TD₿: Bitcoin Banking Systems: Full Reserve vs. Free Banking by Eric Yakes
TL;DR Under a Bitcoin Standard, the banking industry, as well as credit itself, will likely look very different than it does today.
Hey Bitcoiners,
There is no reason to sugarcoat it — things are looking bleak out there.
We have major central banks like the Bank of Japan intervening in the FX markets to prop up their currencies, spiking bond yields, banks like Credit Suisse appear to be in distress, and the FedEx CEO recently came out and said he thinks a worldwide recession is underway.
In many ways, this is the culmination of a decade of policy errors and a lack of long-term thinking that has led us to this point.
Governments and central banks have run massive deficits and kept borrowing costs artificially low, which has led to record global debt levels. The IIF expects the global debt ratio to reach 352% of GDP by the end of 2022.
The IMF recently gave a warning in August that about 60% of low-income countries are at high risk of or already in debt distress, and about 20 emerging markets have debt that’s trading at distressed levels.
The traditional credit-based monetary system appears to be spinning out of control, and that is manifesting itself as increased volatility across all asset classes, including Bitcoin.
It’s times like these where I wonder what the economy may look like on a Bitcoin Standard, specifically when it comes to banking.
- Will there be full-reserve or fractional-reserve banking?
- Will there still be a lot of credit-financed investment, or will it be more equity-financed?
- Will the power and influence of banks shrink over time, or will Bitcoin banks grow in size to replace their incumbents?
There are so many questions that come to mind, and luckily Author Eric Yakes took a stab at deeply exploring this topic in this paper. (09/07/2022)
Bitcoin OG Hal Finney envisioned a future filled with Bitcoin-backed banks that offered different levels of interest based on their reserve profiles.
I don’t know whether or not Hal will be proven correct, but I do know that a system built on Bitcoin and geared more towards equity and less debt would be much more sustainable compared to the banking system we have today.
Tick tock next block,
Cory Klippsten
Sign up for Swan and receive $10 in free bitcoin today.
Quote of the Day
“One day 6 billion humans will have a bitcoin wallet. It won’t just be a “replacement” for banks, it will be the bedrock of civilization. Trolls are welcome to comment, make it juicy I want to frame a few and put it on my wall next to the ones about Africa never adopting bitcoin.” - Ray Youssef, Founder of Paxful
Job of the Day
Coinbits is looking for an enthusiastic UX Designer who can help build the next generation of Bitcoin products and services. This is an entry- to mid-level position and is the perfect opportunity to make an impact and build a portfolio of in-market designs for Bitcoin.
Not your particular skillset? Check out all the Bitcoin jobs at bitcoinerjobs.com.
Featured Event
Saturday - come to the Uganda Bitcoin Meetup at the Patio Cafe & Restaurant in Kampala, Central Region, from 3:00-6:00 pm and enjoy a fun and open discussion about the history of money, energy, and Bitcoin!
Not in town for this? Check out all the Bitcoin events at bitcoinerevents.com.
Meme of the Day