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It's transparency with the bank reserves. With a bank, you actually don't know if there is gold in their vault unless you go and verify if the gold is in the v
by mahyarm 10y ago
It's transparency with the bank reserves. With a bank, you actually don't know if there is gold in their vault unless you go and verify if the gold is in the vault. A consortium of banks can also multi-sign an address, so a certain amount of key holders will have to sign off to move the bitcoin, decreasing risk. Then you can use the bank's services to have the equivalent of credit cards, fast off chain transactions and so on.
I guess a similar gold vault problem is possible with private key control, but that is the same as verifying if the bank still has the keys to their gold vault, a much smaller problem.
- iofj 10y agoIt's called fractional reserve banking because they don't have gold in their vaults, except for specific ratios. Very, very few banks have gold, instead they have government bonds. They don't have those in 1:1 either. In the EU: 2.5% of the value of your deposits the banks own in bonds. In the US: complex, but let's give a simple, not that wrong answer : up to 10%. In Australia: 0% required, but in practice the banks have a little bit. That's all the banks have. In our current Bretton-woods economic systems, banks create (and destroy) money.