also the divide separating commercial banking from investment banking might appear to be an advantage. But carries many of the same implications which leverage does.

Bank bailouts might be the fallout which occurs when leveraged investments go bad. Being able to invest more money than is currently on hand might appear to be an advantage. But it can also contribute heavily towards instability and unreliability over the long term. It sacrifices long term value for potential short term gains.

francojon

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Quote from: krishnapramod on January 10, 2018, 09:37:25 AM

Quote from: francojon on January 09, 2018, 04:55:07 PM

As you know, banks can lend more money than they have in deposits, however you currently cannot do that with cryptos. Do you think that it is a decisive advantage or it could be somehow countered?

Fractional reserve banking, if you look from a certain perspective then banks might have a decisive advantage over cryptos, but FRB or debt-based monetary system is what lands economies into inflation/financial crisis. Is FRB possible with Bitcoin or cryptos? The dynamics of FRB doesn't apply to cryptocurrencies, no central authority, no intermediaries, no deposit/wallets/be your own bank. FRB is not impossible with Bitcoin, but then you would need some sort of a Bitcoin bank/free banking/exchanges/P2P lending/Bitcoin bonds, comes down to trusting a third party. There are some interesting discussions on this topic.

https://en.bitcoin.it/wiki/Fractional_Reserve_Banking_and_Bitcoin

https://bitcointalksearch.org/topic/if-you-have-100-bitcoins-in-your-computer-wallet-and-100-in-your-mtgox-account-51899

https://bitcointalksearch.org/topic/is-fractional-reserve-banking-possible-with-bitcoin-314123

https://wiki.mises.org/wiki/Criticism_of_fractional_reserve_banking

Thanks that is quite insightful. Although in theory economic mismanagement is not per-se linked to a fiat economy, it does happen almost always so I guess that would give cryptos and advantage.

francojon

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Quote from: Ayiranorea on January 10, 2018, 01:26:59 PM

What the banks provide as interest for the savings or the investment is quite low compared to that of the earning from the growth of bitcoin as well other digital currencies. So, I don't think that banks have advantages over bitcoin just because of the multiplier.

What I mean is that I cannot lend to someone else more bitcoins than I have, however the banks can do it (and they of course do it). Just by setting an account on whatever the national bank is, they can lend x10 that ammount (or x4 or x8 depending).

francojon

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Quote from: Daemon_Hell on January 09, 2018, 05:18:22 PM

Quote from: francojon on January 09, 2018, 04:55:07 PM

As you know, banks can lend more money than they have in deposits, however you currently cannot do that with cryptos. Do you think that it is a decisive advantage or it could be somehow countered?

You can actually create a crypto bank and lend/deposit in crypto. Only catch - you need to store crypto inside this bank, just like the regular one.

But you cannot really multiply the crypto. You see, if you have 10 dollars in deposits all you need to do to create 30 dollars is make a note on an account. You cannot create crypto out of nothing like banks do.

Ayiranorea

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What the banks provide as interest for the savings or the investment is quite low compared to that of the earning from the growth of bitcoin as well other digital currencies. So, I don't think that banks have advantages over bitcoin just because of the multiplier.

bribed

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Banks have the power of creating new money whenever they are lending money to someone. This has resulted in depts that can never been payed back. The current financial system is destructing itself with the way it does "business". But thats just my point of view, there surely are thousands of banksters with thousands of reasons why Im wrong with that assumption and why it is all legit and good for the world.

budz0425

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Quote from: audaciousbeing on January 10, 2018, 10:58:28 AM

Quote from: francojon on January 09, 2018, 04:55:07 PM

As you know, banks can lend more money than they have in deposits, however you currently cannot do that with cryptos. Do you think that it is a decisive advantage or it could be somehow countered?

This is one angle I haven't considered myself and its really something because it means if both bank and crypto have 21million in USD, banks can then create as much as they are allowed by regulations but this cannot be said in the case of crypto. But on another look this is what caused the financial quagmire that we have in which people spend more than what they have by going beyond their means in wanting to lead a good life and the moment they lose their source of income, they tend to go to the point they don't want. But with crypto, no one is allowed to spend more than what he has, there is no further creation of money it is fixed and that is an advantage that force every one not to go beyond your means.

That is correct we are just bound to withdraw or spend just the appropriate amount that we have unlike in bankd where we can borrow money but it is not like that in cryptocurrency. Maximine our money and avoid borrowing money as much as possible.

audaciousbeing

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Quote from: francojon on January 09, 2018, 04:55:07 PM

As you know, banks can lend more money than they have in deposits, however you currently cannot do that with cryptos. Do you think that it is a decisive advantage or it could be somehow countered?

This is one angle I haven't considered myself and its really something because it means if both bank and crypto have 21million in USD, banks can then create as much as they are allowed by regulations but this cannot be said in the case of crypto. But on another look this is what caused the financial quagmire that we have in which people spend more than what they have by going beyond their means in wanting to lead a good life and the moment they lose their source of income, they tend to go to the point they don't want. But with crypto, no one is allowed to spend more than what he has, there is no further creation of money it is fixed and that is an advantage that force every one not to go beyond your means.

