Quote from: odolvlobo on February 10, 2013, 10:09:24 PM

Quote from: MoonShadow on February 10, 2013, 04:26:59 PM

Quote from: TradeFortress on February 10, 2013, 10:38:19 AM

We are going to see more than 22 million bitcoins if it actually takes off.

Taken alone, this is false. Do you wish to clarify?

I assume that he means that because of fractional reserve banking, the amount of bitcoins and bitcoin-equivalents will be much greater than 21 million.

In FRB, when you deposit money in the bank, the bank then loans out 90% of that deposit. The actual amount of money doesn't change but the perceived/effective amount of money does. The total is now 1.9 times the original amount. The same thing will happen with bitcoin.

I don't think fractional reserve banking is likely to happen in bitcoin. Why? Because bitcoin already has very low transaction cost so the use of money substitutes doesn't make sense (added risk, no gain)

For the interested I suggest an awesome read: Peter Surdas (lonelyminer) master thesis ("Economics of Bitcoin: is Bitcoin an alternative to fiat currencies and gold?"), especially chapter 3.7 "Austrian Business Cycle Theory, fractional reserve banking, money supply and Bitcoin"

http://dev.economicsofbitcoin.com/mastersthesis/mastersthesis-surda-2012-11-19b.pdf

Quote from: lonelyminer

Due to its extremely low transaction costs, a monetary system based on Bitcoin is expected to have a money supply identical to the monetary base, i.e. inelastic. This is an important goal of the proponents of the Austrian Business Cycle Theory. Bitcoin provides a historically rst opportunity to achieve a switch and a maintenance of an inelastic money supply without legal reform, and without having to address fractional
reserve banking. In this respect, it is superiour to both gold and at money.

also see Peters blog for some great articles: http://www.economicsofbitcoin.com/