Fractional reserve banking means that you get more interest on your savings.
Imagine, 20 million BTC are held in a bank offering 1% interest. They stay sitting for 6 years with compound interest, see the issue?
The reason interest had to exist in the first place, was to incentivize actually putting money into the banks, now the only reason to do it would be security. Additionally, if inflation didn't exist, I think people could learn to be happy with a 0% ROI in banks. With Bitcoin, it may even be reasonable for banks to charge anti-interest to accommodate the deflation that will arise. So long as the interest matches inflation, the system is fair, and you never lose purchasing power parity from your savings.
Got to disagree there.
Interest is the key driver or mechanism which gets money from the hands of savers who have spare money into the hands of producers who need it for expansion or more efficient production. Producers benefit society and living standards. This is the essence of capitalism.
Today the whole system has gone horribly wrong because borrowed money is being used for consumption (cars, holidays, houses), and reckless lenders (banks) are constantly bailed out by central banks. It is bankruptcy which is the cleansing process in capitalism releasing money from the banks back into society. Interest can work in an economy with an inflexible monetary base (Bitcoin). In the example of a bank with 20 mil BTC offering 6%, it would soon go bankrupt, releasing BTC to the system and restoring normal conditions.
Central banks create moral hazard by manipulating interest rates, encouraging reckless lending (for consumption), excessive credit money, enabling excessive government funded by excessive debt, diverting funds from producers, stealth taxing savers, and thereby creating a system where eternal inflation is an essential feature.