Bitcoin Forum

The problem with Fractional reserve banking system.

This means that banks are only required to keep a certain percentage of the deposited money in their bank vault or at the central bank. The remaining money is loaned out to other customers who need the money to finance various activities, such as buying a home, starting a business, or making a large purchase.

Fractional reserve banking allows banks to make profits by charging interest on loans while ensuring that depositors have access to their money whenever they need it. So, they are under the condition to let their customers withdraw mass amount of their deposits, thus creating a crisis.

This is the reason why all the Banks are broken. They are lending out money to people which they don't have or own. And the most concerning thing is counterfeiting. If a normal person does it, then it's a crime, but when the central banks and government does it, they can get away with it. This is the one thing that hurts the economy the most.
When they go bankrupts, the whole pressure is put upon taxpayers. This is a criminal scandal.

Bitcoin could solve all of this. Counterfeiting could be avoided at all cost with this, and bitcoin having limited supply makes it impossible to create more, as they are able to do with fiat currency. Other aspect of Bitcoin is already known to people, so I don't want to talk about those now. All I want to know is, how good is it in terms of preventing these crises. 

What is your view on this?

Or indeed, no money at all. In 2020 the reserve requirement for banks in the US was lowered to 0%. Yup, you read that right. There is now no requirements for banks to have any money on hand whatsoever.

It is not just the remaining money that is loaned out, but banks also create new money out of thin air when they hand out loans.

Bitcoin could absolutely solve this, but if and only if people actually hold it in their own wallets and not on centralized exchanges. We already know that most centralized exchanges are running fractional reserve systems with bitcoin and other coins. We've seen this in particular over the last few months when the likes of Celsius, Voyager, BlockFi, FTX, and more have collapsed and been unable to pay back everyone who had deposited. With a centralized exchange you don't own any bitcoin - all you have is an entry on their spreadsheet. That exchange can show you any number they like, while they actually spend/gamble/loan your coins out freely. The only difference is that centralized exchanges cannot just create new bitcoin out of thin air like banks can with fiat, but they are very much fractional reserve just like banks are.

I don't see people getting used to not keeping their funds on centralized exchanges any time soon, because some people won't just learn until something very bad happen to them or their money.

Before the FTX saga there was Luna, before Luna there was Mt-Gox if people should have learned it would have been a long time ago and centralized exchanges will struggle to survive, the only thing closer to Banks in crypto space are centralized exchanges.

This is why I called CEX the bank of the digital space, and it is also why I still blame some developers, I wonder why they have not been able to come up with a decentralized exchange that is 99% close to everything that a CEX has to offer, but in a Decentralized form, this is why Bitcoin existed right? Everyone should use Bitcoin as an example, and also follow its way.

Right, an exchange could go broke and any entity using that exchange would go broke along with it, but the Bitcoins would still be somewhere and not leave the economy/economic cycle. Someone else would have it and either save it or reintroduce it into the economy.

With fiat the problem is that pseudo-value is created to represent assets, like a house. That is where the real bubbles are generated because that pseudo-value fiat is not backed by any real EVA, i.e. by work or effort of some kind. It is pure dust that out of pure volume makes the house bigger than it is. Once the market realizes this, the dust dissolves into thin air, houses literally collapse and lose their pseudo-value, and since this is a systemic issue the entire real estate industry collapses, spilling over to anything remotely related to that industry.

With Bitcoin this pseudo-value creation isn't possible in the same way. Someone either has the real Bitcoin to buy a house (which can still be overpriced), or not. If it is overpriced, someone else gets a good deal, but the overpricing has sort of a cap concerning the industry.

Could pseudo-Bitcoin be created? Oh yes! But imagine someone coming to you saying "hey this is Bitcoin-TA (thin-air), I want to buy your house, I pay a good price". The person could accept the offer, but knows that the Bitcoin-TA should be invested very quickly because Bitcoin-TA can lose value due to infinite printing, aka inflation.

Now one might think the person buying with Bitcoin-TA got a good deal as well, but let's assume that every house, every estate that was bought with Bitcoin-TA is also labeled "TA-Estate", such that everyone knows all these objects have been bought with Bitcoin-Thin-Air, meaning that there is no real value backing the estate, that more Bitcoin-TA could be printed any second. Everyone buying a house with Bitcoin-TA will also only be paid salaries in Bitcoin-TA from when the contract for the purchase is signed.

Greed will get this Bitcoin-TA economy going, but over time people will become suspicious as estate prices are rising while salaries are not. It is all too good to be true, and there are always enough people that it is too good to be true, but it ignore it regardless. The Bitcoin-TA economy will crash at some point because of market uncertainties as nobody knows the real value of the estate as the money used to buy it isn't based on EVA, but created out of thin air.

An economy based on real Bitcoin has less options for monetary policy, or let's say less scope, but with less scope also comes less risk. Some say with less risk comes less opportunity, but that only counts for a few % of our population as those who are rich and play it smart are the ones who win when bubbles burst.

