Fractional Reserve Banking: Difference between revisions
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Put simply: a fractional reserve bank (or exchange) faced with a bank run will not be able to give back 100% of their bitcoins to users and will go bankrupt. | Put simply: a fractional reserve bank (or exchange) faced with a bank run will not be able to give back 100% of their bitcoins to users and will go bankrupt. | ||
==January 3rd Proof of Keys day== | |||
Every year on January 3rd bitcoiners are encouraged to move their bitcoins to wallets under their full control. By withdrawing from exchanges and other custodians, fractional reserve and other frauds are exposed. This makes Bitcoin stronger by removing weak players from the system. | |||
Revision as of 11:51, 29 December 2022
Fractional Reserve Banking is the practice whereby a bank holds reserves that are a fraction of its on-demand liabilities. It contrasts with a Full Reserve Banking system in which banks must hold reserves for 100% of on-demand liabilities.
Holding only a fraction of on-demand liabilities means that in the event of a bank-run the bank is mathematically unable to meet its obligations.
Put simply: a fractional reserve bank (or exchange) faced with a bank run will not be able to give back 100% of their bitcoins to users and will go bankrupt.
January 3rd Proof of Keys day
Every year on January 3rd bitcoiners are encouraged to move their bitcoins to wallets under their full control. By withdrawing from exchanges and other custodians, fractional reserve and other frauds are exposed. This makes Bitcoin stronger by removing weak players from the system.