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Comment by jpmattia | Hacker News Reader

> No, you can't, you need to create a new "currency" to do so.

You are confusing "fraction-reserve banking" with something else, probably "quantitative easing".

There is no requirement to create currency with fractional-reserve banking: A bank simply loans out a fraction of its reserves, which has the effect of creating money, but only in the sense of increasing M1. M0 remains constant.

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In different perspectives, you are both correct. Particularly, there is a sense in which bank account balances are a separate currency redeemable in the currency in which they are denominated, so that, yes, you have to create a separate currency to do fractional reserve banking, but it's the kind of currency that various entities are going to be creating as soon as you want to support any kind of useful ecosystem around a cryptocurrency, including exchanges.

Exactly, and the difference of trying to do FRB with bitcoin or gold is that the new currency being created isn't the original currency.

In the case of USD, for example, a USD created by a bank is indistinguishable from one you deposited on the bank.

You could say that being able to double spend in certain conditions is a feature of modern currencies, and largely necessary for a stable economy, which is impossible under bitcoin.

> "Particularly, there is a sense in which bank account balances are a separate currency"

You can define "credits" and "debits" in a currency to be a separate currency, but since that has been in the lexicon for millenia, you'd have a very long road ahead for acceptance of terminology like that.

There is a reason why we define M1 as different from M0. Trying to say that bitcoin is some newfangled currency that demands M0 and M1 be equal? Good luck with that.

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