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".

You are wrong

You can not operate a fractional reserve bank using bitcoins, it's impossible by definition because you can lend only the money you actually own and no more. Fractional reserve system works such that you need only 10% reserve of actual money and you can create 90% out of thin air ... you can not create new bitcoins out of thin air like that, you have to actually own them to lend them. And that's why a fractional reserve banl can never ever exist in bitcoin economy no matter how anybody tries

And hello to fellow Zeitgeist member


There is some weird gold worship going on in some economic circles, gold is not so special or particularly good money IMO. It does not have any inherent value, I do not need gold in my everyday life and I do not know anybody who does. There is some use for gold but that's not what gives it its value ... in that sense gold is just as fiat as US dollar except it's not unlimited supply of it. But even if we disagree on this which we probably will there is another problem, there is no way for you to know whether there actually is in the safe the amount of gold the bank says there is, this is what led to the fractional reserve in a first place. You do not have to actually create more gold to create money out of thin air, you just have to *cliam* you have. So Bitcoin is much better than gold because you can not fake how much you own.


It is created "from thin air" because when you solve the hash, 50 bitcoins just appear out of nowhere

The trick is that there is no central authority which issues bitcoins so nobody can use this to manipulate the market. It is evenly and at predictable rate distributed through the economy according to CPU power which is the most fair way without any central authority Satochi could think of (and I can't think of any better, can you?)

If it causes drop of monetary value depends on multiple factors, in isolation yes it would result in that but the bitcoin economy is dynamic and if the supply of bitcoins increases just as bitcoin economy expands it can actually be gaining value while new bitcoins are injected. Which seems to be happening now.

I hope I helped to clear up some things

Ah, I saw that already and forgot  

But it's still buried in the wiki (which is not linked from the main page) and does not contain the most important point IMO, that is *use bitcoins* to provide a service (good). If there is nothing to buy for bitcoins there is no incentive to use them.

Thanks

I think many people are wondering what they should do to most effectively support bitcoin and secure its successful future. It would help to have this explained somewhere visibly. I believe the best thing everybody can do is to offer services and goods for bitcoins, that's what makes a currency useful, an ability to exchange it for as much diverse spectrum of what one might want as possible. It's also an investment as with every new thing that can be bought for bitcoins the value of bitcoins themselves rises.

This can take many forms, it could be game (items for BTCs), support forum (BTCs as reward), micro-donations ... anything, but I think it's best to start with the virtual stuff ... or not creativity is key ...