Bitcoin is not democratic. It is voluntary.
Sorry, I meant democratic in the sense that it currency is "issued" by the users of the currency instead of a central organization, and in the sense that it would take a majority of us agreeing on a change to the bitcoin system for such a change to take place. Granted, we would be splitting the block chain and thus would not be a true democracy, as the minority would not be forced to go along with the majority. I say "democratic" for lack of a better word. The essence of what I am trying to say is that bitcoins tip the balance of power over currency away from central organizations and back into the collective hands of the currency holders. "Voluntary" is, I see, probably more accurate, though not exactly the word I was looking for as it fails to capture the redistribution of power the bitcoin system entails.
Hey, that sounds like a pretty good idea! Imagine if we organized something like that around the bricks-and-mortars banks. We'd be labeled as terrorists.
Which is why I think it would be a good idea to start any preventative practices now, while our community is still nascent. Once the normals start pouring in it'll be quite hard to start such a movement for that very reason. "You want me to do what?
Isn't that bad?
Can you explain how you send more bitcoins than you have?
Of course. When your bitcoins are held by a bitcoin bank, the only assurance you have that the bitcoins are still there is the number on your screen and, someday, your ATM receipt. Bitcoins are like cash minus the infini-flation and are subject to many of the same abuses.
As far as the rest of your post, the way to keep organizations honest is to be a knowledgeable consumer/user and don't use the organizations that do business in ways you dislike.
I understand. Unfortunately it's not that simple, though I wish it were. Being a "knowledgeable consumer/user" isn't possible if an organization lies well. I was too young at the time to remember any details, but I understand this is what happened with Enron. Sure, they went under eventually and all their lying caught up with them, but by that time the damage had been done. I don't think there's anything wrong with consumer activist groups helping keep willing businesses transparent and forcing the unwilling ones (through peaceful means, by my ideology) to do the same.
If a bank is practicing fractional reserve while claiming full reserve, well that's fraud.
True enough. Though I would argue that it is also an undesirable state of affairs akin to fraud, though obviously not the same as fraud, when there is a disconnect between what a bank's customer means when they say "fractional reserve" and what the bank means when they say "fractional reserve." The bank's culpability in such a case would come in degrees directly correlated to how clear or obfuscated they chose to make their use of their customers' money. After all, nobody should be held liable for another person's willful ignorance; nor should a person be faulted for believing falsely when another deceives them.
Each bank customer can set how much of their deposits the bank is allowed to use.
If you specify 0% this would mean the bank just stores your money and you'd have to pay a fee.
If you specify 25% perhaps then it would be free, but you earn no interest.
At 50%, you earn a small interest
At 90%, you earn max interest
Your monitor software or service is then programmed to warn you if the account drops below your specified limit. The software or service could also provide stats for different banks, how much reserve they have on average.
Could this be implemented in practice?
Yes, actually. My initial thoughts were to keep the loaning institutions and the banking institutions separate, at least in terms of interface. But if one wanted to keep them together and allow fractional reserve banking while keeping things voluntary and transparent, that would be a pretty good way to do it.
Couldn't one monitor a banks transactions through block explorer?
The block chain is already public.
You both make really good, really obvious points. I can't believe I overlooked that. I fail.
Though I can see how the bank run idea *could* become relevant if a bank were to become big enough to offer "instant transfers between bank members and improved interest rates" if only every participating member sends their bitcoins to the same address and uses the bank's interface to transfer. But you both are right: the system itself resists allowing a person to unwittingly become party to fractional reserve banking.
It's not some sort of scam, it's merely how the system works.
Yes there is corruption in banking, and an enforcement gap in fact, many many problems indeed. But at least understand the problem, let's drop all this 'black helicopters' shit.
Fair enough. Although as far as I'm concerned, banks should be full reserve unless a person opts in to some sort of well-defined investment or loaning program. Loans should follow as direct a path between the source of the money and the recipient as possible. Think Kiva, but on a bigger scale. That's my dream system at present.
Btw, any ideas on how one might allow/encourage community ownership and development of a bitcoin service? The bank run idea was obviously a bust, fractional reserve banking being impossible to pull off without a vigilant account-holder's knowledge thanks to the block chain.Edit:
I really do think the development of more freely available, non-profit, public bitcoin services would be in the best interest of the bitcoin community. I mean, it wouldn't be a bad thing if people could exchange their currency for bitcoins at no cost, right? And pulling my money in and out of a bank for free and without restriction (as MyBitcoin allows) is good too, right? And allowing a bank's customers to add new services to the bank, a la Facebook apps, and allowing the same to peruse the source code of the bank's system to audit and learn and perhaps start their own services would, in fact, be in the community's best interests, right? That is, after all, what I am hoping to accomplish with my service. Am I preaching to the choir or am I out of tune here?