12 ms·

> There absolutely is Banks and/or exchanges cannot create more bitcoin.

by eric_cc 4y ago

matheusmoreira 4y ago
Sure they can. You deposit 1 BTC, they loan it out to someone else. Boom, 2 BTC.
- eric_cc 4y ago
  No. There is still 1 BTC in this scenerio. When you choose to deposit your 1 BTC you've lost custody of it and somebody else has gained possession of it. All you have is a promise that you'll get it back - which is not === BTC.
  - NovemberWhiskey 4y ago
    You'll have to explain how that's usefully different from the fiat context.
    - eric_cc 4y ago
      First you'll have to explain to me why you would give somebody your bitcoin and allow them to give it to somebody else!
      - NovemberWhiskey 4y ago
        ... because they promise to give you back one BTC plus something else of value?
      - matheusmoreira 4y ago
        Interest. Right now Binance is offering 5% APY for BTC savings. If you give them your BTC, you'll stack sats automatically.
      - alecbz 4y ago
        You really don't need to explain why; it's enough to observe that people do it.
      - TomSwirly 4y ago
        https://www.bankrate.com/glossary/r/repurchase-agreement-repo-loan/ https://www.bankrate.com/glossary/r/repurchase-agreement-rep... Every single day it's Economics 101 here.
    - Karunamon 4y ago
      Because there's no such thing as unbacked BTC. You either have the UTXOs pointing at an address you hold the keys for, or you do not. If someone loans you BTC, the supply of BTC has not increased.
      - NovemberWhiskey 4y ago
        All bitcoin is "unbacked". There's no intrinsically useful asset behind bitcoin. Your private key is just a bundle of bits. Bits are so abundant as to be worthless.
        eric_cc 4y ago
        Same with paper fiat currency.
        NovemberWhiskey 4y ago
        I know? The point is: neither bitcoin nor fiat currencies are asset-backed. In both cases, there are commercial entities that offer accounts where you can deposit the "thing", and the "thing" is then loaned to someone else, and this is done for some kind of valuable inducement. The question is: why is one called fractional reserve banking, a behavior that is acknowledged to increase the money supply, and the other one called "oh no this is definitely not increase of the money supply, it's just you relinquishing custody of your bitcoin and why would you do that, there's no reason you'd ever do that".
        snovv_crash 4y ago
        Actually paper fiat currency is accepted by a government to pay property tax. In this way you need it to keep possession of land, so the entire land value of the linked country, and all the infrastructure built on it, is the backing for 'fiat' currency.
        junofan 4y ago
        I think I responded to your other comment, but I don’t think this is true. Do you have any further reading? A currency is not backed by land value. It’s usually “backed” by a combination of sovereign debt obligations and its status as legal tender.
  - matheusmoreira 4y ago
