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0 sats \ 3 replies \ @taxd OP 14 Apr 2023 \ parent \ on: Fractional reserve banking in Bitcoin bitcoin
Banks do not lend fiat they don't have. People deposit fiat, get an IOU, and the fiat is lent out and the bank gets an IOU. Thus two IOUs are created which balance each other. But no pseudo-fiat is created.
Exactly the same thing can and will happen with BTC, since credit is valuable and bought for interest.
Sorry, but no. Banks lend money they don't have and that they create out of thin air precisely by fractional reserve, which cannot happen on PoW blockchains (BTC or LTC) layer 1.
Of course there can be other non institucional form of fraud, like lending other things than BTC or LTC using them as "collateral" that they don't have, like Sam Bankman-Fried and other crooks have done already. And that'll keep happening, of course.
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This is a very common misconception which many people have.
I don't care, I make money out of peoples mistakes instead of arguing.
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Not arguing, just trying to educate the misinformed hopping to help them better understand the corrupt system the neo-liberalism has brought us, and why Bitcoin is so much relevant than they might think.
As US Space Force's Major Jason Lowery has explained to the US Defense Department, Bitcoin is a weapon of self-defense and not just money. And I'm convince it is so not only for States (mainly for every other one to defend themselves from US predatory abuse), but also for individuals (mainly the working class and the poor, closer and closer as time pases), companies (mainly small ones), and all kind of other organisations.
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