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I don't think you understand what I was trying to say. I'm well aware that they create money, but they're literally not printing dollars. They do not cause M0 t

I don't think you understand what I was trying to say. I'm well aware that they create money, but they're literally not printing dollars. They do not cause M0 to increase. Nobody but the Treasury can cause physical dollars to be created, but that doesn't prevent fractional reserve from occurring. So, anybody who claims Bitcoin doesn't support fraction reserve based solely on the fact that banks can't create new Bitcoin is incorrect.

philipwhiuk 8y ago
Okay. I'm Chase Bank. How do I issue 600 BTC given I have 20 BTC in my account. There is zero allowance in the protocol for this to happen.
- brian_cloutier 8y ago
  Say the reserve requirement is 10%. Wikipedia states [1]: > The minimum reserve is generally determined by the central bank to be no less than a specified percentage of the amount of deposit liabilities the commercial bank owes to its customers. If someone gives Chase $100, Chase is allowed to loan out up to $90 of it, and must keep the remaining $10 in reserve. 1: https://en.wikipedia.org/wiki/Reserve_requirement https://en.wikipedia.org/wiki/Reserve_requirement The protocol allows someone with 100BTC to send someone else 90BTC.
- spookthesunset 8y ago
  Easy. As an exchange almost all your volume is “off chain” transactions between two traders. And since you aren’t audited or beholden to any financial regulation there is nothing stopping you from having one side of the trade be your own bot. All that bot does is sell newly created fake bitcoin and keeps the dirty USD fiat for the exchange owner. Again since the system isn’t audited, the exchange can have massively more “bitcoin” in its database than it actually has on the blockchain. The system (Er, scam) can work just fine until a bunch of folks start withdrawing bitcoin. Since virtually all of the exchanges are unaudited, sketchy “businesses” I wouldn’t be surprised if they all run this way. It might come to pass the almost all of the exchange volume consists of trading fake bitcoin that is backed by almost no real bitcoin.
  - DoctorOetker 8y ago
    sure but these "off chain" transactions are not really Bitcoin, but the exchange's promises of Bitcoin (or whatever cryptocurrency under discussion). As long as custommers succeed in end-to-end conversion the distinction is moot, until they fail to succeed in this end-to-end conversion. So still a commercial bank can not fractional reserve bank BTC, only fractional reserve bank promises for BTC. For a while people may fall for such a scheme but players learn...

philipwhiuk 8y ago

Okay. I'm Chase Bank. How do I issue 600 BTC given I have 20 BTC in my account. There is zero allowance in the protocol for this to happen.

brian_cloutier 8y ago
Say the reserve requirement is 10%. Wikipedia states [1]: > The minimum reserve is generally determined by the central bank to be no less than a specified percentage of the amount of deposit liabilities the commercial bank owes to its customers. If someone gives Chase $100, Chase is allowed to loan out up to $90 of it, and must keep the remaining $10 in reserve. 1: https://en.wikipedia.org/wiki/Reserve_requirement https://en.wikipedia.org/wiki/Reserve_requirement The protocol allows someone with 100BTC to send someone else 90BTC.
spookthesunset 8y ago
Easy. As an exchange almost all your volume is “off chain” transactions between two traders. And since you aren’t audited or beholden to any financial regulation there is nothing stopping you from having one side of the trade be your own bot. All that bot does is sell newly created fake bitcoin and keeps the dirty USD fiat for the exchange owner. Again since the system isn’t audited, the exchange can have massively more “bitcoin” in its database than it actually has on the blockchain. The system (Er, scam) can work just fine until a bunch of folks start withdrawing bitcoin. Since virtually all of the exchanges are unaudited, sketchy “businesses” I wouldn’t be surprised if they all run this way. It might come to pass the almost all of the exchange volume consists of trading fake bitcoin that is backed by almost no real bitcoin.
- DoctorOetker 8y ago
  sure but these "off chain" transactions are not really Bitcoin, but the exchange's promises of Bitcoin (or whatever cryptocurrency under discussion). As long as custommers succeed in end-to-end conversion the distinction is moot, until they fail to succeed in this end-to-end conversion. So still a commercial bank can not fractional reserve bank BTC, only fractional reserve bank promises for BTC. For a while people may fall for such a scheme but players learn...