    You said what happened to Luna can't happen to BTC because the BTC supply is capped. It's not. The inability to mine new BTC doesn't actually matter. The pseudobanks we call exchanges are still able to introduce numberless BTC into circulation through loans. The result is inflation and possibly market crashes in case of defaults. Really no different from what Tether and every other bank is doing. I've written more detailed posts about this: https://news.ycombinator.com/item?id=31375366 https://news.ycombinator.com/item?id=31375366
    - eric_cc 4y ago
      > BTC supply is capped. It's not. Yes, it is. They are not introducing BTC into circulation. This is verifiable via the blockchain. Banks creating IOU's or derivatives or whatever other abstraction they can come up with never generates new BTC. You'd hope that people foolish enough to work with such financial institutions would know the risk of possessing nothing but an instrument created by the bank. If you're unwilling to take custody of your own bitcoin, you better damn well do some good research on third party custodians.
      - matheusmoreira 4y ago
        How much BTC exists in the blockchain is ultimately irrelevant. What matters is the amount of BTC actively circulating. If you deposit 1 BTC on Binance, then I can get your BTC in the form of a loan. I can even withdraw your BTC. Meanwhile, Binance records still say you have 1 BTC, they even allow you to trade with it. So there's really 2 BTC in circulation. That BTC is duplicated, it's in multiple places simultaneously.
        snovv_crash 4y ago
        And of course, the music keeps playing as long as Binance has liquidity.
        codehalo 4y ago
        Still doesn't have anything to do with Bitcoin, or the bitcoin supply.
  - TomSwirly 4y ago
    > There is still 1 BTC in this scenerio. You simply do not understand finance. Consider Eurodollars as another example: https://www.investopedia.com/terms/e/eurodollar.asp https://www.investopedia.com/terms/e/eurodollar.asp
    - gardenhedge 4y ago
      > You deposit 1 BTC, they loan it out to someone else. Boom, 2 BTC. Do you mean "they" purchase a second bitcoin with the second person's loan money? if not, where does the second bitcoin come from? (Hint: think about the blockchain)
      - kemotep 4y ago
        Bitcoin is fungible. That Bitcoin doesn’t have to be *exactly* yours but they update their ledger and loan 1 BTC to someone after you deposit your 1 BTC into the bank account. Based on the interest rate of that loan, the bank is giving you a cut in Satoshis. If you choose to withdraw the 1 BTC before the other person’s loan is pid back, they must provide you 1 BTC. They can choose to take that 1 BTC from someone else’s account or use the profits they make in loans and other financial transactions to provide you that 1 BTC. On the blockchain, there only exists the 1 you deposited, the 1 that was loaned, and the 1 that was generated as profit by the bank. The blockchain tracks these transactions. The bank only has to settle these transactions when someone withdraws and when someone is depositing. Internally, there can be as many or as little transactions are as necessary.
  - winkeltripel 4y ago
    If it is close enough for a real bank in USD, it's probably okay for an exchange in bitcoins, right? If the bank/exchange maintains a 5% reserve, every unit of currency can produce a multiplier/velocity of 20. Bank loans substantially increase the ability of businesses to fund activity.

