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Do We Need Central Banks? (2017)

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Re: Do We Need Central Banks? (2017)

#11

Post by TekMol »

dogma1138 wrote: post #4
TekMol wrote: post #2

It's interesting to think about how the role of central banks might change in the age of crypto currencies. Governments can print Euros and Dollars. But not Bitcoin and Ethereum. Popular theory is that governments have a good grip on currency usage because they can decide which currencies they accept for tax payments. And because they can force merchants to accept certain currencies. It will be interesting to see if…

Since there is no fractional reserve and the blockchain ensures that you have the equivalent of fully correspondent banking with each node in the network there is no need for a central bank on the other hand the blockchain itself can be viewed as is the central bank with the large mining pools acting as its board of directors. That said since no blockchain currently offers a credit system it’s not really possible to…

Well, every crypto currency has it's own characteristics. And therefore different USPs. I don't expect currencies that involve blockchains to be the dominant payment channels of the future. For payments, I expect simpler constructs. Lightning Network already handles most transactions without blockchain interaction. And Iota is a completely blockchainless currency that got traction already.

I think there will be many more approaches before one becomes the 'everyday' crypto currency.

Re: Do We Need Central Banks? (2017)

#12

Post by dogma1138 »

brian_cloutier wrote: post #9
dogma1138 wrote: post #4

Earlier quoted context omitted.

Since there is no fractional reserve and the blockchain ensures that you have the equivalent of fully correspondent banking with each node in the network there is no need for a central bank on the other hand the blockchain itself can be viewed as is the central bank with the large mining pools acting as its board of directors. That said since no blockchain currently offers a credit system it’s not really possible to…

There's no fundamental reason why Bitcoin shouldn't also have fractional reserve. I mean, cash also has a fixed supply! (from the Bank's POV) It's not like Chase Bank (or whatever non-central bank) can just print more dollars. If you just sit on your Bitcoin it collects 0% Bitcoin-denominated interest. Maybe you'd prefer to make a loan to a bank and have them pay you interest. For the term of the loan that money isn'…

I didn’t say it should or shouldn’t I said that currently they do not offer any sort of a built-in credit system.

And if you do fractional reserve off the blockchain then your crypto isn’t currency but rather closer to say what gold was during the gold standard era.

And yes Chase can “print” dollars that’s what the fractional reserve system means for every dollar they store in the central bank they can loan X dollars. When you ask for a mortgage Chase essentially creates most of those dollars out of thin air.

Re: Do We Need Central Banks? (2017)

#13

Post by nfoz »

yasp wrote: post #3

Probably not. I suspect the Austrian school of economics will be proven right about money and credit eventually.

What does that mean?

I'm not versed in economics, and generally find it overwhelming to look into, because of deeply-set political opinions and implications buried in all of it. Is "economic school" a political choice (differing goals) or a choice of tooling/methodology?

Re: Do We Need Central Banks? (2017)

#14

Post by brian_cloutier »

dogma1138 wrote: post #5
yasp wrote: post #3

Probably not. I suspect the Austrian school of economics will be proven right about money and credit eventually.

That’s the gist of it the blockchain offers most of the “services” provided by the central banking primarily correspondent banking (well sort off since you don’t have to manage correspondent accounts as you have a single ledger) and it also offers a consensus forum (most of them do at least) which acts as the board of directors of a central bank. The big difference is that unlikely most fiat currencies there is no cr…

As I pointed out in another comment in this thread, fractional reserve is just as possible with Bitcoin as it is with cash, it's not like banks increase the money supply by printing cash.

If you give your money to a bank it won't be sitting in an account you have the key to, it'll be the bank's to control and they'll be free to lend it to other people.

This might even be a desirable state of affairs: money which you don't give to a bank collects 0% interest.

Re: Do We Need Central Banks? (2017)

#15

Post by dogma1138 »

brian_cloutier wrote: post #14
dogma1138 wrote: post #5

Earlier quoted context omitted.

