If you deposit BTC to a centralised exchange they display your balance but they don’t necessarily have to keep that BTC. They may have users that have a total balance of 1 million BTC but only hold 500 K BTC in their wallets due to hacks or other bad decisions they have made. If you had the BTC in your wallet with your own keys the balance will show what you have with no risk of deceit.
If they lend someone money, that needs to be in the form of real valid coins. They can’t create coins out of thin air, except by mining. The coins they lend must come from somewhere, from mining or deposits.
So they can’t lend out more money than they have as deposits.
So bitcoin banks can loan out your money. What they cannot do (i think) is create new money the way normal banks do. If I lend the bank $100, the bank can turn that into $150 credit + $50 debt. Then it can loan out $120 dollars. I think that’s impossible with bitcoin, which is an important and good feature of the currency. But I thought the article was saying bitcoin banks can do that.
So they can’t create new BTC but they can loan it out and display to you that you have BTC balance when they don’t actually have it in their possession, just like banks. BTC in a centralised exchange on in a bitcoin bank is not real BTC. It does not have the same properties as BTC.
If you deposit BTC to a centralised exchange they display your balance but they don’t necessarily have to keep that BTC. They may have users that have a total balance of 1 million BTC but only hold 500 K BTC in their wallets due to hacks or other bad decisions they have made. If you had the BTC in your wallet with your own keys the balance will show what you have with no risk of deceit.
If they lend someone money, that needs to be in the form of real valid coins. They can’t create coins out of thin air, except by mining. The coins they lend must come from somewhere, from mining or deposits.
So they can’t lend out more money than they have as deposits.
Where do the coins come from then?
Nobody said they are creating coins. Just that they may be displaying balances that they may not have anymore.
Oh I understand. Thanks.
So bitcoin banks can loan out your money. What they cannot do (i think) is create new money the way normal banks do. If I lend the bank $100, the bank can turn that into $150 credit + $50 debt. Then it can loan out $120 dollars. I think that’s impossible with bitcoin, which is an important and good feature of the currency. But I thought the article was saying bitcoin banks can do that.
So they can’t create new BTC but they can loan it out and display to you that you have BTC balance when they don’t actually have it in their possession, just like banks. BTC in a centralised exchange on in a bitcoin bank is not real BTC. It does not have the same properties as BTC.