Re:Binance exchange hackers steal bitcoins worth $41m
by ForHackernews on Wednesday May 08, 2019 @12:41PM
(#19860568)
I suspect you're getting downvotes not out of disbelief but because most educated people in the developed world are already well familiar with the concept of fractional reserve banking. (For myself, it was covered in my 12th grade AP economics class) Your rather long comment doesn't contain any new information for the majority of readers.
Fractional-reserve banking is the common practice by commercial banks of accepting deposits, and making loans or investments, while holding reserves at least equal to a fraction of the bank's deposit liabilities.
Let's say we have a 5% reserve, which is realistic if you look at EU and US. Let's say there is a new bank, and you deposit 100 euro's at that bank.
I go there to lend out $95, which is allowed because the bank keeps $5. You have a nice shop, and I buy something for $95.
You deposit this $95 at the bank, which they can lend out again keeping a 5% fraction. I go there and lend out $90, buy something at your shop, and you again deposit this at the bank. We do the same with $85 and $80.
So you now have an account with 100 + 95 + 90 + 85 + 80 = $450. Nice! Now you go to that bank and request that money in cash.... oops.
Seems weird, but this is actually how it works. Look it up if you don't believe me: fractional reserve banking!!!