That’s the gist of it the blockchain offers most of the “services” provided by the central banking primarily correspondent banking (well sort off since you don’t have to manage correspondent accounts as you have a single ledger) and it also offers a consensus forum (most of them do at least) which acts as the board of directors of a central bank. The big difference is that unlikely most fiat currencies there is no cr…

As I pointed out in another comment in this thread, fractional reserve is just as possible with Bitcoin as it is with cash, it's not like banks increase the money supply by printing cash. If you give your money to a bank it won't be sitting in an account you have the key to, it'll be the bank's to control and they'll be free to lend it to other people. This might even be a desirable state of affairs: money which you…

As I pointed out no where was stated that it’s not technically possible but that it’s not practiced or supported by current mainstream cryptos.

If anything some of the larger blockchains “naturally” move towards a “central bank” like model.

Say you have a blockchain that requires you to sync 100’s of terabytes if not petabytes of information to setup a new node and 100’s of gigabytes a day to keep it upto date.

It’s not going to be feasible for individuals to talk to it directly.

Now you already have exchanges that keep ledgers other than the blockchain and that already do most of their transactions off the blockchain these are your banks.

In this model the blockchain essentially offers only value store for the exchanges and keeps only the exchanges honest this is essentially your central reserve.

The blockchain offers also a consensus protocol where either the miners if it’s PoW or the exchanges if it’s PoS hold the important seats, that’s your board of directors.

So yes I don’t think that current crypto is incapable of mimicking the model of banking we currently use some already do it unintentionally to some extent.

But currently there isn’t a single crypto that offers a built in fractional reserve and credit system as part of its blockchain its off possible to implement it.

Re: Do We Need Central Banks? (2017)

#16

Post by shanghaiaway »

TekMol wrote: post #2

It's interesting to think about how the role of central banks might change in the age of crypto currencies. Governments can print Euros and Dollars. But not Bitcoin and Ethereum. Popular theory is that governments have a good grip on currency usage because they can decide which currencies they accept for tax payments. And because they can force merchants to accept certain currencies. It will be interesting to see if…

Governments are never going to adopt a currency controlled by foreign entities.

Re: Do We Need Central Banks? (2017)

#17

Post by closeparen »

brian_cloutier wrote: post #9
dogma1138 wrote: post #4

Earlier quoted context omitted.

Since there is no fractional reserve and the blockchain ensures that you have the equivalent of fully correspondent banking with each node in the network there is no need for a central bank on the other hand the blockchain itself can be viewed as is the central bank with the large mining pools acting as its board of directors. That said since no blockchain currently offers a credit system it’s not really possible to…

There's no fundamental reason why Bitcoin shouldn't also have fractional reserve. I mean, cash also has a fixed supply! (from the Bank's POV) It's not like Chase Bank (or whatever non-central bank) can just print more dollars. If you just sit on your Bitcoin it collects 0% Bitcoin-denominated interest. Maybe you'd prefer to make a loan to a bank and have them pay you interest. For the term of the loan that money isn'…

>It's not like Chase Bank (or whatever non-central bank) can just print more dollars.

Yes, it can, that's what fractional reserve means. Banks create (most of) the money they lend. This is regulated by the central banks but carried out via ordinary retail banking. When you swipe your credit card, buy a car, etc. money is being created out of thin air. The universe remains balanced because it corresponds to your obligation to repay; as you do, the money ceases to exist.

Re: Do We Need Central Banks? (2017)

#20

Post by TomMarius »

shanghaiaway wrote: post #16
TekMol wrote: post #2

It's interesting to think about how the role of central banks might change in the age of crypto currencies. Governments can print Euros and Dollars. But not Bitcoin and Ethereum. Popular theory is that governments have a good grip on currency usage because they can decide which currencies they accept for tax payments. And because they can force merchants to accept certain currencies. It will be interesting to see if…

Governments are never going to adopt a currency controlled by foreign entities.

Really? In many parts of the world (outside of the US, e.g. Georgia), dollar is used/accepted even for taxes.
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