Topic: Fractional-reserve banking in Bitcoins - nothing prevents it! - page 2. (Read 6204 times)

There is a huge incentive to not have fractional reserve banking and here it is:

http://www.youtube.com/watch?v=qu2uJWSZkck

Yes... For example, if I deposit bitcoins into an account at mybitcoin.com, and take a screenshot showing my account balance, you could call that a "bitcoin backed note" of sorts.  (It would be better, though, if the site gave you a formal, digitally-signed certificate showing your balance.)

It would be ok if it was just a business model, but then it would be ok to compete with them on a large scale. I'm almost certain that when Bitcoin or any cryptocurrency gets popular enough, the central bank system will try to make laws against it, not because there's anything wrong with cryptocurrencies, but because their "business model" is really a dictatorship. We don't need to make laws against Fractional Reserve because the right to compete is enough.

It's got nothing to do with fractional reserve banking. It's just a business model. Banks operating a fractional reserve just happen to have a monopoly in most countries. Examine the nature of that monopoly. Is it backed my violence?

Google "Von NotHaus" for the answer.

http://en.wikipedia.org/wiki/Fractional-reserve_banking

It makes the rich get richer and the poor get poorer. When the poor lack food or other things, they make a plan of how to get it from the rich people. When the rich use supply and demand to determine who should get food and who shouldn't, they make another plan, which is to fight for survival, and others join them. Food is one of many things they fight for, and its not always things they need, but it is mostly caused by "the rich get richer and the poor get poorer" which is mostly caused by the Fractional Reserve system and Patents, but Patents are a different problem.

In a Fractional Reserve system, terrorism (a type of war) and other wars are inevitable and in increasing amounts over time. As such wars increase, Patriot Acts and other reductions of freedom and increases of military spending will happen. Reacting to that, terrorism and other wars will increase. Its a cycle of conflicts escalating until World War 3.

Therefore we either get rid of the Fractional Reserve system or World War 3 will happen.

The anonymous part has advantages and disadvantages, but just about the economic part, an unlimited grid of Bitcoin currencies, each with their own network, each designed with their own economic equations, is an example of a better system than Fractional Reserve, because economic equations would evolve and compete the same way products evolve and compete today, and whatever equations work best would be used by more people, more invested in them.

Someone could probably try this on a small scale right now if they could figure out a way to issue some kind of BTC-backed notes.  Physical notes are obvious enough, but the electronic format of such a thing would require some amount of cleverness...

Yes, its not really viable at this point. But in the future it will probably happen (Im pretty sure it will happen).

Getting back on topic, I can't see banks that do nothing but take in bitcoins and loan than out again being viable.  How do you secure a loan denominated in bitcoins?  If I loan them out and the value doubles or triples the borrowers would probably never be able to pay the loan back.  It seems like it could possibly work if you were only lending capital to fund bitcoin businesses who would thrive if the value jumped, but I can't see how it would really work.

Two different people consider this trolling. Sorry, good enough for me!
I apologize, and I am out of this subject 

If you trust the bank enough you could have an anonymous account just controlled by a private key. IF you trust the bank enough (big IF, but there are some examples in reality).


Stop trolling. That you engage in some contract with the bank does not mean their notes become legal tender. IT just mean that you accept them, not everyone else. Legal tender means that the bank notes are forced upon everybody.

Uncle Vinnie, thank you for not calling me retarded 

Not if you don't want to. Others might.

So we would all need to accept "their books" as legal tender  

*shrug*

I doubt it would work in an anonymous setting. Banking depends on trust.

I'm assuming the "men with guns" means the government. Societies find all sorts of interesting solutions for contract enforcement, and settling peacefully is usually cheaper than going to war.

The deposit (transfer of possession of the 100BTC) would be reflected in two places; in their books and in the block chain. According to the block chain, the bank owns the 100BTC. But according to the contract between the depositor and the bank, the depositor owns the 100BTC but consents to the bank lending all or a fraction of it out.

So, vinnie, how would this work in an anonymous setting, and without "men with guns"?
Just trolling...

Adam, thank you for your opinion on my IQ!
Retarded as I am, please explain how the bank (which one?) can "deposit" BTC100 in the block chain if said bank does not own BTC 100 to clear the transaction.

Thank you in advance for your explanation!

In addition to what Adam said, the bank would likely be issuing a bitcoin backed note or secondary digital currency. So they would either issue the loan in the form of BTC and pay their original depositor his withdrawals in bitcoin backed notes, or issue the loan in the form of bitcoin backed notes and pay the original depositor in his original BTC.

Are you trolling or just retarded? 

• I have 100 BTC
• I deposit this with the bank, now the bank has it
• The bank takes these BTC and loans them to someone else so now this third party has them

Would you care to explain how a bitcoin bank can lend a hundred bitcoins it does not have?
Some details on how the block chain might look would also help...