Author: Eric Voskuil 2021-07-09 14:55:14
Published on: 2021-07-09T14:55:14+00:00
In a discussion on the Bitcoin development mailing list, Eric Voskuil responded to a comment about companies' solvency by pointing out that there is an unsupportable leap being made between a vault (money warehouse) and any company, including banks. A company cannot possibly show that it has all of the money that every person has invested into it. At times, a solvent company may even have zero cash. It is also not possible for a company provide cryptographic proof of its many necessarily non-crypto assets and liabilities. Voskuil suggested that if people want a vault, they can just use their own wallet, and added that solvency does not imply a 100% cash balance of the amounts invested. Another participant in the discussion insisted that cash reserves absolutely relate to a bank's ability to survive as a bank, but Voskuil argued that "relate to" is a far cry from 100% reserve. At 100% reserve, an investment fund would most certainly fail. Banks are investment funds, not money warehouses. Money markets (banks without a reserve requirement) don’t break the buck, compete effectively with banks with reserve requirements, and maintain around a 10% reserve. Voskuil found it confusing that anyone would put money into a business and expect it to sit there, and he clarified that calling someone's thoughts "nonsense" is not an insult.
Updated on: 2023-06-15T00:08:50.223890+00:00