Bitcoin Forum

I decided to make a a thread about Come-from-Beyond's wonderful idea so everyone can see it, discuss it and suggest the date.

There are really only two reasons to do this:

1) You want to make sure that businesses that promise not to keep fractional reserves are keeping their promises.

2) You want to pressure businesses that don't make such promises into not keeping fractional reserves even where that makes business sense.

I fully support 1. But 2 just seems like a way to raise everyone's costs.

Although I guess I could see it in the case of businesses like Mt.Gox that are very vague about whether they are or aren't keeping a fractional reserve. As a way to force transparency, that might be a good thing.

What date do you suggest?

October 25^th

There is most certainly a number of people who won't adhere to this initiative, and the result is that not all of the BTC is withdrawn from all the services. So, how can we be sure the services which claim not to keep a fractional reserve aren't, actually, doing the opposite?

The best way is to insist on third-party audits. But if you can get even 30% cooperation on something like this, it could make a difference.

It would be interesting to hear why October 25th. Or any other date.

You don't need everyone to participate. Actually, you don't even need the majority to accomplish it. Institutions that use fractional reserve typically have only a small fraction of what they are supposed to have at disposal. Hence the term fractional reserve.

We can't be sure. But it still could have some effect. Like http://en.wikipedia.org/wiki/Earth_Day.

I suggest to do it in about two weeks. It's long enough to get all participants ready (for example right now I couldn't do it) but not long enough for everyone to forget/lose interest or for exchanges to make some nasty counter-moves.

This really is a silly idea.  For plenty of reasons.

Do you know Eric Cantona?  The soccer player?

He made exactly the same call in december 2010.   When you start to have the same political ideas as a soccer player, it can't be good, can it?

In a nutshell, if you don't like the fractional reserve system, fine, just drawback all your money, buy precious metals or bitcoins, do not ever borrow money from a bank, and that's about it.

Why do people always refuse to do anything unless millions of people do as them?  This is just a silly group behavior.

http://memecrunch.com/meme/95TJ/group-behavior/image.png

I suggest the date when bitcoin was launched

;D hahaha.. you made me laugh. Thank you.
However, I don't think it is a silly idea. Bitcoin is still small enough to make this work. Of course Cantona was unsuccessful on the global scale. Everyone knew it was nearly impossible and therefore everyone acted accordingly. No one participated.

Because we need to coordinate such efforts to make them work. Sometimes individual behavior is good. Sometimes you have to cooperate in groups to succeed. There's nothing wrong about group effort. It is how civilization was born.

What do you have against fractional reserve, anyway??   Banks do not lie to you.  On your balance sheet it is written "credit" and "debit", not "deposit".  So the bank does not make any mystery of the fact the money you "own", is actually some money the bank owes you.  If you don't believe in its ability to repay you on time, fine, just get your money back right now.  I don't get why you should wait for other people to do the same thing in the same time.  If you do that, then yes indeed the bank might not be able to pay you.  Bravo:  you'd be creating the very thing you were advocating against.  What for exactly?  To prove your point?

Why do you want to destroy a system that hundreds of millions people are happy with (or at least, do not complain), when you can just step away from it peacefully?

Because it's theft of labor by legal decree.

A proper exchange with a cold wallet is not going to be able to do this in one day with full security.  They will either need to delay and check, and do the moves in increments to be sure it is legitimate.  You will not know if they really had all of the coins or not as it would end up getting spread over several days.  If they can do it all in one day they either didn't check hard enough or they had no cold storage and didn't check at all.  

Which is worse, fractional reserve or bad security?

We are talking about Bitcoin, not banks.

Oops.  I totally missed that.   Sorry.


PS.  Well, the idea is more or less the same, anyway.

Very good point. Perhaps, exchange owners should move all coins to a hot storage during that day and monitor withdrawals. Of coz, owners can refuse to do this, but if this lowers their credibility, they'll think twice.

It is not.

The fact that not all customers withdraw their funds in the same time allows them to use statistics in order to increase their ability to repay their debts towards their clients.  There is nothing wrong in a clever use of statistics, clients know what is happening and they pretty much always get their fund back in time, which is the only thing that was promised.  So no, this is not a theft in any way.

I made the same mistake you did in jumping the gun and thinking the discussion was FRB and not fractional reserve as it relates to bitcoin.


That doesn't fill me with confidence. Fractional reserve for a limited commodity like bitcoin would cause instability in the price and in the market.

Fractional reserve gold is a bad idea and an even worse one for bitcoin. Bitcoin was created, in part, to escape the manipulations of FRB.

The big difference is that it is much easier, and virtually costless, to withdraw your funds.  So FRB is much more armless with bitcoins because people can have most of their savings on their own PC.

Also, there is very little you can do against that.  But I guess the proposed idea on this thread is meant exactly for this purpose:  putting some pressure on exchanges so they are extremely cautious in their fractional reserve rates, and ultimately they don't use FRB at all.

So, the idea does actually make some sense.  My bad.

I support this. Until the exchanges have independent account balance audits from a reputable firm, things like anti-fractional reserve day are a must. Personally, I have very few coins on any exchange already because none of them have proper auditing or insurance.

Anti fractional reserve decade sounds better. 
Nobody wants a collapse of the countereit system in a day.  That would be messy.
A good target is 15 years.  How are we doing towards that target?  Metrics anyone? 

i keep mine on in my personal wallet.dat anyway. :D

Yes...let them eat cake.....25. Okt. !

