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>The entire purpose of the Federal Reserve is to enable a system of monetary expansion or contraction This is just one of several mandates that the Fed has. T

>The entire purpose of the Federal Reserve is to enable a system of monetary expansion or contraction This is just one of several mandates that the Fed has. The Fed also exists to supervise and regulate banking institutions, in addition to running the national payment system. The author's post could fall under the latter responsibility.

zanny 12y ago
> The Fed also exists to supervise and regulate banking institutions So how, exactly, in a world where bitcoin was king (and pigs could fly) would the fed "regulate" bitcoin institutions? You cannot do fractional reserve banking in bitcoin without all your loans being blatantly obvious and public. Users would track the coins they put in the wallets you control in their name, and if you touch them they will raise hell. You don't need consumer protections in that system because everything is public. And I don't condone whatever privacy violations would be necessary to audit a bitcoin banks wallet security infrastructure, when they can naturally (in the same way services like bitfinex and campbx have sought security accreditations) do so on their own as a competitive advantage without any unnecessary violence. So what exactly is the federal reserve going to do to bitcoin wallet holders (aka bitcoin banks) besides the above? Bitcoin as property is just as prosecutable in court if your bank fucks up and loses your money as any other asset, I can't believe that is reason for an entire bureaucratic federal infrastructure to exist.
- krschultz 12y ago
  We did fractional reserve banking w/ the gold standard. There is no reason you couldn't do fractional reserve banking on top of bitcoin, with the bitcoin replacing gold.
  - zanny 12y ago
    I don't mean you cannot do it, you just cannot obfuscate where the money goes, since you can trace bitcoins across the block chain unless people are actively and intentionally diluting them, in which case you know where the paper trail ends and thus who was doing that.
- msandford 12y ago
  Sure you can! Remember Fedcoins have convertability to paper, and paper has convertability to Fedcoin. That means that Fedcoin can be created and destroyed at will by the Fed. Since nobody knows the total amount of cash in circulation (maybe not even the Fed) it's basically impossible to prove that the Fed "printed" Fedcoins by making them up rather than "legitimately" converting cash into Fedcoins. It's not as though the Fed is going to mark the provenance of the coins to facilitate people analyzing the system. All cash that gets converted to Fedcoin comes out of the Fed's wallet and all Fedcoin that gets converted to cash goes into the Fed's wallet. The whole point of bitcoin is that you don't need a central authority to keep people from making up an infinite number of "chits". But if you're going to have a system where there are some folks in charge there's no need to have a blockchain; it's an artifact of the need to have a decentralized authority system. If they can create and destroy at will for convertability to work, they can create and destroy at will to print money.
- icebraining 12y ago
  You cannot do fractional reserve banking in bitcoin without all your loans being blatantly obvious and public. Users would track the coins they put in the wallets you control in their name, and if you touch them they will raise hell. Did that happened with Mt.Gox or any of the other "web wallets" where all BTC is mixed in various addresses? How do you even know if they're touching "your" Bitcoins or theirs? There's no such thing as "a" Bitcoin that you can track. You don't need consumer protections in that system because everything is public. The ownership of the addresses isn't. The bank just transferred X BTC to another wallet, is that an internal reshuffle or a loan?
- dllthomas 12y ago
  "Users would track the coins they put in the wallets you control in their name, and if you touch them they will raise hell." That's not a bank, that's a security service that users would have to pay for. There is nothing about bitcoin that prevents banks that run the traditional way where I loan bitcoin to the bank and the bank loans bitcoin to home buyers and such and give me back some small interest at some negligible risk.

zanny 12y ago

> The Fed also exists to supervise and regulate banking institutions So how, exactly, in a world where bitcoin was king (and pigs could fly) would the fed "regulate" bitcoin institutions? You cannot do fractional reserve banking in bitcoin without all your loans being blatantly obvious and public. Users would track the coins they put in the wallets you control in their name, and if you touch them they will raise hell. You don't need consumer protections in that system because everything is public. And I don't condone whatever privacy violations would be necessary to audit a bitcoin banks wallet security infrastructure, when they can naturally (in the same way services like bitfinex and campbx have sought security accreditations) do so on their own as a competitive advantage without any unnecessary violence. So what exactly is the federal reserve going to do to bitcoin wallet holders (aka bitcoin banks) besides the above? Bitcoin as property is just as prosecutable in court if your bank fucks up and loses your money as any other asset, I can't believe that is reason for an entire bureaucratic federal infrastructure to exist.

krschultz 12y ago
We did fractional reserve banking w/ the gold standard. There is no reason you couldn't do fractional reserve banking on top of bitcoin, with the bitcoin replacing gold.
- zanny 12y ago
  I don't mean you cannot do it, you just cannot obfuscate where the money goes, since you can trace bitcoins across the block chain unless people are actively and intentionally diluting them, in which case you know where the paper trail ends and thus who was doing that.
msandford 12y ago
Sure you can! Remember Fedcoins have convertability to paper, and paper has convertability to Fedcoin. That means that Fedcoin can be created and destroyed at will by the Fed. Since nobody knows the total amount of cash in circulation (maybe not even the Fed) it's basically impossible to prove that the Fed "printed" Fedcoins by making them up rather than "legitimately" converting cash into Fedcoins. It's not as though the Fed is going to mark the provenance of the coins to facilitate people analyzing the system. All cash that gets converted to Fedcoin comes out of the Fed's wallet and all Fedcoin that gets converted to cash goes into the Fed's wallet. The whole point of bitcoin is that you don't need a central authority to keep people from making up an infinite number of "chits". But if you're going to have a system where there are some folks in charge there's no need to have a blockchain; it's an artifact of the need to have a decentralized authority system. If they can create and destroy at will for convertability to work, they can create and destroy at will to print money.
icebraining 12y ago
You cannot do fractional reserve banking in bitcoin without all your loans being blatantly obvious and public. Users would track the coins they put in the wallets you control in their name, and if you touch them they will raise hell. Did that happened with Mt.Gox or any of the other "web wallets" where all BTC is mixed in various addresses? How do you even know if they're touching "your" Bitcoins or theirs? There's no such thing as "a" Bitcoin that you can track. You don't need consumer protections in that system because everything is public. The ownership of the addresses isn't. The bank just transferred X BTC to another wallet, is that an internal reshuffle or a loan?
dllthomas 12y ago
"Users would track the coins they put in the wallets you control in their name, and if you touch them they will raise hell." That's not a bank, that's a security service that users would have to pay for. There is nothing about bitcoin that prevents banks that run the traditional way where I loan bitcoin to the bank and the bank loans bitcoin to home buyers and such and give me back some small interest at some negligible risk.