BrewMaster

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Quote from: francojon on January 09, 2018, 04:55:07 PM

As you know, banks can lend more money than they have in deposits, however you currently cannot do that with cryptos. Do you think that it is a decisive advantage or it could be somehow countered?

well to understand this you first need to ask yourself how are banks lending more money than they have in deposits? and the answer is because people don't cash out! they don't take the loan in cash. for example if you buy a house with a loan you transfer the money into the other person's bank account. everything is done digitally and within their system.

now how can we do that with cryptocurrencies? it is simple, you run a banking system that works with cryptocurrencies! look at coinbase for example. if you deposit you become owner of an "account" that has some BTC associated with it. you can then pay other coinbase users some BTC and no BTC ever changes hand. it is just numbers going around inside their database = banking system. you just have to add loans to this system...

Yzhel

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Banks has nothing to do with cryptocurrency but the crypto has advantage in banks since all of those crypto owners are opening saving account in banks, so the tendency is that banks were benefiting from people who are earning from crypto world.

krishnapramod

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Quote from: francojon on January 09, 2018, 04:55:07 PM

As you know, banks can lend more money than they have in deposits, however you currently cannot do that with cryptos. Do you think that it is a decisive advantage or it could be somehow countered?

Fractional reserve banking, if you look from a certain perspective then banks might have a decisive advantage over cryptos, but FRB or debt-based monetary system is what lands economies into inflation/financial crisis. Is FRB possible with Bitcoin or cryptos? The dynamics of FRB doesn't apply to cryptocurrencies, no central authority, no intermediaries, no deposit/wallets/be your own bank. FRB is not impossible with Bitcoin, but then you would need some sort of a Bitcoin bank/free banking/exchanges/P2P lending/Bitcoin bonds, comes down to trusting a third party. There are some interesting discussions on this topic.

https://en.bitcoin.it/wiki/Fractional_Reserve_Banking_and_Bitcoin

https://bitcointalksearch.org/topic/if-you-have-100-bitcoins-in-your-computer-wallet-and-100-in-your-mtgox-account-51899

https://bitcointalksearch.org/topic/is-fractional-reserve-banking-possible-with-bitcoin-314123

https://wiki.mises.org/wiki/Criticism_of_fractional_reserve_banking

Yabuy92

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Quote from: francojon on January 09, 2018, 04:55:07 PM

As you know, banks can lend more money than they have in deposits, however you currently cannot do that with cryptos. Do you think that it is a decisive advantage or it could be somehow countered?

the bank can lend money to us of course because it has a complete self-ideality, while crypto is anonymous how can we can lend money if like that. except seprti using KYC and even then not just enough, but kedepanya it can be done if cooperation with the bank of course

Hydrogen

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Quote from: francojon on January 09, 2018, 04:55:07 PM

As you know, banks can lend more money than they have in deposits, however you currently cannot do that with cryptos. Do you think that it is a decisive advantage or it could be somehow countered?

....

I think there is a fundamental relationship between greater risk and greater potential profits in investment and finance.

Greater risk contributes towards greater instability also.

Investment banks are geared towards short term profits, rather than creating long term value. Bitcoin's historical plan is the opposite. Bitcoin was designed to build long term value, rather than sacrificing stability for short term gain. Historically, bitcoin was the long term opposite to investment bankings short term focus. Although that has changed to a degree with futures and speculative markets becoming more common in crypto, with short term price swings (greater volatility) becoming more normal.

I don't think that leverage and short term focus is necessarily an advantage, its a different business model/gameplan/philosophy.

Daemon_Hell

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Quote from: francojon on January 09, 2018, 04:55:07 PM

As you know, banks can lend more money than they have in deposits, however you currently cannot do that with cryptos. Do you think that it is a decisive advantage or it could be somehow countered?

You can actually create a crypto bank and lend/deposit in crypto. Only catch - you need to store crypto inside this bank, just like the regular one.

FrueGreads

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Quote from: francojon on January 09, 2018, 04:55:07 PM

As you know, banks can lend more money than they have in deposits, however you currently cannot do that with cryptos. Do you think that it is a decisive advantage or it could be somehow countered?

If that was an advantage, I would say it should be in favor of crypto and not banks, because it makes them more reliable and trustworthy. Markets crash and some banks go bankrupt because of that. They loan what they don't have, users stop paying them because they can no longer afford it, and banks end up with more debts that they can handle. Banks should not be allowed to lend more money than what they actually hold, but that's how our economy is built, and that is a problem in my opinion and not an advantage.

francojon

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As you know, banks can lend more money than they have in deposits, however you currently cannot do that with cryptos. Do you think that it is a decisive advantage or it could be somehow countered?

Topic: Do banks have and advantage over cryptos because of the multiplier? (Read 115 times)