Thanks Zyk

If people knew about how the banking system works (almost no one does) they would surely NOT be happy.  Ignorance is bliss for those hundreds of millions. They all likely believe the government makes money.

Go around and ask one question..  Where does money come from?  The answers you get will almost certainly all be WRONG!

+1

People are not aware of this system, that’s why they don’t complain about it.
Stay passive is a dangerous thing.

Ok, I'll bite. Where does money (fiat money) come from?

Remember, we are not talking about the purchasing power, wealth or value that the money might represent.

I'm not responsible for other people's ignorance.  Whatever are the reasons why they are happy with the system, those reasons are not my concern.  I'm not in their head, and I'm not sure I understand the system better than they do, anyway.  Maybe YOU are the one who is wrong.

There really is no point launching a croisade against a this monetary system since you are not forced to hold fiat money.   Just buy precious metals, bitcoins or whatever.

You're not forced to hold fiat money, but your life is affected heavily by the monetary system. I'm not going to argue whether FRS is good with fiat, but as far as I remember, Bitcoin wasn't originally meant to use it. Bitcoiners think exchanges don't use FRS and act accordingly. Thus if exchanges use it, they are being scammed and lied to. We should try to find out. Or just wait and hope.

I'm a bitcoiner and I have very little doubt that some exchange do indeed some FRS.
Why ?  Just because they can.

If you have a customer that has been giving you 100BTC so that you just hold them, and if you haven't heard of this guy for months, it's really difficult to resist the temptation of using at least a fraction of this money to do some business for your profit.   If the guy claims his money, but you have only 90BTC on his account because you used 10 BTC for something (a loan or whatever), hell you just have to take 10BTC from an other sleeping account.

It's that easy, and nobody has to know.

That's why when I send money to an exchange, I always presume that they will use it for some stuff, without explicitly telling me.



No.  Just be cautious and do not put too much money in the same time in an exchange.

Banks work similarly. They take depositor's money. They write down the amount. They lend it to a loaner. The loaner uses the money for business, for personal, for tuition, for fixing a house, for paying other bills, whatever. The loaner pays back upon loan maturity, or the loaner defaults in which case the bank gets the collateral, a house, a car, whatever.

The bank then pay's interest on the depositor's money.

There are hundreds or millions of depositors. There are thousands of people taking out loans. In the end, the bank makes money, and this is just on money; we're not yet talking about investments.

If everyone withdraws their money, the bank runs. Not everyone is going to withdraw their money from a particular bank unless it has had some bad publicity. And when people can't withdraw their money because of the bank run, then the bank has really bad publicity now. It has happened to some banks in my country. They simply closed. Someone started a rumor about the bank being in trouble, then people started withdrawing all their money, and of course the bank has to honor the ones who did it first, until they ran out of money, and then they were in real trouble.

I think this is a great idea. I would suggest framing it as "find out if the exchange is honest" day - the whole "fractional reserve banking" thing, while accurate and correct, gets people distracted with arguments about monetary policy, as this thread amply demonstrates.

If the exchanges want to hide behind "we need time to figure out if the request is legitimate and move funds from our cold wallet", then that's fine, maybe this needs to be "keep the bank honest WEEK", instead. The point is to maximize the stress on the exchange, and if it takes a week to reach that point, fine.

I am worried about exchanges engaging in fractional reserve banking for two reasons: the first is that it lets them hide security problems/losses, the second is that it may be very tempting for them to gamble with customer money in the various Ponzi schemes that are still floating around. If everything works out nicely, they give back my BTC at 0% interest, and they keep the crazy Ponzi interest. Things don't work out so nicely, well, they'll probably have a lot of excuses about why they can't give my money back. So I get all of the risk of a Ponzi and none of the profit. Yum!

If someone wants to run an exchange that does fractional reserve, and other people want to deposit their funds there, well, I don't have a dog in that fight, and it would be stupid to try to stress that system with a coordinated mass withdrawal.

On the other hand, I want any financial intermediary I deal with to be very clear with me about whether or not, when I deposit some BTC, that precise amount is stored somewhere and is (more or less) immediately available to be returned to me at any time.

There's a practical reason for people to participate, even if they're not personally worried about fractional reserve - if they don't withdraw, but everyone else does, and that entity was engaged in a little undisclosed fractional reserve banking . . . then they may never see their funds again. So even people who hate the idea are better off participating.

I think it might be better to wait more than 2 weeks before launching to provide time for education & marketing of the idea.

However, I also have two arguments against the plan (though, on balance, I personally support it):

1. It would be a great time for bad guys to deploy wallet-hijacking trojans, since value will be in local wallets, and the users are less likely to be accustomed to using their local wallets and perhaps careless with their security.

2. It would be a good opportunity for someone to make trouble by DDOS'ing exchange(s), or other infrastructure, and profiting by shorting BTC, creating a panic to cause mass sell-offs of BTC as funds move to other currencies, leading to a price drop, and then covering their short positions at the new low price.

Fractional reserve is an entirely unwholesome and ethically bankrupt way to manage a nation's currency. Hundreds of millions of people are "happy" with it because they don't know the first thing about what's really going on. Make yourself a hot cup of tea and watch this educationalist material:

https://www.youtube.com/watch?v=0K5_JE_gOys

Watched it already many times several years ago.  I kind of grew up since.