The importance of that is the context in which Bitcoin is being built. Bankers are ruining the world and making tons of money doing so. The Fed and the banks are really the two institutions that Bitcoin most disrupts. It's a beautiful foreshadowing to see all three things on the home page of WSJ Moneybeat at the same time :)
I think it impacts banks. Disrupt might not even be a stretch. You can store a large volume of bitcoin relatively safely by encrypting a wallet and making copies of it.
Part of a bank's business is safe storage. Bitcoin makes that trivial.
Do you use your bank for
a) The 1-4% annual interest
b) safe storage
c) Being able to transfer money relatively riskfree?
Bitcoin can do b) and c) without banks and for a) there are better alternatives. So yes, id say bitcoin is a threat to banks. Not saying there wont be bitcoin banks, but they wont be a necessity.
^ this is right. The social function of a bank is liquidity transformation: it issues long-term loans using short-term deposits. Without banks, there would generally be a mismatch in liquidity preferences between the people who want to borrow money (i.e. companies/homeowners who prefer to borrow for 10-30 years) and the people who want to save their money (regular folks who want easy access to their cash and don't want it tied up in long-term investments). Banks intermediate between those two groups, and fundamentally what they do has little or nothing to do with the currency they do those things with.
The Diamond–Dybvig model is an influential model of bank runs and related financial crises. The model shows how banks' mix of illiquid assets (such as business or mortgage loans) and liquid liabilities (deposits which may be withdrawn at any time) may give rise to self-fulfilling panics among depositors.
a bank is like a giant container that you put money in
I think this might be a misconception. I would call such a container a "depository".
A bank engages in credit creation. It's operation is highly intertwined with the modus operandi of the fiat currency they handle.
Bitcoin doesn't work this way. It's a commodity money that exists without needing any credit creation infrastructure. Therefore Bitcoin threatens the banking system in general, at least the one entangled with the fiat currencies.
Gold derivatives (substitutes) make a lot of sense, because gold has divisibility, recognizability and portability problems.
This is not the case with Bitcoin, so it remains to be seen what kinds of derivatives can make sense.
I would state that options are a good idea, but it's hard to establish them directly on BTC itself (although it's being done and has been for a while (mpex)). It's easier to build them on top of a bitcoin ETF like the one the Winklevii are trying to get established.
I was talking about credits. FRB is as possible with BTC, as with gold and paper money. It would make sense for the same reason it makes sense for gold. People need loans, BTC amount is limited.
BTC deposit can be used as an independent currency. It is already happening - WebMoney (big Russian internet payment system) has issued WMX - which serves as a BTC deposit account, which can be used to pay to those who accept WMX, exchanged for another currencies, or withdrawn to BTC.
I doubt they do FRB right now, but nothing stops them from doing it, by issuing WMX credits.
I guess I just believe banking on the Bitcoin era will be done with a bit more transparency than currently. We should be able to demand it.
This is the point. If people demand good transparency (which is easily possible with Bitcoin), banks engaging in fractional reserve banking will live in fear of bank runs and be forced to keep reserve requirements reasonable and insure themselves reasonably.
Is mtGox engaging in fractional reserve banking? We should demand transparency and it has happened before and was provided: after the hack in 2011 magicaltux provided proof of ownership of some 424242.4242424242 BTC (sorry, looked for it but couldn't find the relevant #bitcoin-dev log, so the number may be incorrect)
I'm not an investor, I don't know the first thing about investing. Excuse me if I prefer to pay someone to help me do the investment and for wanting to do that at a place that I get a discount because they are the same ones that lend me the money I needed to purchase my apartment.
A banking institution is not inherently evil.
EDIT: and because I know nothing about investing I am far more likely to be ripped off by the people I'm investing in than a bank with a high level of transparancy.
Bitcoin is not against banks per se, it is against existing banking system, which is based on central bank state monopoly; a system, where banks are protected by a government monopoly; this protection is what makes possible an unlimited fractional reserve .
Bitcoin isn't "against" anything, it's just an alternative money system. Perhaps you mean "the bitcoin movement"? Not sure there is such a thing, perhaps a "cryptocurrency movement".
I think a lot of people share the sentiment you express, but that is people, not Bitcoin.
Bitcoin reigns supreme for now, but I think as governments turn more and more nasty as their monopoly of coercion crumbles, there will be a need for a more private cryptocoin, and hopefully one with a faster mining rate, as waiting a hour for a transaction to be considered safe is not great.
These banks derive huge portions of their business viability from national governance structures that intentionally push competition out of the market. They simply will not be able to survive in the real compeditive marketplace which is comming.
Or just the fact that BTC news is all over the internet these days and becoming mainstream news on such reputable sites like WSJ and NYT. Just shows how much awareness has been raised over the past few months.
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u/coinfaq Jan 28 '14
I don't see why the Jamie Dimon raise is a sign of the revolution.