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You're right that BTC IOUs on Ripple are not fully interchangeable with BTC. However, neither was gold interchangeable with USD, yet each gold note was redeemab
by crystaln 13y ago
You're right that BTC IOUs on Ripple are not fully interchangeable with BTC. However, neither was gold interchangeable with USD, yet each gold note was redeemable for gold. This did in may ways restrict the level of fractional reserve banking, and certainly the direct issuance of money. (Many suspect that the US did not have nearly enough gold to redeem all its currency, and that this was a primary motivation for leaving the gold standard.)
The process of redemption of BTC IOUs for actual BTCs on the Ripple network resembles the process of redemption of gold-backed USD for gold. Similar to gold being transmitted over a different network than gold-backed USD (the former being physical,) BTC backed notes would be transmitted over a different network - something like Ripple.
Fractional reserve banking can also be practiced directly with BTC, simply by lending against deposits.
(explained here: http://www.cnbc.com/id/101048897 http://www.cnbc.com/id/101048897)
- dnautics 13y ago"Many suspect that the US did not have nearly enough gold..." That's an understatement! It was the national policy of an entire country i.e. France (well I guess not all their citizens directly practiced this suspicion) to withdraw its gold reserves in the US for precisely this reason, until nixon closed the window in 1970.
- gaadd33 13y agoHow did Nixon taking the dollar off the gold standard change where France keeps it's gold reserves? Do you mean their standard policy was to convert all dollars received into gold? Doesn't pretty much every major country still keep some fraction of its gold reserves in the basement of the NY Federal Reserve?