I've watched the video The Lightning Network Explained (Litecoin/Bitcoin), and read the following comments by Craig Wright:
From the video explanation of segwit/lightning it would seem that a bitcoin is required to open a payment channel and create the "IOU" that is used for the lightning transaction(s).
How can this be considered fractional reserve if there is a 1-to-1 mapping from bitcoins to payment channel balances?
It would actually seem to do the opposite and keep 3rd parties honest.
What am I missing?