Quote from: beeblebrox on June 06, 2013, 07:49:43 AM

Quote from: Razick on June 06, 2013, 06:41:44 AM

Quote from: Chet on June 06, 2013, 06:32:23 AM

Anything can be abused.
Fractional reserve doesn't seem possible with BTC, no way you could lend btc you didn't have. But it would be possible to create a system that lent $ (or some other fiat) based on holdings of BTC. I don't see why anyone would, but thats a different question.

Fractional reserve banking doesn't allow lending money that doesn't exist, it just permits lending money that you don't personally have even though someone else does.

It is possible to do fractional reserve banking with bitcoin. Fractional reserve banking does allow to you to lend money that doesn't exist-- indeed that is exactly what banking is all about. The banks lending more money than they have on deposit is how money is created!

That's the effect, but it's not like an individual bank has $100 in deposits and loans out $1,000. That is the symptom, but it's not that simple if I understand correctly.