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Showing 7 of 7 results by rherena
I see a lot of people misunderstanding the topic at hand...
Some are talking as if more notes must be printed for FRB to work. Others are talking about it as if bitcoin would be what backs the notes. This isn't the case as the only "notes" that would be used are those of the account holder. Essentially, that's just a login stating that you own the account with the bank. In this case, the bitcoins wouldn't be stored, they would be what's given out as the notes. If it's gold you're talking about, think of it as holding an account with the bank, but the gold is lent out. That's the form that bitcoin FRB would have to take to work.
Others look at history and say that, eventually, all FRB schemes fail without government intervention without analyzing the causes for that failure. Most cases have government intervention in the loanable funds market in some way, such as the manipulation of the money supply or interest rates (monetary manipulation,) or problems with moral hazard (FDIC, etc.) Sans that manipulation, manipulation which is either extremely difficult or impossible to create in the bitcoin economy, such systems have existed and have created stability.
Others still seem to think that the only way for FRB to exist with bitcoin is for it to be melded into the current financial structure, but that's certainly not the case. What will most likely happen is that wallet services will become the more secure and more useful provider of funds management. For example, someone will most likely create a bitcoin based debit card or phone app that must work through their system (much like VISA for debit cards working through your bank account,) in which case there's reason to believe that others will create competing systems. Through this process, a depository system will be constructed in which interest rates will become a competing factor -- this will require a fractional reserve system, or deposits that aren't 100% on demand. The competing process here will set reserve rates as opposed to interest rates.
Hopefully this is helpful to those who have responded.
Some are talking as if more notes must be printed for FRB to work. Others are talking about it as if bitcoin would be what backs the notes. This isn't the case as the only "notes" that would be used are those of the account holder. Essentially, that's just a login stating that you own the account with the bank. In this case, the bitcoins wouldn't be stored, they would be what's given out as the notes. If it's gold you're talking about, think of it as holding an account with the bank, but the gold is lent out. That's the form that bitcoin FRB would have to take to work.
Others look at history and say that, eventually, all FRB schemes fail without government intervention without analyzing the causes for that failure. Most cases have government intervention in the loanable funds market in some way, such as the manipulation of the money supply or interest rates (monetary manipulation,) or problems with moral hazard (FDIC, etc.) Sans that manipulation, manipulation which is either extremely difficult or impossible to create in the bitcoin economy, such systems have existed and have created stability.
Others still seem to think that the only way for FRB to exist with bitcoin is for it to be melded into the current financial structure, but that's certainly not the case. What will most likely happen is that wallet services will become the more secure and more useful provider of funds management. For example, someone will most likely create a bitcoin based debit card or phone app that must work through their system (much like VISA for debit cards working through your bank account,) in which case there's reason to believe that others will create competing systems. Through this process, a depository system will be constructed in which interest rates will become a competing factor -- this will require a fractional reserve system, or deposits that aren't 100% on demand. The competing process here will set reserve rates as opposed to interest rates.
Hopefully this is helpful to those who have responded.
Well bitcoin IS like gold. FRB issues promisary notes for an asset, regulation fixes a maximum issuance:asset ratio.
In the case of the Bretton Wood System that asset backing was gold. A new Bretton Woods system could be created on top of bitcoin just the same.
I bolded the part in your quote that would be nice to happen, but probably wont, eventually mainsteam users will probably ride the fractional system on top. Which will allow inflation/deflation control for governments.
In the case of the gold system one might think: At least the asset backing (gold) can be audited, trouble is that some auditors can be persuaded to say anything when regularly gifted with a hotel room full of top class hookers etc. But with bitcoin the audit could be (and should be) public data, so that's a big plus to a FRB with bitcoin. There could be no shadow stats, the true FRB ratio would be public.
As i stated above there is a clear issue lending in BTC, first and foremost is trust. Assuming online banking in BTC somehow resolves this issue, how would the legal system handle an online currency, in issues like default, or fraud ? Also banks need to comply with things like anti-money laundering and anti-terrorism rules. There seems to be no clear way for that to verified in BTC.
Who would want to say "this item costs 0.0000000001 bitcoin" compared to "this costs a dollar"? No one.
So no, people do not want to deal with decimal points. They like dealing with whole numbers. I'd like to see someone go to a bank and request $0.00023 dollars. lol
So no, people do not want to deal with decimal points. They like dealing with whole numbers. I'd like to see someone go to a bank and request $0.00023 dollars. lol
This isn't the dollar, bub
And besides, they're completely different. $.00023 will never, ever, ever, ever, ever, be worth the dirt on your feet. A single Bitcoin encompasses tens, to hundreds of dollars. A fraction of a fraction of a Bitcoin is equal to a dollar.People would call it something different if it came to that. You seem very sure of yourself for someone who shouldn't be. Besides, there's no way we'd whittle down to 1 BTC considering the last Bitcoin will be minted sometime after you're dead. Nobody's gonna lose all 21 million coins, I guarantee it.