Just imagine someone wants to buy a house and someone wants to sell a house, the question will be whether the buyer decides to go with a little bit of a smaller house with the label "Bitcoin-Real" and the seller prefers "Bitcoin-Real" over "Bitcoin-TA", because that is the route to go if you want assets that are backed by money that is based on EVA.

Bitcoin carries value on its own merits because effort must be put in to create it. Bitcoin-TA doesn't. The problem is that there is no USD-REAL and USD-TA, we can't differentiate whether the dollar bill we hold in our hands was just a button on a keyboard or a human being's or machines hard work.

Because of fiat. It is impossible to have an instant decentralized fiat/bitcoin exchange because of how slow fiat is. CEXs get around this by taking custody of your fiat first, but the price you pay is zero privacy and zero security.

The caveat to what you have said is that some exchanges, such as Coinbase, already allow instant off-chain transactions between their users. Such transactions are internal only - Coinbase update balances on their internal database, but nothing ever touches the blockchain. In such cases, Coinbase doesn't move any bitcoin and does not even need to own the bitcoin in question. Such transactions are absolutely "thin air bitcoin", as you put it.

Only if you have bitcoin in your own wallet do you actually own any bitcoin. Otherwise all you own is an entry in a spreadsheet.

I was reading the OP and the first thing I thought of was this. It should be renamed because the system is no longer even a reserve system at 0%. However, it's not 0% in all cases, for example, in Europe the ECB maintains a reserve of 1% for deposits with a term of less than two years, lol, and 0% for the rest.The funny thing is that since the fractional reserve system has been in place, the world has reached high levels of development and welfare, but I guess that's like the temporary welfare of someone who keeps refinancing credits to spend more and more, until it all blows up.


I don't see it either but I think that things like the SVB cases and others attract people to bitcoin and even if it is a small percentage, it makes some people understand that if you manage your bitcoin keys it is an amount that you own, just as if you own and hold an amount of gold, but the numbers that appear in your bank account are a mere bookkeeping entry based on a house of cards.

bitcoin.. the bitcoin network is real store of wealth that CANT be taken off the network, nor away from the owner, because bitcoin has a good private key/signing policy, bitcoin is safer then banks..(as long as you dont share/give away/leave open for someone to find your private key)

however when it comes to subnetworks that allows other unit balance without Xconfirms. is where fractional reserve occurs again because as one flaw, the pegging mechanisms of subnetworks are not strong.. as another flaw the ability to create balance using fake/non existent or unconfirmed funding locks allows fractional reserve/counterfeiting/ loss of value games to be played

so this is why people that want safe secure value should stick to only using the bitcoin network and request that the bitcoin network scales. instead of using the abusive subnetworks that pretend to have the same security as bitcoin

there is a big reason why blockchains solves things which other "digital money" doesnt solve. so yes bitcoin solves this, as long as people dont then start using bitcoin as the staging system to then use other systems like centralised custodians or badly conceived subnetworks

Does Bitcoin have intrinsic value? (https://bitcoinmagazine.com/culture/does-bitcoin-have-intrinsic-value)

Bitcoin has many outrageous specifications that can help it to be a very good alternative for fiat currencies, banks and gold. Only if people don't be blinded with chance to get rich by centralized exchanges.

Reminder: do not keep your money in online accounts (https://bitcointalk.org/index.php?topic=5421039.0)

If they leave their bitcoins on centralized exchanges, in online accounts, they are practicing like storing fiat currencies at banks.

In essence that is what I said when I asked "Could pseudo-Bitcoin be created? Oh yes!", but I get your point. The problem might be that too many people use custodians to manage their funds and then the thin air bubble game begins again in the books of the custodians, here Coinbase.

But @o_e_l_e_o I think I have some trouble to get my head around the example I myself provided with the real estate transaction. For such a transaction you actually need real Bitcoin right? Are you only referring to on-platform lending services where users can use fake-Bitcoin (aka leverage) to trade on platform and either lose or win thin air?

As soon as it comes to transactions of Bitcoin vs. real assets, on-chain Bitcoin will be needed, right? Or does Coinbase operate a Bitcoin lending service where they send Bitcoin off-platform to users requesting a loan? So to say, they keep 10% real Bitcoin as a reserve, lend out 90% off-platform and cover the 90% + even more via typing thin air Bitcoin into their books?

Perhaps you can help me get a better understanding here. I feel I might be missing a piece of the puzzle.

The banking system may seem like a huge fraud, but whether we like it or not, it will continue to exist and fool us because it's established by the government. With Bitcoin, we can enjoy the freedom we've been wishing for, but unfortunately, we can see how strict the government is with Bitcoin and cryptocurrencies in general.

Although Bitcoin is ideal and could provide transparency, we will not be able to enjoy it if we hope for mass adoption, since we live in a world governed by people who serve their own interests first.

Bitcoin promotes anonymity, but the government wants to make KYC compulsory, which will defeat its purpose.

They just use people's money to make money. In other words, the bank only uses people.

I'm not sure if people know that this is how their money will be used. Or maybe they know but they continue to use the bank because they get interest on what they deposit. Even though the depositors in the bank receive some interest but the bank earns more than what they earn from the borrowers.

