So I've been thinking a lot about banking lately, specifically how it could be done within an anonymous, secure, community where fraud is so freaking easy. All-in-all, I don't think it would be that difficult to set up a BitCoin bank. The problem I see is incentive to continue running it.

Traditional banks make money mostly in three ways:

- Loans paid back with interest
- Fees associated with accounts
- Other associated 'services' like a safe deposit box, financial consultations, etc

By far, I'd say the primary driver for a banks revenue stream is probably loans. Loans are done through a series of complex financial manipulations where banks are allowed to lend out roughly 9-10 times what they have in the vault at any one time (called 'fractional reserve banking' http://en.wikipedia.org/wiki/Fractional-reserve_banking) and I see that as a major problem with our current banking industry. I don't think it's a good idea for a BitCoin ban so that leaves only two major ways for a bank to earn money.

Obviously, offering things like safe deposit boxes is complex in an anonymous system (though not impossible) as are financial consultations (they can compromise a customers anonymity and the consultant would need to compromise their anonymity to prove they're not a huckster). So, really, that leaves only fees associated with accounts (holding and withdrawing) as a reliable way for a BitCoin bank to make money.  This is certainly doable but definitely (probably?) won't make a banker wealthy (which might not really be the goal).

What challenges do you think need to be overcome before we can see First Bank of BitCoin open its doors?

Rage