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> 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/eu
by 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 agoBitcoin 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.