Under the partial reserve system, as long as you go to the bank to withdraw all the funds, the bank will inevitably misappropriate other people’s money to repay your money, which is typical of robbing Peter to pay Paul. The partial reserve system is a Ponzi scheme, and its stability is based on the fact that most participants do not require all deposits to be withdrawn.
By obscuring the lending relationship and the escrow relationship, the lending right can be transmitted in a chain manner, resulting in multiple parties having the right to use the same fund at the same time.
So debt expansion is inevitable, and finally, the entire economy is built on the basis of debt expansion. The economic cycle and the debt cycle are highly overlapped, and the debt cycle will greatly aggravate the volatility of the business cycle.
On the pretext of smoothing out the huge fluctuations in the economic cycle, the government and the central bank have gained huge economic control.
However, under the full reserve system (that is, the deposit reserve ratio is 100%), the bank is only the custodian and does not have the right to lend. Only the actual asset owner has the right to lend. Therefore, 100 dollars in assets can only correspond to 100 dollars in liabilities at most, and liabilities can never be greater than actual assets.
Why is Bitcoin a full reserve system? Because any amount of funds (real assets) corresponds to a unique private key. Who owns the private key, who owns the funds. When the private key changes ownership, the funds change ownership. The owner of the private key has the sole right to use and lend.
