Re:Cryptoeconomics: Paving the Future of Blockchain Technology
by PeterisP on Sunday July 23, 2017 @08:38AM
(#14831981)
Fractional reserve lending of bitcoin would happen in the same manner as fractional reserve lending of gold coins.
E.g. a bank attracts deposits of bitcoin (i.e. the bank gets the bitcoin, the customer gets an IOU/note in legal records saying that the bank owes them a bitcoin), lends these bitcoins out, some of the lent bitcoin get deposited in another bank and re-lent, etc. In this manner the on-chain bitcoins travel around faster, and the total money supply (bitcoin + all bitcoin-denominated IOU's) can easily grow.
E.g. a bank attracts deposits of bitcoin (i.e. the bank gets the bitcoin, the customer gets an IOU/note in legal records saying that the bank owes them a bitcoin), lends these bitcoins out, some of the lent bitcoin get deposited in another bank and re-lent, etc. In this manner the on-chain bitcoins travel around faster, and the total money supply (bitcoin + all bitcoin-denominated IOU's) can easily grow.