Quote from: o_e_l_e_o on Today at 10:16:01 AM

The whole premise behind fractional reserve is that banks aren't handing out real money or real coins when they approve loans or credit for their customers. They are handing out numbers on a spreadsheet only. This could work in bitcoin just fine if people don't actually withdraw their coins from the platform in to their own wallet, but rather just trust the number the platform shows them is present in their account, as they do with centralized exchanges, web wallets, and so on.

Indeed, forcing the bank or centralized service to sacrifice some of the coins they are holding with every block mined, actively encourages them to hold as little as possible in their reserves, making fractional reserve worse rather than better.

This of course all ignores the fact that you would never get consensus on a proposal to start stealing coins from people's wallets and adding them back in to block rewards.

The difference is that if you end up with all of your fiat with you, then some people would have to car thousands of dollars, some would even have to face with millions of dollars stored somewhere, you can't put that in your wallet in cash. Whereas in crypto we are talking about digital numbers, download a non-custodial wallet on your phone and pay with QR code if you want to and you are done, it is as easy as that to carry crypto.

Yet, we are still seeing billions of dollars deposited into exchanges, what happens if those exchanges started to use your money to do something with it? What if there are 2 billion dollars deposited but 1.5 billion dollars left because exchange lost half a million dollars trying to do something? As long as people do not withdraw all together, they will slowly make that back as profit and will eventually equal the deposited number again.