banks do not create money, they create money substitutes
fractional reserve banking is an inherent aspect of all lending
I agree that the argument feels like a nitpick -- "fractional reserve exchanges didn't increase the supply of bitcoin, they increased the supply of claims on bitcoin" feels like a trick.
However, I am convinced of the argument that exchanges (or banks for that matter) cannot create infinity claims on bitcoin. They are still constrained by real settlement when it happens. So while they can affect price by increasing the number of claims on bitcoin, they are limited in their ability to do this y the necessity of maintaining some percentage of real bitcoin in order to meet withdrawals.
Is Voskuil arguing this to demonstrate that fractional reserve banking is inevitable? That fractional reserve banking is caused by lending, bank or no, and money printing is just an effect?
Yes, I believe the argument is that fractional reserve banking is necessary for growth -- which kinda implies that it is inevitable. But he would disagree that banks engage in money printing.
The argument is that banks/exchanges create credit/claims on bitcoin. And this is different than money because exchange balances never settle for the full balance (there's always a withdrawal fee or something which, even if slight, is tantamount to a discount on the value of the balance).
So I think that saying what fractional reserve exchanges are doing is creating credit and not money printing is not a nitpick. It's a real difference.
I suspect Voskuil's larger point here is that he wants to defend the concept of fractional reserve banking. He doesn't see that as the source of problems. He sees government control of money supply as the source.
I believe the cryptoeconomics argument is that
I agree that the argument feels like a nitpick -- "fractional reserve exchanges didn't increase the supply of bitcoin, they increased the supply of claims on bitcoin" feels like a trick.
However, I am convinced of the argument that exchanges (or banks for that matter) cannot create infinity claims on bitcoin. They are still constrained by real settlement when it happens. So while they can affect price by increasing the number of claims on bitcoin, they are limited in their ability to do this y the necessity of maintaining some percentage of real bitcoin in order to meet withdrawals.
Yes, I believe the argument is that fractional reserve banking is necessary for growth -- which kinda implies that it is inevitable. But he would disagree that banks engage in money printing.
The argument is that banks/exchanges create credit/claims on bitcoin. And this is different than money because exchange balances never settle for the full balance (there's always a withdrawal fee or something which, even if slight, is tantamount to a discount on the value of the balance).
So I think that saying what fractional reserve exchanges are doing is creating credit and not money printing is not a nitpick. It's a real difference.
I suspect Voskuil's larger point here is that he wants to defend the concept of fractional reserve banking. He doesn't see that as the source of problems. He sees government control of money supply as the source.