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Sure they can after all FRB existed when gold and silver were the mediums of exchange with and without central banks, and central banks certainly couldn't make gold or silver out of thin air. The central banks just need to keep a reserve of whatever medium of exchange they use in reserve if they're using a non-fiat system. Obviously unlike gold and silver transferring and holding bitcoins is not much of a burden so it doesn't make a whole of sense, but just like there's a chance of a 99% reserve bank system failing so is the possiblity of a bitcoin FRB system.

That's a good point, but there is some difference. The central banks did exist. The difference is that there were banknotes which were backed by gold. Not the gold itself circulated, but the banknotes. The central bank could print more, even without having enough gold to back it, and they did so. To counter that, the governments restricted private individuals to convert the banknotes to gold, or allowed it at fixed price below the market price, or simply confiscated gold from private people. It was de facto a fiat currency (the banknotes), just technically backed by gold, but not really a gold.

If you go further back in time, when the real gold was used in circulation, i.e. the gold coins. Even that time they could debase the coins by "shaving" them, or adding less precious metals (all just different forms of inflation), or simply by fixing price by government.

All the above is not possible with Bitcoins, again I have to say, hats off to the creator.

peterz

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