> There absolutely is Banks and/or exchanges cannot create more bitcoin.

matheusmoreira 4y ago

Sure they can. You deposit 1 BTC, they loan it out to someone else. Boom, 2 BTC.

eric_cc 4y ago
No. There is still 1 BTC in this scenerio. When you choose to deposit your 1 BTC you've lost custody of it and somebody else has gained possession of it. All you have is a promise that you'll get it back - which is not === BTC.
- NovemberWhiskey 4y ago
  You'll have to explain how that's usefully different from the fiat context.
  - eric_cc 4y ago
    First you'll have to explain to me why you would give somebody your bitcoin and allow them to give it to somebody else!
    - NovemberWhiskey 4y ago
      ... because they promise to give you back one BTC plus something else of value?
    - matheusmoreira 4y ago
      Interest. Right now Binance is offering 5% APY for BTC savings. If you give them your BTC, you'll stack sats automatically.
    - alecbz 4y ago
      You really don't need to explain why; it's enough to observe that people do it.
    - TomSwirly 4y ago
      https://www.bankrate.com/glossary/r/repurchase-agreement-repo-loan/ https://www.bankrate.com/glossary/r/repurchase-agreement-rep... Every single day it's Economics 101 here.
  - Karunamon 4y ago
    Because there's no such thing as unbacked BTC. You either have the UTXOs pointing at an address you hold the keys for, or you do not. If someone loans you BTC, the supply of BTC has not increased.
    - NovemberWhiskey 4y ago
      All bitcoin is "unbacked". There's no intrinsically useful asset behind bitcoin. Your private key is just a bundle of bits. Bits are so abundant as to be worthless.
      - eric_cc 4y ago
        Same with paper fiat currency.
        NovemberWhiskey 4y ago
        I know? The point is: neither bitcoin nor fiat currencies are asset-backed. In both cases, there are commercial entities that offer accounts where you can deposit the "thing", and the "thing" is then loaned to someone else, and this is done for some kind of valuable inducement. The question is: why is one called fractional reserve banking, a behavior that is acknowledged to increase the money supply, and the other one called "oh no this is definitely not increase of the money supply, it's just you relinquishing custody of your bitcoin and why would you do that, there's no reason you'd ever do that".
        snovv_crash 4y ago
        Actually paper fiat currency is accepted by a government to pay property tax. In this way you need it to keep possession of land, so the entire land value of the linked country, and all the infrastructure built on it, is the backing for 'fiat' currency.
        junofan 4y ago
        I think I responded to your other comment, but I don’t think this is true. Do you have any further reading? A currency is not backed by land value. It’s usually “backed” by a combination of sovereign debt obligations and its status as legal tender.
- matheusmoreira 4y ago
  You said what happened to Luna can't happen to BTC because the BTC supply is capped. It's not. The inability to mine new BTC doesn't actually matter. The pseudobanks we call exchanges are still able to introduce numberless BTC into circulation through loans. The result is inflation and possibly market crashes in case of defaults. Really no different from what Tether and every other bank is doing. I've written more detailed posts about this: https://news.ycombinator.com/item?id=31375366 https://news.ycombinator.com/item?id=31375366
  - eric_cc 4y ago
    > BTC supply is capped. It's not. Yes, it is. They are not introducing BTC into circulation. This is verifiable via the blockchain. Banks creating IOU's or derivatives or whatever other abstraction they can come up with never generates new BTC. You'd hope that people foolish enough to work with such financial institutions would know the risk of possessing nothing but an instrument created by the bank. If you're unwilling to take custody of your own bitcoin, you better damn well do some good research on third party custodians.
    - matheusmoreira 4y ago
      How much BTC exists in the blockchain is ultimately irrelevant. What matters is the amount of BTC actively circulating. If you deposit 1 BTC on Binance, then I can get your BTC in the form of a loan. I can even withdraw your BTC. Meanwhile, Binance records still say you have 1 BTC, they even allow you to trade with it. So there's really 2 BTC in circulation. That BTC is duplicated, it's in multiple places simultaneously.
      - snovv_crash 4y ago
        And of course, the music keeps playing as long as Binance has liquidity.
        codehalo 4y ago
        Still doesn't have anything to do with Bitcoin, or the bitcoin supply.
- TomSwirly 4y ago
  > There is still 1 BTC in this scenerio. You simply do not understand finance. Consider Eurodollars as another example: https://www.investopedia.com/terms/e/eurodollar.asp https://www.investopedia.com/terms/e/eurodollar.asp
  - gardenhedge 4y ago
    > You deposit 1 BTC, they loan it out to someone else. Boom, 2 BTC. Do you mean "they" purchase a second bitcoin with the second person's loan money? if not, where does the second bitcoin come from? (Hint: think about the blockchain)
    - kemotep 4y ago
      Bitcoin is fungible. That Bitcoin doesn’t have to be *exactly* yours but they update their ledger and loan 1 BTC to someone after you deposit your 1 BTC into the bank account. Based on the interest rate of that loan, the bank is giving you a cut in Satoshis. If you choose to withdraw the 1 BTC before the other person’s loan is pid back, they must provide you 1 BTC. They can choose to take that 1 BTC from someone else’s account or use the profits they make in loans and other financial transactions to provide you that 1 BTC. On the blockchain, there only exists the 1 you deposited, the 1 that was loaned, and the 1 that was generated as profit by the bank. The blockchain tracks these transactions. The bank only has to settle these transactions when someone withdraws and when someone is depositing. Internally, there can be as many or as little transactions are as necessary.
- winkeltripel 4y ago
  If it is close enough for a real bank in USD, it's probably okay for an exchange in bitcoins, right? If the bank/exchange maintains a 5% reserve, every unit of currency can produce a multiplier/velocity of 20. Bank loans substantially increase the ability of businesses to fund activity.