I understand that this is not appropriate question but it obsesses me for a long time (other forums do not give certain answer) and I think that finantial cryptography experts should understand this very well. I am interested to know what prevents bank to issue more money than it has on its deposits. Say, customers transferred 1000k dollars to bank. What prevents it to lend 100M as loans/withdrawals? I think that every bitcoin user is such banker and answer must be answered.

  • 1
    It is not clear how you arrived at the conclusion that every Bitcoin user is comparable to a bank. Also, it might be interesting for you to read up on Fractional reserve banking.
    – Murch
    Aug 10, 2014 at 1:46

1 Answer 1


Banks do lend out more money than they have. This concept is referred to as Fractional Reserve Banking. Government regulation is supposed to impose a minimum of reserves they need to keep, limiting the amount of money they may create.

The difference between Bitcoin users and banks is that banks can lend out more money than they have, because they can just increase the account balance of their customer, while adding a liability of the customer to their own bookkeeping.

Meanwhile, if a Bitcoin user lends bitcoins, for the borrower to be able to use them, he has to transfer actual bitcoins to the borrower. Unlike the banks' ability to increase different account balances at the same time, the Bitcoin lender cannot send the same bitcoins to different borrowers at the same time. If however, the Bitcoin borrowers are satisfied by receiving a statement of liability from the lender, the lender could pursue Fractional Reserve Banking as well.

  • Do you mean that banks are free to increase their account as soon as customer promised to return a loan with %? My question actually is how does the government control (or other agent) that the bank does not print more money than it is permitted by low.
    – Val
    Aug 10, 2014 at 14:40
  • @Val: Governments control you, me and banks by carrying a big stick and pointing at the prisons they've built for people who do more than is permitted by law. You, I and the bank employees gave government that stick for that purpose. Aug 12, 2014 at 14:54
  • @RedGrittyBrick funny trolling. But, I would like to hear the answer still. Do you need me to repeat the question?
    – Val
    Aug 12, 2014 at 14:58
  • @Val: How about you put your "actual question" in your question post, so we that we may actually read your question before formulating an answer.
    – Murch
    Aug 12, 2014 at 15:02
  • @Murch Nice trolling. He has the question both in the OP and below this answer. But, we troll him asking to put his question into his question. Har-har! This @Val was really scorned today! How is question what prevents banks from printing money is different from how do you control the banks not to print more money than they have/allowed to print. Which one would you prefer to answer?
    – Val
    Aug 12, 2014 at 15:43

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service and acknowledge you have read our privacy policy.

Not the answer you're looking for? Browse other questions tagged or ask your own question.