3 ms·

> To think otherwise is an exercise in wishful thinking on your part, or not really understanding how money works. I think you are missing that, with USD, ther

> To think otherwise is an exercise in wishful thinking on your part, or not really understanding how money works. I think you are missing that, with USD, there's actually no distinction between a dollar and a dollar created by fractional reserve banking. They can be used for exactly the same things. With BTC, it's fundamentally impossible for that to be true. You are comparing fractional reserve dollars generated by a bank to a fractional reserve BTC created by an exchange but it's not an apt analogy. The bank has a charter from the government to essentially create real dollars. I'm certainly not claiming that it's impossible for a BTC exchange to be insolvent, but doing so is likely illegal and, although it may appear to, does not add net new BTC into the system. Fractional reserve banking adds net new dollars into the system which can be redeposited into a different bank (or the same bank) to once again generate new dollars. Won't work with Bitcoin. Let's take existing exchanges and brokerages: Coinbase, Robinhood, and PayPal all keep full reserves or lie about it.

lottin 5y ago
To be clear, this is not an analogy. I was describing the process by which commercial banks create money out of thin air. And the same exact process can be used by exchanges to create bitcoins out of thin air. There's nothing special about bitcoin that prevents this money-creation process from working. It works with any asset. It works with commodity-backed money as well. And you don't know that this isn't happening right now, because not all Bitcoin exchanges are audited. It might very well be the case that bitcoins are being created out of thin air right now by some exchanges, thus inflating the global supply of bitcoins. You have no way of telling. Also you don't know whether this is illegal. These exchanges could be in a jurisdiction where it is legal, and it would still affect the global supply of bitcoins.

lottin 5y ago

To be clear, this is not an analogy. I was describing the process by which commercial banks create money out of thin air. And the same exact process can be used by exchanges to create bitcoins out of thin air. There's nothing special about bitcoin that prevents this money-creation process from working. It works with any asset. It works with commodity-backed money as well. And you don't know that this isn't happening right now, because not all Bitcoin exchanges are audited. It might very well be the case that bitcoins are being created out of thin air right now by some exchanges, thus inflating the global supply of bitcoins. You have no way of telling. Also you don't know whether this is illegal. These exchanges could be in a jurisdiction where it is legal, and it would still affect the global supply of bitcoins.