The Danger of Fractional Reserve Bitcoin is Here

over 4 years ago

Unfortunately people are making the same mistake that they once did with the banks and this is happening with the crypto exchanges becoming the new banking system. How do we know that exchanges are actually buying bitcoin from miners and sellers when you hold your crypto on an exchange? The answer is that you don't. There's no regulation saying that your exchange has to go and buy bitcoin when you give them national fiat. They might simply have recorded that transaction in their central database and issue an "IOU".

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So are these IOU's now exceeding the total supply of bitcoin? Exchanges are incentivized to avoid the volatility of crypto by holding stable coins like Tether and DAI. Then they can arbitrage the prices of various coins and make more money.

The new centralized exchanges are going to become the future JP Morgan's and Citibanks of the world if you continue to make the mistake of holding your crypto on exchanges. Regulators will make sure of that and we already see the trend of exchanges bowing to authority and submitting to regulation.

If you hold your crypto on a centralized exchange, you have not exited the system and you run the risk of not just depressing the value, but also of the coins being stolen from you.

Not your keys, not your crypto.

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3 comments

@taskmaster4450le 80

over 4 years ago

The issue I have with BTC (and the forks) is that miners are akin to central banks. Any new tokens first go through them before entering people's wallets.

On Steem, a token goes from the blockchain to ones wallet, a big difference.

As to the point of exchanges, I couldnt agree more. I use them when I am converting fiat but it is usually a pass through.

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@anonymint 65

over 4 years ago (Edited)

See my response to @zoidsoft’s blog which also addresses your point. The FATF (with its additional 9 regional groupings) which appears to be the 10 Kings in Revelation is to be that global central bank.

Oh and I entirely disagree/refute/rebuke your assessment of PoS(hit) altcoins.

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@steemitboard 66

about 4 years ago

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