Hello, I have bitcoin since 2017 and follow all the various discussions about the future of bitcoin and how it may become the monetary standard one day.
One thing I can't really see an answer to is how credit creation would work on a Bitcoin standard (or gold standard for that matter) as the system would be fully reserved and not fractionally reserved as the current standard is...
Wouldn't this mean there would be a limited amount of credit available to lend out then? Which could then hinder economic/growth expansion? Would be great to get an explanation on this, thank you
This actually is a one of the great criticism which traditional economists do on bitcoin. According to the traditional economics for economic growth there has to be an inflationary setup where new credit and new money is continuously being created in the economy. Bitcoin hinders it by capping a limit on that which would mean money would eventually get dearer instead of getting cheaper and people would eventually keep on hoarding money itself than spending it leading to a deflationary spiral situation and collapse of economy. But honestly, practically this might be very difficult from what we have in theory so I would like to see the idea in practice for sure.