If the purpose of why they used to deposit in the Bank is just the interest, it is better if you invest it in Bitcoin, it will grow even more and you can be sure that your money is secured.

I don't feel people keep their money in the bank because of interest, banks offer a small interest rate. We all use banks because it is not possible to do without them for now. If you have a job in your country, your salary would be paid into your bank account, if you offer a service or you want to receive money from friends or families, most times they send it through your bank account, so it has nothing to do with investment, the banks remain important in our society.

If you own BTC, it does not mean your money is secure. Your money is only secure if you store your BTC in the correct way, that's in your self custody wallet which you must have set up in a safe enviroment. I hold a lot of my money in my BTC self custody wallet, but i also have some of my funds in my bank account, and i am sure that's the same thing for a lot of BTC enthusiasts.

Pretty much. There is no end to all the projects you can fund when you can just print money out of thin air. But at some point that has to come to an end, either because you stop printing money or you print so much of it the whole system collapses.

Well, it depends. If the other party is happy to accept bitcoin through their Coinbase account, then you can pay them without any real bitcoin moving whatsoever: https://help.coinbase.com/en/coinbase/trading-and-funding/sending-or-receiving-cryptocurrency/instant-sends
If the other party wants bitcoin sent to an external wallet, then of course Coinbase would have to send out real bitcoin, but with them running a fractional reserve system doing so leaves even fewer bitcoin to cover the deposits of other customers who are at constant risk of losing everything in a bank run.

I think that Fiat and Bank are important components in the modern economy. Fiat is a currency issued by the government and widely used in commercial transactions, while Banks are financial institutions that provide financial services, including lending and savings. However, the Fiat and Banking systems also have limitations and problems.

Some of those issues include:
Depreciation: Fiat can depreciate due to inflation and other factors, while Bank can go bankrupt and lose customer's money.
Control: Governments and Banks have control over the issuance and use of Fiat, which can lead to restrictions on financial freedom and privacy

There are so many problems affecting the banking system and of course we know that most fiat monies are not anymore backed by gold and are issued with just faith of the government printing them...and couple with an economy based on debt one day things will really go wary and I think we have been witnessing this happening right now to some extent. Can Bitcoin be the solution? I would say partly in terms of protecting one's assets like a safe haven which is the role of physical gold. The only problem with Bitcoin is its volatility...let's hope that somebody stability can be coming to Bitcoin.

The presence of Bitcoin amid the uncertainty of the economic system at that time to be a solution even though some consider it just a stupid breakthrough made by Satoshi but now all recognize if Sotoshi's idea can really overcome all that.

That's more or less my view.

We rely on banks so much and that is why they are still around. And no, people don't keep money in banks for interest. It's more like a security thing. They keep their money in banks, thinking that their money is safe there. Even my mom always tells me to keep my money in the bank. I was like hell no.
So it is secure to keep the money in the bank in their point of view.

The moment we stop relying on the banks, they will collapse. As said on OP, when people withdraw massive amount of money from banks, they face crisis. It is important because we make them important. Same goes for fiat currency. It's just a piece of paper. We gave it a value, otherwise it's worthless.

This is the contradiction that I am also wondering about, how can we enjoy privacy when bitcoin is mass adoption? And if bitcoin is truly decentralized, why expect the adoption of a centralized institution like the government? They only accept it when they control us or profit from it, I never expected bitcoin to be popular around the world.

They trust banks to store their money and not all people store their money in banks to get interests as bank savings. Storing money in banks and opening bank accounts which serve for your bank savings are different.

In both choices, you can receive interest from banks but with official bank saving account, you will get a higher interest rate because there will be terms on how long your contract with bank will be expired, 3 months, 6 months, 1 year, 2 years. This is cause of something bad, banks will use your money when expiration date is still far and they can bet with your money.

When their bet fails, they go bankrupted and you lose your money. Some banks can be supported and rescued by central banks and governments but investors to bank stocks will lose money forever.

To an extent they are correct, it is more secure than keeping your money under your pillow or keeping it somewhere in your home you think is safe, it is even much more secure than buying BTC and storing them in a centralized exchange as a lot of people do. Storing BTC in a self custody wallet and having the knowledge of what you are doing is only what i can consider a safer way to keep your money, but sadly not everyone can do it, especially the aged and those who do not trust BTC.
Banks can collapse, but the entire banking system cannot collapse, money may even be printed out of thin air to rescue failing banks. We have to rely on banks because we cannot do without them for now, do you have a job in real life? I do, and my salary is paid into my bank account, and if you do, i am sure that's where yours is paid into as well. When people and friends want to send you money, you can't give them your BTC address if they aren't BTC enthusiasts, so they have to send it to your bank account.
Look, if a bank run happens, the bank is surely going to collapse because of their fractional reserve system, but if there is massive withdrawal of money from a particular bank, where are people going to put all that money? You and i would say BTC because we believe in it, but there are millions of people who do not, so they would just put the same money into another bank they think is safer.

