Re:“They’ll Just Make It Illegal”
by landryraccoon on Saturday June 23, 2018 @10:23AM
(#17381392)
The crypto bank that puts deposits to work can pay interest. The 100% reserve bank can’t. That’s how it competes.
Consumers will use it because they already use banks without 100% reserves such as Bank of America, HSBC, any current bank in the banking system...
Yes but banks are protected by the mechanisms I mentioned.
What happens if financial institutions cannot "create money", i.e. make loans?
I don't have all the answers about how a new economic system might work, but some possibilities I can think of include:
- New cryptocurrencies (possibly built on smart contract platforms) could replicate some features of the banking system
- Some loans could be based on deposits instead of new money creation (i.e. the naive view of how banks work)
- Easier creation of equity instruments based on crypto tokens could substitute for debt financing
One thing that fascinates me about all this is the ease of experimenting with new ideas. I don't know where we'll end up, but I'm optimistic that this messy process will end up advancing civilization.
In some future crypto-based world, exchanges can be fully audited on a blockchain. Using technologies like Plasma you can even have a cryptographic guarantee that you'll be able to get your money back out, even though the exchange itself runs on a fast central database. The sort of crypto bank you're describing would have a hard time competing with that.