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Banks don't make money from mortgages and loans, but from deposits. Our financial system uses fractional reserve. When you deposit $1 in a bank account, they ar

Banks don't make money from mortgages and loans, but from deposits. Our financial system uses fractional reserve. When you deposit $1 in a bank account, they are allowed to have ~10x that, or $10. They can literally create virtual money and deposit on other people's accounts (loans). From $1 deposit, they make 900% instantly. From $1 loan, they make 5-10% a year. Crypto exchanges can't create money. Unless they have their own tokens. But even these tokens have more transparency than our current financial system. So yes, they're pushed to handle their customers' money in risky ways to make a profit. It's dumb. Against the whole point of decentralization... It's like hosting every TOR node on AWS.

hollerith 4y ago
>Our financial system uses fractional reserve. When you deposit $1 in a bank account, they are allowed to have ~10x that, or $10. . . . From $1 deposit, they make 900% instantly. That is not how fractional reserve works. The way it works is when you deposit $1, the bank loans it to some other customer but there is a rule saying that they can loan out at most 90 cents of that $1. The purpose of the rule is to make it less likely that the bank will need to resort to the Federal Deposit Insurance Corporation when the bank's customers withdraw more money than the bank expects or hopes they will withdraw.