Fiat is worthless. Consider a $100 dollar bill. A cheap piece of cloth-paper, with a few pretty pictures on it, and some pretty printed words. True value? Maybe a couple of cents. The $100 value is a figment of the imaginations of a world of people who value it that way.

What about Bitcoin? Even less real value than the fiat. Nothing to really hold in your hand if the electric grid or the Net happen to go down. Nothing to it at all. Only the imaginations of some of the people to give it value.

The question is, what should people be holding as value or valuable? With the world of finance the way it is these days, we need to be considering true and real value, whatever it is.

8)

Many people believe that banks provide the best security for their customers because they are supported by the government. This kind of assumption has penetrated all bank customers around the world, but most customers do not know where their money is being used.

When someone knows how banks work, then I think they are less likely to keep their money in the bank for whatever reason. Of course it's hard to tell the facts to anyone who has been brainwashed by a centralized banking system with the assumption of security in the foreground. Profit sharing or annual interest is not much, it's just their way of attracting customers.

I completely agree with your assumptions because that's the reality. Banks generate profits from their customers' funds, that is a fact that may have been ignored by millions of customers so far. As a result I no longer use the bank to save money, but that has not removed it from my needs because at one point I had to consider the bank a certain amount.

Bitcoin in self-custody can prevent this, but not when you are dealing with third party platforms, as the same method used by traditional banks can used, as we have seen with the scams involving Celsius and FTX. So solely using bitcoin as currency isn't enough. The P2P feature must be also applied in order to prevent you from having your money scammed.

On the other hand, the fact banks make profit this way and pay interest to their customers isn't a bad thing at all. The problem is when this practice isn't well executed for real. That is, when it's done irresponsibly by the banks and financial institutions, like on the examples mentioned above regard crypto universe.

When well executed, it's a very profitable kind of business for every parts involved.

Self-custody is one of the best ways to protect your cryptocurrency funds.  There are also peer-to-peer (P2P) trading platforms that allow users to trade cryptocurrencies directly with each other, without the need for intermediaries.
As for interest on deposits, many cryptocurrency services offer staking or lending programs that allow users to earn interest on their funds, but personally I wouldn't even put 1 satoshi in it

Yes that was what I thought, too. But as a result of centralized custodians playing their number games on the balance sheets, bank runs or other problems that lead to liquidity emergencies could lead to massive system risk for the crypto industry as no new Bitcoin can be printed to bail out big players. It's the opposite for real banks that are too big to fail (or in the case of the UBS now too big to bail...). In the long run, when crises happen, they should usually help flushing the gamblers out of the market I guess? Those who want to be part of the game for a long time are more or less forced to understand that fractional reserve will one day go wrong for them. Though if until then they have earned money for a luxurious life, they probably don't care. But that's where the law hopefully hunts them down, though that is wishful thinking because it doesn't with bankers either.

Why not?

And what happens when a country prints so much of it that it costs $100 trillion for a loaf of bread? Their banking system absolutely collapses and they end up using a different currency altogether.

This has already happened multiple times recent. Look at the likes of Celsius, Voyager, and BlockFi. All of these entities were running fractional reserve systems and holding a tiny proportion of the balances they were showing to their customers on their accounts, while the majority of bitcoin that had been deposited was being loaned, gambled, and otherwise risked to make profits for themselves. A small number of people withdrawing their coins was enough to cause liquidity issues followed by a larger bank run and then complete collapse.

This is the risk you take with any and every centralized exchange. They are fractional reserve scams with no one waiting to bail them out.

I think this is the perfect example for this.
https://i.postimg.cc/fRBZwbWy/p05fx2ps-1.jpg (http://postimg.cc/PCp0yTwn)

An image from Somaliland, a self-declared republic in East Africa. People are running around the market with a cart full of money to buy everyday goods.
Image collected from: Source (https://www.bbc.com/future/article/20170912-the-surprising-place-where-cash-is-going-extinct)

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As long as there's this concept of "centralized" exist, this will continue to happen. We are the one who trust them with our money and then they took advantage of it. We need to stop in order to make them stop. Without any customers, they are useless. This is why every one who is smart enough, keeps their holdings in personal wallet.

Yes definitely Bitcoin will solve the problem because fiat currencies are physical currencies that can be robbed or destroyed similarly with the bank but when we talk about digital currency bitcoin takes place. such kind of currencies can not be robbed or destroyed also you can manage your own coin no one can manage it on your behalf. and the cryptocurrency payment getaways have security feature that can secure your coins and transaction. so i think bitcoin will solve many problem.

This is an example of hyperinflation, this is what unlimited printing of money can lead to, the result of such a strategy will always be the same. I was once told a similar story with a cart, when a man with a cart full of money went to buy bread, but on the way he was distracted and the cart was stolen, but at the same time they poured out all the money, because it already cost nothing, and the cart was much more expensive, so it stole.

This is the nature of fiat money, they print a lot when the government needs to help a weak economy, but the more money they print, the higher inflation becomes, as a result, collapse is inevitable.

