Quote from: Lethn on August 19, 2014, 09:54:04 AM

Quote from: knight22 on August 19, 2014, 01:50:24 AM

I wouldn't touch these exchanges even with a ten foot pole. Too many manipulation can occur in these.

+1

Fractional reserve banking is a scam, all financial exchanges or places of businesses should operate purely on a 1:1 ratio of whatever they hold and what is represented digitally.

I would disagree that traditional fractional reserve banking is a scam.

What happens in a traditional fractional reserve system is that someone deposits $100 in a bank, so the bank would have $100 in assets (the $100 bill) and $100 in liabilities (the deposit to the account holder). What the bank will do with part of the $100 is they will lend it to a borrower. So now they will still have $100 in assets (now a $10 and $90 that is owed to them from the borrower) and $100 in liabilities (the same $100 deposit).

What is potentially happening with Chinese exchanges is they are taking a 1 BTC deposit, and spending some amount of it, say .1 BTC. In this example they have only .9 BTC in assets (they spend the .1 on themselves) but 1 BTC is liabilities. Hopefully you can see how different these two scenarios are.