0 sats \ 3 replies \ @siggy47 14 Apr 2023 \ parent \ on: Fractional reserve banking in Bitcoin bitcoin
There is nothing preventing someone from giving an iou on identified bitcoin at a wallet address. If a third party is willing to accept this iou as payment for a future transaction, a fractional reserve system could begin naturally. This is how fractional reserve trading began with gold deposits.
But it isn't bitcoin and there is no convenience reason why you need a certificate for an item that is itself a kind of certificate and just as easy to handle. It's not going to be bitcoin, if the marketing is honest, and the supply will be rubbery and nobody will hodl them.
There just isn't reason for financialisation with a fixed supply regime. You can park your surplus in coins for later investments, people can make contracts where they pay you coins and then you promise to pay them a share of the profits. That doesn't require funny numbers either, it's a separate kind of contract.
A credit market in bitcoin is not the same as fractional reserve banking, but it achieves the same thing without the central lever that is used to create boom/bust cycles and consolidate centralisation.
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I see your point. Still, I can imagine a scenario where there would be an incentive for using an iou versus actual bitcoin. For example, in the future transaction fees may become significant.
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By that time whole bitcoins will be moving around the lightning network in one go. So, yeah, still no change in the friction going forward. If the economics of running nodes remains similar against the living costs with an increase in block size then there's that solution too. It is possible that advances in the protocol will drastically reduce the on-chain data size per user as has already happened several times with new transaction formats and segwit and so on.
When all LN nodes support AMP fully larger payments will become easier and more routine on LN.
I doubt that BIP 42 will ever be rescinded. Certainly, from my cold dead hands!
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