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Fractional reserve banking works, up to a certain multiplier (you can loan out every bitcoin you take in; if you can find people willing to accept "certificates
by JoachimSchipper 16y ago
Fractional reserve banking works, up to a certain multiplier (you can loan out every bitcoin you take in; if you can find people willing to accept "certificates valid for 1 bitcoin", you can loan out as many as you want).
- narrator 16y agoCertificates valid for one bitcoin are not bitcoins though. There is no reason to keep your money with a bank for safekeeping as their is for physical gold which is how the whole fractional reserve system got started. The goldsmith would give you receipts valid for your gold so you could safekeep it with him. Also, there is no government to print up fiat to bail out the banking system, so when loans default investors lose their money permanently.