Topic: Money creation system - is bitcoin creation resistant? - page 3. (Read 1513 times)

To bad you gave us only two choices in the poll, because I simply don't know. It is possible, yet very risky.
Your doubts however are fully justified, lack of transparency and experience with most financial institutions of days past, suggests us that they do. On the other hand, there is no way of having metaphysical certitude that they in fact fractioning crypto.
For all that we know, exchanges will always explain themself with cold storage slogan. You know, for your safety.

I encourage you to vote in poll.
-snip-

I never really thought about it, but it seems like you are right. However, I just decided to skim Hitbtc's terms of use and I didn't find anything about them using users' funds for their own purposes (the exception is security measures, but that's not what you were talking about). Moreover, when I went though blockchain.info terms, I found quite the opposite:
So perhaps, even though they could write down one balance and actually transfer money elsewhere, they don't do it, because they are not banks and don't want to lose the trust of people.

We all know that we currently have 17 mil btc in circulation and there won't be more than 21 mil of them.

None from us is withdrawing money from bank accounts. We are only using small part of them by paying with credit cards but it's the same as transferring money from bank to bank, sometimes its just change in the records of one bank.
In most countries mandatory reserves are around 3-5% (do your own math here ) ... and its legal !

Big part of all bitcoins are stored in crypto exchanges wallets.
Crypto exchange knowing a fact that (f.e.) 80% of their users founds are never being withdrawed they can create sell orders on market equal to 300% of their users funds.

Crypto exchange stores 100 000 users' bitcoins. Knowing for a fact that 20% of funds is enough to cover everyday withdrawals they know that they can create in their books 300 000 btc and sell to their users who came with fiat to buy btc (all users together has 400 000 btc now - in exchange books, 20% - 100 000 is needed to cover every day withdrawals). That way crypto exchange created extra 300 000 btc. Don't get me wrong. They are not true bitcoins which can be stored on blockchain and transferred to wallet. Those are bitcoins created in exchanges books into investors, storing founds on crypto exchanges, hands that thinks that they have real bitcoin.

not only exchanges can do that. Every company that stores your coin on their wallet can do that.
Storing bitcoin on exchanges or any other third part company wallet dumps and destroys bitcoin.

The Wallet is provided to you exclusively by Blockchain Luxembourg S.A. At no point will Blockchain ever take custody or control over Virtual Currency stored in your Wallet

Lost till they start moving again.

Physical Bitcoins such as Casascius coins can be used as means of exchanges without the coins themselves moving on-chain, and I am pretty certain that a lot of what people consider to be 'lost coins' are actually being used still, but just in form of exchanging private keys, because that's basically what it is.

I heard that currently 30% of bitcoins are lost.

Bitcoin is very much deflationary, because if we imagine that it has replaced all fiat tomorrow, it would very soon (within a decade) reach the point when the amount of value created by its emission (network rewards) will become lower than the growth of economy, thus resulting in deflation, meaning the decrease general price levels. But since Bitcoin is too small to influence the economy, the most noticeable effect would be Bitcoin's own price increase over time, although this effect can easily be buried beneath volatility, just like it happens with gold.

Firstly, just because bitcoin has a limited supply doesn't make it deflationary. It is in fact still inflationary since the money supply is still continuously going up, despite at a decreasing rate. Only at the stage where the average amount of bitcoins lost that can't ever be accessed again exceeds the amount of bitcoin created on a daily basis can bitcoin be truly be deflationary.

So you are saying that the traditional money creation system is worthy and you want to bring it in a decentralized ecosystem?

No advantage stems from the bank money creation. It does only create bigger liabilities and debt. I see no reason to implement this feature to the currenct ecosystem.

I am already aware (and got chances to know from an exchange operator itself) that exchanges are misusing our funds for their own trading purposes but never thought about how it will impact for dumping bitcoin's price itself. I am personally following and keep suggesting not to keep cryptos in exchange but for the reason of hacking scare, but never got time to think in your perspective even after hearing about those misusing.