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You'll have to explain how that's usefully different from the fiat context.

by NovemberWhiskey 4y ago

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.
        NovemberWhiskey 4y ago
        I think that's right - fiat currency is not asset backed; in the case of the USD, it's backed by "the full faith and credit" of the U.S. government.
- matheusmoreira 4y ago
  > If someone loans you BTC, the supply of BTC has not increased. True when someone does it, false when a fractional reserve bank does it. When someone loans money to someone else, money physically changes hands and there is no concept of a reserve. Banks are able to maintain the illusion of full reserves even though they operate in a state of perpetual insolvency.
  - Karunamon 4y ago
    Please explain the mechanism by which a "bank" is able to transfer to you an amount of BTC that they do not have wallet control over? This is a critical difference. A bank can loan you fiat money that they do not physically have, with the almost always correct assumption that most people won't want to convert that database entry into cash at the same time. This is not possible with bitcoin. Either the bank has the coins in wallets they control to send to a wallet you control, or they do not and can't.
    - NovemberWhiskey 4y ago
      >Please explain the mechanism by which a "bank" is able to transfer to you an amount of BTC that they do not have wallet control over? BTC that's in an offline wallet is like cash under the bed; and you're right that no-one is lending money that they have under the bed. However, a significant number of BTC owners don't keep their money in their own wallets - they keep it at an exchange, which almost certainly commingles it with other owners in shared wallets. You can certainly take a maximalist position here and assert that the exchange is the real owner, because they have the private keys. The fact of the matter is that the real world includes a difference between legal and beneficial ownership; and has done since well before the existence of fiat currencies - because it's useful.
      - Karunamon 4y ago
        That still is not the same thing. Coins in an exchange can only be traded for other coins in the same exchange - it's effectively KrakenBTC or BinanceBTC or [...]. Unlike fiat money in a bank, these exchange balances exist only in their walled gardens and cannot be exchanged for goods or services, effectively decoupling them from the total supply. The total supply of bitcoin is the sum of all unspent transaction outputs on the Blockchain. Not what a bunch of exchanges tell their users they have.

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.
      - NovemberWhiskey 4y ago
        I think that's right - fiat currency is not asset backed; in the case of the USD, it's backed by "the full faith and credit" of the U.S. government.
matheusmoreira 4y ago
> If someone loans you BTC, the supply of BTC has not increased. True when someone does it, false when a fractional reserve bank does it. When someone loans money to someone else, money physically changes hands and there is no concept of a reserve. Banks are able to maintain the illusion of full reserves even though they operate in a state of perpetual insolvency.
- Karunamon 4y ago
  Please explain the mechanism by which a "bank" is able to transfer to you an amount of BTC that they do not have wallet control over? This is a critical difference. A bank can loan you fiat money that they do not physically have, with the almost always correct assumption that most people won't want to convert that database entry into cash at the same time. This is not possible with bitcoin. Either the bank has the coins in wallets they control to send to a wallet you control, or they do not and can't.
  - NovemberWhiskey 4y ago
    >Please explain the mechanism by which a "bank" is able to transfer to you an amount of BTC that they do not have wallet control over? BTC that's in an offline wallet is like cash under the bed; and you're right that no-one is lending money that they have under the bed. However, a significant number of BTC owners don't keep their money in their own wallets - they keep it at an exchange, which almost certainly commingles it with other owners in shared wallets. You can certainly take a maximalist position here and assert that the exchange is the real owner, because they have the private keys. The fact of the matter is that the real world includes a difference between legal and beneficial ownership; and has done since well before the existence of fiat currencies - because it's useful.
    - Karunamon 4y ago
      That still is not the same thing. Coins in an exchange can only be traded for other coins in the same exchange - it's effectively KrakenBTC or BinanceBTC or [...]. Unlike fiat money in a bank, these exchange balances exist only in their walled gardens and cannot be exchanged for goods or services, effectively decoupling them from the total supply. The total supply of bitcoin is the sum of all unspent transaction outputs on the Blockchain. Not what a bunch of exchanges tell their users they have.