110 sats \ 3 replies \ @siggy47 18 Oct 2023 \ parent \ on: _Broken Money_ book club, part 2 bitcoin
I agree. I know this is heretical to some, but a fractional reserve system could be much less susceptible to fraud and manipulation with bitcoin as the asset. Gold is notoriously difficult to audit, even with good intentions. Bitcoin's ease of custody and transparent ledger could foster a whole new credit system.
I'm with you on this one -- fractional reserve is a tool that affords certain things, and you pay for those affordances w/ certain failure modes. If you make a drastic change to some underlying aspect of how it works, you should expect different outcomes to ensue.
Given the (what seems to me) genuine utility in institutions that do a good job in assessing something akin to credit-worthiness, deploying capital, etc., I can see an explosion of new types of fractional-reserve constructs and institutions made possible because of btc.
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Where bitcoin strikes me as particularly interesting in this regard, is that the free market remedy for fractional reserve banking is bank runs and those can occur very rapidly with digital money.
That means you're probably right that bitcoin will greatly reign in the amount of fractional reserve banking that occurs.
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Yeah, this is one of those really interesting cases where velocity would seem to unlock some new possibilities -- kind of like the financial analogue of more is different.
It's hard (for me) to reason about what this will actually mean, but also obvious (to me) that it will mean something.
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