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> In a world where fractional reserve banking still exists, but is backed by bitcoin, you’d have lots of “bitcoin notes” being created, NOT bitcoin. No one woul

by lottin 5y ago

> In a world where fractional reserve banking still exists, but is backed by bitcoin, you’d have lots of “bitcoin notes” being created, NOT bitcoin. No one would be creating new bitcoin apart from miners. No, this is a misunderstanding of how fractional reserve banking works. Bank deposits are money, despite the fact that they might be only partially backed with reserves. Bank deposits are not IOUs. And the same is true of bitcoin deposits held by the public at crypto-exchanges. Theses bitcoin balances are bitcoins, despite the fact that they might be only partially backed with reserves. These are not a "bitcoin notes", but actual bitcoins. And therefore more bitcoins can be created by exchanges simply by lowering their reserve ratio.

didericis 5y ago
> the same is true of bitcoin deposits held by the public at crypto-exchanges. These bitcoin balances are bitcoin No, those balances are not bitcoin. If it is not a balance assigned in the distributed ledger, it is not bitcoin. I understand that the ious in the dollar system are the money. You are misunderstanding the difference in how the reserves would be generated in a world backed by bitcoin. Saying bitcoin is the same as an iou not on chain is an egregious misrepresentation. Bitcoin in a world with “bitcoin notes” backed by fractional reserve banking would be very similar to gold when dollars used to be exchangeable for a set amount of gold. It is not the dollar in that comparison, it is the gold. But it has the added property that it is easily transportable and could also act as a direct form of payment. It is not practical to buy a sandwich with the equivalent dollar amount of gold, even when there was a static exchange rate between the two when we were on the gold standard. It would, however, be practical to ALSO directly exchange bitcoin, in addition to exchanging “bitcoin notes”. Direct exchange is the original vision of crypto, but a world where people primarily exchange “bitcoin notes” instead of bitcoin still benefits from the fixed supply of what the note can be exchanged for.

by lottin 5y ago

didericis 5y ago

> the same is true of bitcoin deposits held by the public at crypto-exchanges. These bitcoin balances are bitcoin No, those balances are not bitcoin. If it is not a balance assigned in the distributed ledger, it is not bitcoin. I understand that the ious in the dollar system are the money. You are misunderstanding the difference in how the reserves would be generated in a world backed by bitcoin. Saying bitcoin is the same as an iou not on chain is an egregious misrepresentation. Bitcoin in a world with “bitcoin notes” backed by fractional reserve banking would be very similar to gold when dollars used to be exchangeable for a set amount of gold. It is not the dollar in that comparison, it is the gold. But it has the added property that it is easily transportable and could also act as a direct form of payment. It is not practical to buy a sandwich with the equivalent dollar amount of gold, even when there was a static exchange rate between the two when we were on the gold standard. It would, however, be practical to ALSO directly exchange bitcoin, in addition to exchanging “bitcoin notes”. Direct exchange is the original vision of crypto, but a world where people primarily exchange “bitcoin notes” instead of bitcoin still benefits from the fixed supply of what the note can be exchanged for.