Topic: Why Fractional Reserve Banking Didn't Prop Up Yet? - page 2. (Read 4538 times)

A 3rd party audit is just a displacement of the trust from the bank to an auditing company.  It doesn't solve anything.

A 3rd party audit. That's probably the best way.

+1

Any other suggestion on how to verify the integrity of banks/e-wallet/whatever.

I have seen both of the money as dept videos, while I thought that it brought up many issues with the current baking system, the rational why usury is bad extended to nothing more than "It is bad, because it is bad, mmmmk."

There is nothing wrong with loaning somebody something and expecting a payment in return; if people decide that usury is wrong and enforce it, they infringe on my right to conduct voluntarily transactions with other people.

When a bank uses the money deposited in it for loans, it therefore has risk.  Thus they offset that risk by giving it's depositors a proportion of the income gained upon it.  If somebody deposits into a bad bank and the money is lost, it is their own fault, they obviously didn't audit the bank thoughtfully enough!

A bank that uses fractional lending should qualify for more risk on deposit, so a higher return should be demanded from deposits.  The system is simple, and there is nothing economically or morally wrong with it.

The key difference in the bitcoin world of banking is that instead of trading promises of bank account amounts between people (eg. bank money / checks / cash), you trade the real thing, e.g. bitcoins.  So the world of bitcoin at it's foundations is solid.  If a bitcoin bank goes down, only those who use the 'bitcoin bank notes' and those who have deposited in it will be effected, not everyone like the current cash system.

The bitcoin banking wold will work identically to when we had banks who stored and loaned gold, and all the transactions were conducted in gold also.  However, gold is physical, bitcoin is not.

Yes and no. I suspect that spends between users at the same e-wallet (I don't like calling them "banks".) company are not handled the same way as regular Bitcoin client spends. The wallet file backups would be incomplete or not entirely accurate.

For example, I've noticed that when I get Bitcoins from a regular client to mybitcoin's SCI I can see the amount on the block explorer. When I get Bitcoins from another mybitcoin user I don't see it on the block explorer. They must just move bits around in their database instead.

Well, they'll tell you you can.  Truth is you won't.

What I mean is that even with a bitcoin bank, despite the technical possibility for a customer to withdraw his funds at any time, statistical laws can be found, allowinng the bank to determine an optimal reserve ratio.

Well, I am definitely going to petition banks I used if I can download their wallet at least one time everyday at anytime I want.

Notice that nothing prevents an islamic banker to lend your money (with no interest of course), to someone.

This means that you could also lose your savings with this system.


There's nothing wrong in fractionnal reserve banking, as long as the customer knows what is is doing.  He is giving his money to someone else.  There is necessarly a risk involved.

From mybitcoin's terms: (https://www.mybitcoin.com/open-account.php)


Translation: Not a bank.


Translation: The Bitcoins in your mybitcoin account belong to you.


Translation: Full reserve.

Yes, they *could* steal and plunder and be a bunch of pirates but that would ruin their reputation. Why would they put all of this effort into this project just to toss it all away?

I, personally, don't keep my Bitcoins there. I use their merchant tools because they seem to be the best ones out there so far.

Well

Loaning is fine. It's just losing my saving due to fractional reserve banking that I am worried about.

Uh huh.

FYI: The topic of usury has been discussed on these forums before, and in great depth.

It was also frowned upon by other religions too. It was punishable by death in many regions of the world.

Earning money, just because you have money, was seen as parasitic.

In case of Bitcoin, the banks can give out wallet backups for each user to ensure they're full reserving.

I might be wrong here, but I heard that under traditional islamic laws, usury, and thus lending for interest are forbidden.

http://en.wikipedia.org/wiki/Islamic_banking

After seeing that money as debt video, that sounds like a pretty good thing !

I disagree. Full reserve holdings companies do exist, and they don't necessarily go fractional reserve "naturally".


That largely depends on the agreement that you have with the organization that is holding your money. If a breach of the agreement happened the "bank" (or e-wallet company, whatever), would quickly lose the public's trust and fast become worthless/useless.

Of course if it were done silently only a run on the holdings would make that information known. This is an entirely different topic. lol

Well, you're supposed to trust a bunch of bureaucrats who will audit the bank and check that everything is in order and that the accounts have not been falsified.

Hmm, how do you verify the integrity of banks?

I think those activities come naturally once you start collecting and storing money from the public.

When you collect money from the public, you can not just sit on that money, doing nothing.  It would be a waste of resource.  You will eventually decide to do something with it, without telling your clients if necessary.

That's why banking is usually described as an unseparable set of apparently different activities :  collecting, storing, offering credit and so on...

mtgox is obviously not full reserved since LRUSD and bank wires aren't dealing with the same currency, and you can fund your account with both.