Bizarre Shadowy Paper-Based Payment System Being Rolled Out Worldwide

Re:Bizarre Shadowy Paper-Based Payment System Being Rolled O... by antr on Tuesday February 18, 2014 @01:43PM (#7260074)

> This is how all banks worked before Yes, before the 19th century. I didn't live back then, but I'm guessing we've come a long way since then: the credit card, online banking, security, etc.

Can you please explain to me how can a BTC exchange can run fractional reserve banking with the current design of Bitcoin? Because I can't.

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Re:Bizarre Shadowy Paper-Based Payment System Being Rolled O... by hapless on Tuesday February 18, 2014 @02:24PM (#7260418)

You give your BTC to MtGox. At this point, you no longer hold your BTC. You have exchanged BTC for a MtGox-denominated currency that is ostensibly convertible to BTC.

At that point, nothing stops MtGox from operating a fractional reserve bank. Or just stealing your deposits.

Substitute any other "exchange" name for MtGox. The principle is the same.

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Re:Bizarre Shadowy Paper-Based Payment System Being Rolled O... by antr on Tuesday February 18, 2014 @03:36PM (#7260858)

that's is not fractional reserve banking. on top of that, yo required another currency (another risk), a requirement you don't need with the current system

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Re:Bizarre Shadowy Paper-Based Payment System Being Rolled O... by maxerickson on Tuesday February 18, 2014 @01:48PM (#7260112)

It just has to make some loans.

If it has 1 bitcoin of deposits and writes 0.5 bitcoin of loans, it can't cover the deposits anymore.

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Re:Bizarre Shadowy Paper-Based Payment System Being Rolled O... by antr on Tuesday February 18, 2014 @03:36PM (#7260866)

fractional reserve banking != loans

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Re:Bizarre Shadowy Paper-Based Payment System Being Rolled O... by maxerickson on Tuesday February 18, 2014 @03:46PM (#7260920)

Yes it does.

I think maybe you are talking about the money creation that a central bank can do. That involves more than just fractional reserve banking, but it often is done in the context of fractional reserve banking.

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Re:Bizarre Shadowy Paper-Based Payment System Being Rolled O... by antr on Wednesday February 19, 2014 @11:05AM (#7264233)

> Yes it does.

Wow. Information/knowledge is one click away. I highly advise Google.

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Re:Bizarre Shadowy Paper-Based Payment System Being Rolled O... by maxerickson on Wednesday February 19, 2014 @11:40AM (#7264446)

I searched out this:

https://www.khanacademy.org/economics-finance-domain/core-fi...

It would be useful for you to explain how 'making loans of deposits' is not a reasonable simplification of that.

Of course actual banking practice is more complicated, but the core meaning of fractional reserve banking is to make loans (or investments, but that is a reasonable thing to leave out in a simplification) out of (demand) deposits (the difference between a deposit and a demand deposit is just a technical matter, for btc the lending institution and depositor would have to work out how immediately available the deposited coins would have to be).

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