Quote from: caveden on August 12, 2010, 03:08:41 PM

Sorry, but I think it's not quite that...

You could, in theory, have fractional reserves of bitcoins, as with dollars. Banks don't create dollars (FDR notes) out of thin air, they create bank account balance out of thin air, and that's is counted as actual dollars in the economy.

Suppose some bank stores bitcoins. People would transfer their bitcoins to the bank and would have an account balance, that they could retrieve when needed. The bank could then lend part of this money without blocking your balance, thus creating fractional reserves.

Of course that, as I said before, there is not much interest in this, because you don't really need to pay for somebody else just to store your bitcoins. You can do it yourself, easily and safe.

Banks do create new dollars out of thin air, it doesn't matter if it's physical paper or account balance as the two are interchangeable. Both are counted as actual dollars in economy as there is no way to tell the difference.

But you are right, I was confused about how fractional reserves work. You could create fractional reserve bank but you are also right that there is no need to actually deposit any money there

Unless people are tricked into it by promises of "investments" and good "returns".