The bank runs and depressions were quite common in the 1800's and before, because of no effort to control inflation or deflation. Once, there was a huge invest

The bank runs and depressions were quite common in the 1800's and before, because of no effort to control inflation or deflation. Once, there was a huge investment in, get this, Wooden Roads. Everyone knows wood rots, but somehow these wooden road investments developed a huge bubble. http://www.stocklobster.com/9998mhpr.html http://www.stocklobster.com/9998mhpr.html If you take the time to read The Wealth of Nations, there is a pretty good description of banking and how it works without a common currency backed by the government. If bitcoin became the entrenched currency, what would happen is banks would issue Bitcoin vouchers to people, "This voucher from Bank of XXX is redeemable for 1 Bitcoin upon presentation." This would increase the supply of bitcoins. What the bank would actually do is probably transfer some of these bitcoins and continue on being a fractional bank, retaining say 10 Bitcoins, and investing 90 Bitcoins. If these bitcoins investments go to buying stuff from other countries, you get new capital(In the Smith sense of Capital) into the buying country, if you just lend your bitcoins to the foreign country, you get the profit, but you lose some capital (your bitcoins are in another country now, not producing capital in your own country, so even though you get a small percentage of profit, you don't grow the total capital in your country). Uh, well, read Wealth of Nations, and take notes. So these banks would still be fractional and exposed to the dangers of a bank run, because they are fractional. If you don't want a fractional bank, you need a bank that charges a storage fee. So you need deflation that outpaces the storage fee, or your stored bitcoins are losing value all the time. You can keep Bitcoins in cold storage, but then they are a) harder to use and b) must be protected. An encrypted hard drive is not a good solution because of hard drive failures. Printing them out essentially turns them into cash.