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> Doesn't it depend on whether you deposit your bitcoin into a bank? Why would you? You can get better returns by simply holding it (since it is deflationary)

> Doesn't it depend on whether you deposit your bitcoin into a bank? Why would you? You can get better returns by simply holding it (since it is deflationary) than by lending it out or investing in productive assets. And even if you deposited, you can't "double spend" the bitcoin, so you can't do FRB with it. > So basically this debate is not whether fractional reserve banking is possible with bitcoin, but whether banking with bitcoin would continue to resemble banking now. It is both. You need FRB to dynamically adjust the supply of money and keep a balance with demand. And the fact that nobody will invest, which kills economic growth. No new startups, no new factories, no new bridges, no new houses, etc...

dpc_pw 8y ago
> Why would you? You can get better returns by simply holding it (since it is deflationary) than by lending it out or investing in productive assets. There's obviously a balance in this scenario, as slower investment pace, makes for slower expectation of BTC value increase. Only "investments" of very low expected return are being prevented by lack of monetary inflation. If BTC-based monetary system produces relatively slow .5% global growth, that means only investments with expected return lower than .5% are not going to happen. Which is a feature, not a bug. It makes growth cycle much more stable and self-balancing. Too high growth slows down investing cycle, low growth speeds it up. No need for central bankers. And it's not that much different than current monetary system anyway, where people just throw they currency into speculative, unproductive assets to escape inflation. Nowadays things like housing serves the role of Bitcoin.
- ucaetano 8y ago
  Sure there is a balance. Just like in emerging markets with high interest rates: if your government pays 10% per year (real terms) interest on its bonds, would you invest in a business that would only return 9%? No, nobody would ever invest in it. But there's a reason the government is paying 10%: to reward the risk of lending money to it. In the case of bitcoin, the only reason there is this deflationary "tax" is because someone arbitrarily decided that the supply of bitcoins should remain constant. So you're voluntarily fucking up your economy. Sure, "we could relax that and make the supply increase over time", but that doesn't address fluctuations on the demand for money, resulting in harder oscillations. And then "but then we could have the supply adjust dynamically based on some guidance from economists plus the balance of supply and demand for money". Well, congrats, you just recreated the modern monetary system.

dpc_pw 8y ago

> Why would you? You can get better returns by simply holding it (since it is deflationary) than by lending it out or investing in productive assets. There's obviously a balance in this scenario, as slower investment pace, makes for slower expectation of BTC value increase. Only "investments" of very low expected return are being prevented by lack of monetary inflation. If BTC-based monetary system produces relatively slow .5% global growth, that means only investments with expected return lower than .5% are not going to happen. Which is a feature, not a bug. It makes growth cycle much more stable and self-balancing. Too high growth slows down investing cycle, low growth speeds it up. No need for central bankers. And it's not that much different than current monetary system anyway, where people just throw they currency into speculative, unproductive assets to escape inflation. Nowadays things like housing serves the role of Bitcoin.

ucaetano 8y ago
Sure there is a balance. Just like in emerging markets with high interest rates: if your government pays 10% per year (real terms) interest on its bonds, would you invest in a business that would only return 9%? No, nobody would ever invest in it. But there's a reason the government is paying 10%: to reward the risk of lending money to it. In the case of bitcoin, the only reason there is this deflationary "tax" is because someone arbitrarily decided that the supply of bitcoins should remain constant. So you're voluntarily fucking up your economy. Sure, "we could relax that and make the supply increase over time", but that doesn't address fluctuations on the demand for money, resulting in harder oscillations. And then "but then we could have the supply adjust dynamically based on some guidance from economists plus the balance of supply and demand for money". Well, congrats, you just recreated the modern monetary system.