I took a screenshot of this because I think more people here would spend a minute reading it. I know that many are ware of this situation in Germany back then, but when I gave it a read a minute ago I realized I already forgot how intense inflation was back at the time.

https://i.imgur.com/GKWoPGi.png

Inflation is underestimated and the spiral of it even more so. I think the example of the bread in Germany shows that nothing has to happen over night. It can be lingering but its final effect is even more brutal and essentially can't be stopped by printing more money ever.

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This has already happened multiple times recent. Look at the likes of Celsius, Voyager, and BlockFi. All of these entities were running fractional reserve systems and holding a tiny proportion of the balances they were showing to their customers on their accounts, while the majority of bitcoin that had been deposited was being loaned, gambled, and otherwise risked to make profits for themselves. A small number of people withdrawing their coins was enough to cause liquidity issues followed by a larger bank run and then complete collapse.

This is the risk you take with any and every centralized exchange. They are fractional reserve scams with no one waiting to bail them out.
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Yes but as I pointed out, as bad as it is that people lose money when these fractional Bitcoin reserve companies collapse, the cleaning mechanism has its merits given that there is no such thing as a money printing bailout machine for companies operating with Bitcoin instead of fiat. I know that they could be bought out, but that usually still happens at the cost of the customer/depositor anyway.

If criminals know you're Bitcoin enthusiast by wearing a cloth with Bitcoin logo, they can force you to give your private key to them which mean Bitcoin can be robbed too! don't forget about $5 wrench attack.

You can manage your own coin if you hold it on a non custodial wallet, if you hold it on centralized exchange you're not have full control over your coins.

Cryptocurrency payment gateway isn't the best place to hold your coins, having a security feature is useless here if you not have the seed phrase or the private key. Just use a wallet, you're gave a wrong suggestion.

Anyone must be familiar with the system of saving money in a bank, we only hold the numbers of all the money we have in the savings book, while we never know whether the money is in their safe or not.

I experienced a quite surprising incident in 2021, when I wanted to take my savings for business purposes, but to my surprise they asked me to wait, some of the employees I asked said they lacked cash in the safe so I had to wait. I saw the head of the bank directly calling the district branch for help asking for a stock of money. So I concluded, that banks never see large amounts of physical money, they just log the numbers on the computer.

Food for thought: Interest rates do not even approach the capital appreciation Bitcoin has had in the past 3 years. Hell, interest rates in the past 3 years don't even approach the appreciation in Bitcoin capital since last month. They're near zero in my country. No reason to hold money in the bank other than to make electronic transactions.

Even more food for thought: in contrast with large banks, crypto-exchanges can't get bailed out, so their CEOs are not incentivized to spend money recklessly. But when a big bank makes a mistake, or acts irresponsibly... Brrr!

Fiat and Bank are complementary to each other but currently fiat and banking systems are slowly becoming traditional systems. Especially when fiat money is stored in a bank, the value of fiat decreases day by day. Especially in our country, due to rising inflation, the liquidity of capital accumulated in banks has started to decrease slowly.
In all these cases only Bitcoin can solve this problem. I think the amount of money I have in the bank is slowly depreciating due to inflation, but in all these cases if I had converted my capital into bitcoin or gold instead of storing it in fiat, my savings would not have been affected by inflation.

Fiat, bitcoin, gold... all are man-made products, and they are worthless if not trusted by people. Value is created from people's beliefs, as long as people have a need, it will always be valuable. Fiat is worthless, but your life is attached to it, without it I am sure you cannot survive in this world. Bitcoin is virtual, and worthless, but it has brought freedom to many people, turned many people from poor to rich, and helped many people have the life worth living that you and I have always dreamed of.

I honestly think it's outrageous that fractional reserve banking is legal. I know that this is what banks do, but I think the risk is just way too high for users. What's worse, people often don't have much choice, they use their banks accounts without wanting to use them just because other things are build around having a bank account. In my country, if you are employed, you can't even choose your own bank and each time you go to work at another place, there's a strong chance you'll need to open another bank account because it is the employer who chooses the bank to work with and all employees get their payments to the accounts of this specific bank. Banks need to find other ways of making money, relying on revenue from the fees, ads in their apps and on websites, partnerships with other companies etc. It's not normal that they can play with the money of customers as they see fit and then if suddenly too many people want to withdraw just file for bankruptcy with a very solid chance of not even facing criminal charges for robbing customers and losing their money. I'm really happy that Bitcoin is not like this at all, but crypto exchanges might be, and we need a better system with banks in any case because they are an integral part of today's economy and lives of so many people.

There is nothing Bitcoin could solve. Bitcoin is simply a digital currency having a volatile market value which benefits investors or users as an asset or investment. Whatever characteristic banks are having, simply determines its characteristics as being regulated by government sectors.Slowly becoming traditional? Fiat and banks are already traditional mode of payments for years or decades. Value decreases day by day? How come? And in what instance Bitcoin will be the aid because of the tendencies for a price increase? In the first place, the market price of Bitcoin is not growing in a consistent manner. Profit therefore is not assured. When it comes on inflation, we somehow cannot do anything about it because it is a reflection of economic status across countries around the globe. We may view this technology as something beneficial but aiding problems is really sketchy even for this industry.