And if the fed's decide to disallow any official merchant trading it BTC, due to fear of fraud or manipulation? Whats the value of those bitcoins then? Or suppose the internet gets wiped out, massive virus, large hardware malfunction or server wipes. BTC seems to be a risky business.
Not possible. Regulators would need to verify the exact value of BTC held as capital. Why a bank would hold capital in the form of BTC would basically be an admission that the fiat they would regularly deal in is suspect. This is among many issues.
If they believe that the currency they deal is risky enough to not hold the fiat or deal in it, then why bother being a bank in that currency? The only real way for BTC to exist in fractional reserve banking is for it to be held as capital, or as a speculative asset. There are clear problems with both.
Given that banking is a risky business why add to the risk by holding a clearly risky currency which can't really be loaned, or transacted in without the assurances of the law itself? Not to many banks holding currency itself anyway, as it needs to earn carry. Not to mention that there are no current capital rules regarding BTC, so banks would have to hold the same amount of capital as investing in stocks.
Until BTC is integrated into the financial system there are likely to never be capital rules drafted, thus to banks it will always be a speculative asset. While we are on the topic of rules, if you were playing bank regulator and a bank was making a loan in BTC, in the event of default what legal recourse would the bank, or anyone else have to remedy the loss itself? If I could simply walk from a BTC loan the interest rate would have to be astronomically high. In that case why not just take a loan in fiat? Esp with the rise of internet banking.
As a speculative asset BTC would rank as less than penny stocks IMO. Your best case scenario is that you get in early. However any security issues, data problems and security could result in complete loss of capital. Most banks are to risk averse to be making this kind of bet. As if it can't be exchanged for other assets that banks can hold or exchange in to return seeking assets or currency for investments then its worthless to banks.
Not to mention the type of size that would be needed for transactions would mean >10% (very rough estimate) of people would need to hold assets in BTC. Something you just wont get people to do until computer literacy is ubiquitous.
Long story short BTC and online currency need some legitimacy from the system itself to integrate into the banking system, unfortunately this defeats some of the purpose of being a non regulatable entity under no government control.
If they believe that the currency they deal is risky enough to not hold the fiat or deal in it, then why bother being a bank in that currency? The only real way for BTC to exist in fractional reserve banking is for it to be held as capital, or as a speculative asset. There are clear problems with both.
Given that banking is a risky business why add to the risk by holding a clearly risky currency which can't really be loaned, or transacted in without the assurances of the law itself? Not to many banks holding currency itself anyway, as it needs to earn carry. Not to mention that there are no current capital rules regarding BTC, so banks would have to hold the same amount of capital as investing in stocks.
Until BTC is integrated into the financial system there are likely to never be capital rules drafted, thus to banks it will always be a speculative asset. While we are on the topic of rules, if you were playing bank regulator and a bank was making a loan in BTC, in the event of default what legal recourse would the bank, or anyone else have to remedy the loss itself? If I could simply walk from a BTC loan the interest rate would have to be astronomically high. In that case why not just take a loan in fiat? Esp with the rise of internet banking.
As a speculative asset BTC would rank as less than penny stocks IMO. Your best case scenario is that you get in early. However any security issues, data problems and security could result in complete loss of capital. Most banks are to risk averse to be making this kind of bet. As if it can't be exchanged for other assets that banks can hold or exchange in to return seeking assets or currency for investments then its worthless to banks.
Not to mention the type of size that would be needed for transactions would mean >10% (very rough estimate) of people would need to hold assets in BTC. Something you just wont get people to do until computer literacy is ubiquitous.
Long story short BTC and online currency need some legitimacy from the system itself to integrate into the banking system, unfortunately this defeats some of the purpose of being a non regulatable entity under no government control.
please do so! and get a post 
don't be so negative, the 5-post-4-hour-rule is there for a reason: to get rid of the trolls. NOT to piss newcomers off.
relax take it easy and smile.
Mod note:
If you see anyone spamming this thread, please report it. Spam will result in an immediate ban.
don't be so negative, the 5-post-4-hour-rule is there for a reason: to get rid of the trolls. NOT to piss newcomers off.
relax take it easy and smile.
Mod note:
If you see anyone spamming this thread, please report it. Spam will result in an immediate ban.
Awsome. Join the libertarian movement into crypto-currency with a restriction.