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From: Eric Voskuil <eric@voskuil.org>
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Date: Fri, 9 Jul 2021 07:55:14 -0700
Message-Id: <DE1DCFFC-66BC-4EA1-922B-CC3A84A3C9DE@voskuil.org>
References: <CAGpPWDa3uVxa+LR5JMmTjkgYTwFH9wWLChekg=8wCdtQ2=9eQg@mail.gmail.com>
In-Reply-To: <CAGpPWDa3uVxa+LR5JMmTjkgYTwFH9wWLChekg=8wCdtQ2=9eQg@mail.gmail.com>
To: Billy Tetrud <billy.tetrud@gmail.com>,
 Bitcoin Protocol Discussion <bitcoin-dev@lists.linuxfoundation.org>
Subject: Re: [bitcoin-dev] Proof of reserves - recording
Precedence: list


> On Jul 7, 2021, at 01:20, Billy Tetrud via bitcoin-dev <bitcoin-dev@lists.=
linuxfoundation.org> wrote:

> But people can certainly pull their money out of companies that can't show=
 solvency.=20

As I pointed out previously there is an unsupportable leap being made here b=
etween a vault (money warehouse) and any company (including a bank).

A company cannot possibly show that it has all of the money that every perso=
n has invested into it. At times a solvent company may even have zero cash. I=
t is also not possible for a company provide cryptographic proof of its many=
 necessarily non-crypto assets and liabilities. What is presumed here is a c=
ommunity-verified sort of crypto balance sheet, with no considerations of ri=
sk - a central aspect of business.

As I said, if you want a vault, you can just use your own wallet. Solvency d=
oes not in any way imply 100% cash balance of the amounts invested. Raising m=
oney under such terms is pointless for both company and investors (the owner=
s of the company).

> > Nonsense, any business can fail, regardless of temporal cash reserves.
>=20
> I agree that any business can fail. But a bank that pretends it can serve c=
ash on demand is not a normal business,

Banks (lending institutions) do not operate under any such pretense. US bank=
s require 7 day time deposits for all interest bearing accounts (read your d=
epositor agreement), and it should be clear that your uninsured balance is a=
t risk. Banks are investment funds, not money warehouses (in Rothbard=E2=80=99=
s terminology).

With a 100% of investment cash hoard, there is zero lending and zero return.=
 This is true for all business.

> and cash reserves absolutely relate to their ability to survive as a bank.=


=E2=80=9Crelate to=E2=80=9D is a far cry from 100% =E2=80=9Creserve=E2=80=9D=
. At 100% reserve an investment fund would most certainly fail. At 20% it wo=
uld fail. Money markets (banks without a reserve requirement) don=E2=80=99t b=
reak the buck, compete effectively with banks with reserve requirements (req=
uired by the taxpayer who is insuring deposits and providing discount credit=
), and maintain around 10% reserve. This is consistent with a world of peopl=
e with time preference that creates around a 10% interest rate (return on in=
vestment).

> Its honestly confusing to me how you could think otherwise.

It=E2=80=99s confusing to me how anyone would put money into a business and e=
xpect (even want) it to sit there.

> Also, calling my thoughts "nonsense" is rude, please check yourself, Eric.=
=20

Check myself? Nonsense is English for =E2=80=9Cdoesn=E2=80=99t make sense=E2=
=80=9D. It=E2=80=99s not an insult.

e=