It's just pointless to keep money in the bank for those periods because you cannot get any added value from the interest compared to the interest Bitcoin can give because of its volatility. It's just the fear of theft and because most people are not awear of Bitcoin, that makes them keep their money in the bank for a long period of time when they could just use it to stack up some BTC.


We are just being deceived, because inflation is making the money not even have a good value in the market, and even by the time the savings period is over, the little interest you would have gained would not even buy anything reasonable because of the inflation rate. man, this is just only deceit. When the money is in the bank and they print more money, that makes your money have no value, and when you receive the little interest, you are happy, not knowing that inflation is real and the money you saved may have even lost value. I don't know if you get my point.


That's not true, we would have even more value than the fiat because Bitcoin has a maximum supply, whereas the fiat can be printed by the government anytime they think they need to, as the OP stated.


The government can try, but the purpose cannot be defeated because Bitcoin's founder is unknown. Recently, there was a case of CZ of Binance being sued, and that was because the government knew him and expected him to cooperate with them. They can pick him up any time they like, but in Bitcoin, who will they investigate? How can they make it centralized? They won't be able to do that.


This is not a challenge; even older people can learn to operate an Android, iOS, or Apple device if they are tough. Humans are open to learning new things almost every day, and it would not be a bad idea to teach them how to store their bitcoin in their wallet and secure their password. If you are also referring to people who are too old, well, they will have children, grandchildren, or relatives that will cater to their needs. Just like my grandma, who's 82 and still strong but doesn't go to the market again, doesn't go for groceries again, and is just either going to church or checking her garden, her children do buy everything she needs. So, people who are not too old can still learn to operate their asset safely.


[/quote]Banks can collapse, but the entire banking system cannot collapse, [/quote]

Why can't they all collapse? Do they operate differently or in any way more uniquely than others?


Is that, ideally, the best thing to do?


So are you insinuating we should keep enduring the devaluation of the purchasing power of money in the market until $10,000 cannot buy a liter of olive cooking oil? Or until $500,000 can't pay rent?



I have a question for you, mate: if perhaps you are the person that puts your money in the bank, and after it collapses and you cannot get your money back, would you still look for another bank to put your money in or advise any of your friends to keep their money? How about when you find out that Bitcoin gives you full control of your money? Would you not adopt it? That is definitely what people will do when the time ripe. I feel the time is gradually ticking down.

On an economic scale, I don't think bitcoin could prevent these crises. One thing is for sure, it could be one of the alternatives.

The majority of people are not even have awareness of bitcoin, I don't think bitcoin can significantly reduce the possibility of it could happen. Bitcoin alone to be the sole solution for fiat and bank is very unlikely to happen. But, in cases those crises you mentioned occurs, we can greatly see that as an alternative it could play a big part. So, I think it is more likely only affect as an alternative, not as a whole replacement.

I agree with what you say, and so far bitcoin was not created to replace the existing system.
Bitcoin is a great alternative to relying solely on fiat and its banks, but it comes back to being aware of each other and being aware of the risks.

Many people rely on banks because of their guaranteed security, while most of them do not know how banks use customer deposits. If someone realizes this, then his mindset about the bank will change. Bitcoin is an alternative solution to fiat and bank, I agree with this idea.

In my personal opinion, Satoshi invented Bitcoin to make our financial system independent from the banking sector. And I also think that Bitcoin is completely separate from these shortcomings of the banking sector. When banks make interest income by lending by our money on deposits and don't have the ability to pay us back when someone defaults on the loan or over-loans and they don't have a plan for it, then Bitcoin is definitely a good   solution will be to get rid of this problem.

It has become increasingly challenging to trust centralized organizations such as banks or exchanges. The only reliable option to trust when holding Bitcoin is our own non-custodial wallet, where we have complete control. Banks generate a significant amount of revenue from loans, even though the funds are not their own. They use public funds, and when they want to avoid their obligations, they resort to declaring bankruptcy. While Bitcoin addresses several issues, its volatility poses a challenge when it comes to investing all funds in it. Therefore, resolving bankruptcy becomes more difficult in such cases.

I've heard this argument multiple times. There's no way to break down the whole electric grid or Internet just like that. If it ever gets damaged and the connection between continents breaks, it's going to get fixed. If there's nobody left to fix it, that's another problem, but in such case we'll be in deep shit anyway and we'll have to barter. Nobody's going to take fiat money, bitcoin, or even coins, unless it's very early in the doomsday scenario.

Bitcoin actually has more value than fiat because it can't be devalued, like they're devaluing every single currency through central bank policies.

First, Bitcoin is not the solution or answer to everything. The problem of fiat currency is called by the Central Banks/Fed's mismanagement and unreasonable printing of more fiat currency and there's no way a trillion currency will be printed in a year and it won't lead to inflation. How would Bitcoin solve the problem? Please don't let us be naive.
The problem of an institutional bank is also caused by mismanagement of user funds and I read from the news that the bank problem is not over.

