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It's interesting to watch Jeremy Allaire repeatedly say that only well-funded companies should be trusted to hold consumers' bitcoins. Companies like, well, hi
by nostromo 13y ago
It's interesting to watch Jeremy Allaire repeatedly say that only well-funded companies should be trusted to hold consumers' bitcoins.
Companies like, well, his.
- sliverstorm 13y agoIt's nothing new. You want banks to have considerable reserve capital, and if you are a company whose function is to "hold BTC" you are a bank.
- julespitt 13y agoThe definition of bank is not an entity that holds currency, otherwise any company or you or I are a bank. To keep it simple, Banks hold reserves because they lend. Paypal, for instance, is not a bank. If your tiny Bitcoin startup holds $1000 in bitcoin, and your obligations are $1000, I don't see the problem.
- sliverstorm 13y agoThe definition of bank is not an entity that holds currency Ok, you're right, that's an oversimplified view.
- camus2 13y ago> Paypal, for instance, is not a bank. Paypal is a bank in Europe. A paypal account is legally a bank account here.
- nostromo 13y agoIs fractional lending even possible with bitcoin? And, if not, why do you need reserve capital?
- sliverstorm 13y agoOf course it's possible. Customer A deposits 2 BTC to Bank A Bank A loans 1 BTC to Customer B Bank A is now a fractional reserve bank, with 50% of its outstanding debts to Customer A actually on-hand.
- a8da6b0c91d 13y agoBut it's kind of like going back to using doubloons as the actual currency, as opposed to certificates. I don't think in practice you could get anywhere like the reserve ratios typical now.
- sliverstorm 13y agoBanks can't print money, so as far as the day-to-day operations of the bank is concerned, the only practical difference between bank notes and doubloons is notes are much easier to process & store!
- moron4hire 13y agoBanks can effectively print money. They can take out loans from the Fed at effectively 0% interest rates, then lend out ten times as much to people. And they can lend to other banks, who they themselves can then lend ten times as much. Banks can print money.
- AnIrishDuck 13y agoSort of. Banks under fractional reserve are limited by a "reserve requirement" [1]. This limits the amount a bank can loan at any time. For example, the reserve requirement imposed on banks in the US today is at most 10% of the bank's liabilities [2]. Bitcoin would impose a 100% reserve requirement that is unheard of (as far as I can tell) in modern banking. I don't believe we can accurately predict the effects of this requirement. I also believe we can't state with any certainty that, given this requirement, a bitcoin banking system would behave at all alike to our current fractional reserve banking system. Frankly, this appears to be another area where bitcoin doesn't seem suited to handle the economic needs of the modern world. 1. http://en.wikipedia.org/wiki/Reserve_requirement http://en.wikipedia.org/wiki/Reserve_requirement 2. http://www.federalreserve.gov/monetarypolicy/reservereq.htm http://www.federalreserve.gov/monetarypolicy/reservereq.htm
- deleted 13y ago[deleted]
- genericacct 13y agoBy the way, is this the same Jeremy Allaire that wrote coldfusion, which was acquired by adobe, and was exploited in the biggest privacy data breach in history?
- lazugod 13y agoWhy on Earth would that be relevant?
- genericacct 13y agoDoesn't seem like the kind of person who can give security lessons to anyone
- Jtsummers 13y agoThat depends on what he's learned. Not to mention, he hasn't had anything to do with the platform since 2003. I have no idea what he's done or learned in the intervening 10 years, but I'd hate people to judge me today on what I developed 10 years ago without considering what I've learned and developed since.
- dwaltrip 13y agoYeah that kind of pissed me off. It felt like he was promoting the moat that makes it harder for smaller teams to compete. You don't need to start with $10 million in capital to innovate in the bitcoin space. Especially if interfacing with banks is not a key aspect of the business. Accountability is important, however.
- yeukhon 13y agoYou should. There is a liability. You are thinking self financing with bitcoin, but when regulation comes public consumers will expect some degree of liability. And this needs capital, not 50k from your personal bank to keep your server running.