Topic: Economics - How does Bitcoin use Reverse Fractional Banking without regulation? - page 2. (Read 2021 times)
January 29, 2013, 04:25:30 PM
How would subdividing a Satoshi work?
January 29, 2013, 03:51:55 PM
This thread died out when on top. Thats great guys.
January 29, 2013, 11:27:13 AM
. . . reverse fractional banking . . .
The term you are looking for is Fractional Reserve Banking. 
January 29, 2013, 11:24:31 AM
But I've heard that reverse fractional banking will be the ultimate savior to bust through the roof of this limit
That is one theory. Another theory is that the limit is not a problem. Another theory is that if the limit ever appears to be a problem, satoshis can possibly be subdivided.
January 29, 2013, 11:22:29 AM
There will be runs on banks and people will experience losses, therefore fractional reserve banking can not go so far as it currently does.
One might say that free banking is inherently regulated by bank runs.
January 28, 2013, 09:37:43 PM
Bitcoin fractional reserve banks can be reulated by requiring a minimum reserve fraction for the bank. Of course, only 100 % reserves will be good enough to protect against a bank run, but in that case the bank would not be fractional. You will also not get interest on deposits in such a bank, and you will have to cover the cost of your deposit.
January 28, 2013, 09:31:00 PM
You can issue non-blockchain promissory notes in lieu of actual bitcoin. This happened with gold in the 19th and 20th centuries, for example.
Whether there'll actually be any incentive to do that voluntarily, of course, is another matter.
Whether there'll actually be any incentive to do that voluntarily, of course, is another matter.
Correct, money supply as now measured with M2, include bank deposits, that means the supply can be multiplied. But bitcoin is different from fiat money since there is no central bank and lender of last resort, and it will not be possible to bail out a bank or having a government guarantee of deposits. There will be runs on banks and people will experience losses, therefore fractional reserve banking can not go so far as it currently does.
January 28, 2013, 06:12:13 PM
You can issue non-blockchain promissory notes in lieu of actual bitcoin. This happened with gold in the 19th and 20th centuries, for example.
Whether there'll actually be any incentive to do that voluntarily, of course, is another matter.
Whether there'll actually be any incentive to do that voluntarily, of course, is another matter.
January 28, 2013, 02:50:05 PM
So it's easy to understand that the total number of Bitcoins will never exceed 21 million, and will in fact only decrease over time as some get lost.
It's further a simpler step to understand that they can be subdivided (to a point) so that they can be used to pay for all sorts of things. I.e. if the price of a bitcoin climbs to about $2000 per usd, I can still get by coffee for 0.0015 BTC.
But I've heard that reverse fractional banking will be the ultimate savior to bust through the roof of this limit, because it will allow the total number of Bitcoins in circulation to effectively exceed 21 million. My only question is, how on earth do such things become regulated? Would lending get out of control?
It's further a simpler step to understand that they can be subdivided (to a point) so that they can be used to pay for all sorts of things. I.e. if the price of a bitcoin climbs to about $2000 per usd, I can still get by coffee for 0.0015 BTC.
But I've heard that reverse fractional banking will be the ultimate savior to bust through the roof of this limit, because it will allow the total number of Bitcoins in circulation to effectively exceed 21 million. My only question is, how on earth do such things become regulated? Would lending get out of control?
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