Bitcoin Bank
wb3:
Quote from: Sultan on January 17, 2011, 08:42:55 PM
I don't understand how that would be useful. Once a coin is spent, it cannot be re-spent, right?
A BitCoin Bank would be a very simple concept. It would be a Safety Deposit Box system for the .dat file accounts. The bank won't know who the customers are or how much are in the deposit boxes. They just charge a fee for keeping the .dat files safe. A good bank would have mirrored backed up boxes across the world and even possible physical .dat files in the form of printed binary for emergency recovery. (ie. EMP pulse takes out all the electronics world wide or something of that nature). You could recover your physical printed binary file and start typing the data in anew to recover. It would be a pain but hey if there is a million buck in there I will type for you.
The second service provided would be a type of holding house. You pay for something, they take your money, tell seller to send product, when you receive it, they clear the transaction to the seller. Trusted Man in the middle. A lawyer-less Escrow account in away. Of course a level of anonymity would be stripped for this to work. PGP keys could work for this. But the Keys Servers could be attacked to disrupt transactions. Unless a system of PGP P2P Keys for sending messages is accepted. The "Bank" would have to have the Public Keys for each transaction and be able to generate messages to each party involved. I guess the the "Bank" could set up its own on account opening and provide a unique private(sort of sense it would need to be given out) key to each account holder for communications.
Sultan:
Your idea of actually physically printing the value is quite a good one, actually. But rather than have the binary string, wouldn't it be better to have it in hex? Less space?
Anonymous:
Quote from: Sultan on March 01, 2011, 08:33:06 PM
Your idea of actually physically printing the value is quite a good one, actually. But rather than have the binary string, wouldn't it be better to have it in hex? Less space?
http://bitcointalk.org/index.php?topic=3941.0
The idea has been discussed since day one. You can put private keys in QR codes.
friendsofkim:
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sounds like a fractional reserve system, one of the fiat money pitfall bitcoin claims it can avoid.
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...both which introduce the evils of Fractional Reserve Banking.
There is nothing inherently wrong with fractional reserve banking, provided the parties who enter into such an agreement understand the agreement, and assume the risk.
The problem is a state-sponsored fractional reserve system where bank notes are enforceable legal tender, deposits are insured by the Government, and banks are not allowed to fail. This creates all kinds of moral hazard, market distortions as well as inflation.
Fractional reserve banking as occurred during the decentralised "Free Banking" era in the US (1837 - 1864) - i.e. subject to proper competition and where the risks are assumed by those entering into contracts with each other, not third parties - is healthy and desirable. During the Free Banking era, bank notes were not enforceable tender, and often traded at a discount against Federal notes the further they traveled from the issuing bank.
One of the major benefits of FRB of this kind is the supply of credit not being limited by the available supply of money. If people are willing to accept a Bitcoin bank's "money" as payment it can also issue credit, which can fuel investment in the bitcoin economy. The important point is that banks which issue credit (e.g. money) improperly by lending to untrustworthy parties, businesses which aren't viable, or into property bubbles, go bust. This imposes discipline on the banks.
If bitcoin is successful this will almost certainly happen, and it will be beneficial for a number of reasons as stated by Hal and others.
myrkul:
Fractional reserve banking would be MUCH harder to do with bitcoins than physical currency, unless banks were allowed to print paper money "backed" by bitcoins. A bitcoin note system would work much like the old gold-backed bills. You could turn in a note for bitcoins at the bank, but if everyone did that all at once... Someone's getting stiffed.
Transactions within the bank would also be possible with "fake" bitcoins, especially if all the bitcoins are held in the bank's wallet, and accounts simply have balances.
The problems start hitting hard when you try to send actual bitcoins. If the bank extends itself far enough, and has enough clients, it may be possible wipe out it's coffers with a transaction or two from each client.
Bottom line, you CAN do fractional reserve banking with bitcoin, but it requires that every other bank and customer agree that your paper or digital notes are as good as the bitcoins they represent, in order to pull it off without any hitches. That requires state backing, and I doubt bitcoin's going to get that.
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