One day my brother received a lot of money from the sale of quite large land. it turns out that the money from the sale will soon be bought back on land that is closer to his house. because the land that was sold earlier was indeed too far away and even had to drive several hours to reach it. at that time he received payments in cash and of course because of the large amount of money. so he was worried to keep it at home even for a few days. and the next day he went to the bank and brought the money to be deposited in the bank. he just made savings at that time. because previously he did not have a bank account book. and that day he saved his money in the bank and he automatically had savings with a large amount of money in his account.

 but 2 days later he apparently needed the money back. because it turned out that the owner of the land that my brother was going to buy apparently wanted to speed up selling his land to my brother and my brother also intended to take all the money he kept in the bank that very day.

but when he came to the bank to take money from his savings it turned out that the bank could not immediately hand over the money to my brother. my brother was told to wait a few days and then come back to the bank to collect it. even though at that time my brother needed the money as soon as possible. because apparently he also had an agreement with someone who would sell the land near my brother's house.

before I did not understand why it could be like that. but now I understand that it was possible that at that time the bank did not have enough money in the safe.

I think this is indeed a weakness of the Bank itself. and maybe when we save in the morning then during the day our money is not in their safe. because it may have been loaned or handed over to someone who withdrew his savings.

So it's no wonder that many banks are currently collapsing.

To my basic understanding, banks keep a part of the total money they have been "lent out to", by the people who deposited it and lend the remaining to institutions and invest in real estates, share markets, bonds, mutual funds, etc.
Now, I'm not criticizing anything but putting my point here.
Just take marketcap of a coin for example.
What is marketcap?
Marketcap is the current price of coin * its circulating supply
Fully diluted marketcap is the current price of coin * its total supply

Now, in both things, what matters is the price of the coin.
So basically, marketcap is the virtual total of price*supply, which means that it is not fixed and it means that if the price dumps down or rises up gradually, so will the marketcap. However, having a huge marketcap doesn't mean that the coin has the buyers to absorb a big dump at the very exact average price where it is currently standing.

So, their money is not safe here too, but the issue here is not about exchanges lending out our coins the way banks do with our money, but the value of that thing we put our money in. Even US dollar can collapse based on the news coming from their part and each time they're raising their interest rates to keep US dollar strong but till when?

I'm seeing this as a double-edged sword where we are not guaranteed to get back the value of our money in the future. We say that a dollar is a dollar, but the value of that dollar isn't even worth a cent because the inflation rate has increased that high. And I believe in value, be it of the coin I put my money in, or the money that I put in banks.

It's true that banks may collapse anytime if all of a sudden, people start withdrawing their funds from there and I don't trust them at all, so I keep as much cash on hands as possible. I'm not interested in their cheap interest rates that we can earn in crypto through a single spot trade.

agree with you,on the value of money and cryptocurrencies. It's true that the value of both traditional currency and cryptocurrencies can be impacted by various factors, such as news and inflation rates.

Regarding the comparison with banks, while it's true that banks keep a portion of the money they lend out, they are also subject to regulations and protections that aim to ensure the safety of people's deposits.  Investing in cryptocurrencies carries higher risks, as the value of the coins can be more volatile and not backed by any government or regulatory body.

As for the concept of marketcap,think you are correct that it is based on the current price and circulating,total supply of the coin. However, the marketcap can also reflect the overall demand for the coin and its potential for growth. It's important  that investing in cryptocurrencies should be done with caution and research, as it can be a speculative and unpredictable market.

Ultimately, the value of money and investments is subjective and dependent on individual beliefs and priorities.According to previous records, it's important to make informed decisions and weigh the risks and benefits before investing in any asset, whether it be cryptocurrencies or traditional banks. However the cash that we have on our pocket,keep decrease our buying power yearly  :'(

Banks exist since centuries. There were banks in Mesopotamia and Greece 2500-3000 years ago.
Do you suggest that we should dump banks completely? I think that the global economy can exist without banks, but sooner or later, somebody is going to borrow money and someone is going to lend money. Banks going bankrupt is a part of the game. The major problem of the financial system isn't fractional reserve banking. The major problem is the uncontrolled money printing and the moral risk, which it creates. Nowadays, every bank can invest in risky assets, knowing that when "the sh*t hits the fan" the central bank is going to step in and provide unlimited support with newly printed money.
I don't believe that Bitcoin could solve this problem. The majority of the people are just too used to using banks and fiat money. They can't simply switch to Bitcoin/crypto.

We can not simply just make something gone out of existence, which has been with us for centuries. Bank is commonly used in every country by 70%+ of their population. And bank is not the problem. But the system is. We can not dump the concept of bank completely.
This is the problem which could be solved with Bitcoin from my POV. Because bitcoin can not be printed unlimitedly as you can do with traditional money. So there's a high possibility that banks will lose their strategy and stop doing something which will lead them towards bankruptcy.
We need both of them in the society. That way people will be able to try them both and they can choose by themselves which will suite them better.
And for me, I will choose BTC. Also I will keep banks as a backup as the price of BTC is volatile. So that's what I think.

