Someone (A) can loan Bitcoin to another person (Bank), with the terms that if he asks he can have it back at any time, and he'll also receive a small percentage of interest each year.
Bank can then lend 90% of the money to a third person (C), betting that A will not ask to get all his money back at the same time. To decrease this risk, he does this with lots of people so he is covered in case only a few ask all of it back (but still is in trouble if too many of them do at the same time).
A still has money (his assets are very liquid as he can ask for them back at any time, very liquid assets are what we call money), C has money, the sum is more than the initial amount, so money was created through fractional reserver banking.
That's all fractional reserve banking is, and nothing about Blockchain prevents it.
>That's all fractional reserve banking is, and nothing about Blockchain prevents it.
Implicit in my comment was the idea that it would be a bad idea to start a fractional reserve bank which used a currency of account that wasn't available in infinite supply from a nearby government.
Also, I merely stated a way in which Bitcoin could be used as a sound bank, not that all possible banks which use Bitcoin are sound.
Someone (A) can loan Bitcoin to another person (Bank), with the terms that if he asks he can have it back at any time, and he'll also receive a small percentage of interest each year.
Bank can then lend 90% of the money to a third person (C), betting that A will not ask to get all his money back at the same time. To decrease this risk, he does this with lots of people so he is covered in case only a few ask all of it back (but still is in trouble if too many of them do at the same time).
A still has money (his assets are very liquid as he can ask for them back at any time, very liquid assets are what we call money), C has money, the sum is more than the initial amount, so money was created through fractional reserver banking.
That's all fractional reserve banking is, and nothing about Blockchain prevents it.