I don't see fractional reserve banking system as something wrong or illegal like what you're implying. I think it is the exact purpose of banks which is to circulate money in the economy by lending out the rest of the money to borrowers or invest it.


I think it is not the printing of money either. It is not the practice for central banks to provide newly printed money directly to banks that are going bankrupt. If they do, it would be so illegal. They just provide liquidity support to banks that are experiencing temporary liquidity problems rather than directly giving them newly printed money. But there was just a case where banks around the world injected large amounts of newly printed money into the banking system to prevent a widespread collapse of the financial system and it was an exemption, controversial, and I think necessary.

What I think plays the huge role in the problem of the financial system is the unequal distribution of wealth. It is very visible in the differences in income, education, inheritance, and access to opportunities in every country.

bank is inevitable, since the existence of banking system corruption is one of the factors bank operates on, and provided that fiat currency with its storage operates in a centralised form they most be a manipulation. The gravity of corruption in the bank can't make people to dump bank because people are used to their system of corruption.

the point am fishing out here, is that banking getting bankrupt doesn't mean that its as result of people are not depositing money in the bank any longer, but it comes as result of the management using money in the bank for business,  so with this observations of bank managers and it system of banking operations, can make bitcoin to supercedes functionalities of fiat banking system. Actual its becoming reason of thought that global economy can exist without banks.

Actually you are making a point here, whereby the masses across the nations has been acclimatised with system of using a fiat currency for daily transactions and it will be very difficult to switch with bitcoin shopping etc, but the reasons while bitcoin can't be use as a means of corrections its because  Bitcoin haven't be generally accepted as a legal tender, but assume all the nations legalise crypto as legal tender it would have been the shortest means  of eradicating banking corruption.

In short, why not use both, we are allowed to use both, no one forces us to use only 1. Bitcoin is only a means of payment, it cannot completely replace solutions from banks.

What if you have no money or money in the bank while your bitcoin investment loses 50% of its value? Would you use bitcoin in an emergency and accept losing 50% of its value?

Bitcoin is a decentralized digital currency and just as the name implies, it simply means that one singular person is in charge of your money except just you and with this very concept you'll agree with me that Bitcoin will definitely solve all this problems with banks and fiat.

But now most private exchanges are already acting the same with banks and are illegally tempering with the holdings of their customers, hence the campaign for the use of decentralized exchanges should be considered and the awareness of privacy should be thought more.

In conclusion, Bitcoin with an unlimited supply will definitely help to fight the crisis with fiat and local banks.

I agree that it has been the main trouble for most financial issues. They rarely have enough money, and the "loan the rest out" means they literally don't have your money. So if all of us put 10 billion dollars into one bank, and they loan 7 billions of that to others, then they have 3 billion left in the bank, so if we all try to withdraw from the bank, what happens? They crash and bankrupt.

This alone is a good enough proof that we shouldn't have it, that's a terrible idea and was never a good thing that can sustain from the very first start. It is there to get banks make more profit, but the risk is too much and shouldn't be done at all. I rather not accept this situation and that's why I am in crypto.

The example you guys are giving does not apply. Yes, the concept of a bank has existed for centuries and it's inherently good, but the banks that existed centuries ago could not lend money they did not have, because you weren't getting money on a piece of paper as an IOU. You were getting physical money, cash, gold, silver...
Nowadays you're getting electronic money that you don't know if the bank has or not (usually it does not).


They're both the same kind of problems. Fractional reserve banking and quantitative easing are both fucked up ideas that can never work in the long run.

Bitcoin could very much be the solution to this fractional banking dilemma given the fact that these banks are pretty much uigh and mighty in the grand scale of things, with the ability to hand out loans and create money out of thin air in the process. But this coild only work if a substantial amount of people in this world or the next hold bitcoin in their personal wallet and not on centralized exchanges like a couple knowledgeable blokes in here have already told you, coz the money and the security is directly correlated to how they play with your funds, and judging the FTX cabash from months ago, you know it's jot going to end well.

Fractional reserve helps banks free up more funds to put into circulation and make more profit. If there are any problems with cash that need to be issued to depositors, interbank assistance is usually involved. Failures in the banking system occur, as a rule, either due to the inept management of funds, or even to the abuse of bank employees. Therefore, failures in the banking system are always temporary, this system is quite stable and always recovers. An important role in its existence is played by the state and its government, which help banks in difficult times. Therefore, banks and their fiat will continue to exist.

I think it's natural for the government to support banking because the government needs the bankers, to support state finances in terms of finance for distribution to the community or distribution for matters of state development because basically the government today still trusts the banking system. the second is that the average government still thinks it's old-fashioned, in other words, most government officials today are still ignorant about technology like bitcoin, which most of them consider to be quite complicated, like in my country.
Of course there will be a long debate when talking about KYC and anonymity, because basically KYC is to confirm personal data of communal status for business owners and the state also needs that data to monitor its citizens and guarantee their citizens, while anonymity is more closely related to what decentralization is. offered bitcoin, of course this will also conflict because in general the state is a centralized organization.