I’m not being a troll I’m seriously asking - how does crypto replace banks? Am I going to get a mortgage in BTC? If narrow banking, why give them my btc at all instead of holding myself? If not narrow banking then they are lending out my btc? Does that even work on blockchain? How do you do fractional reserve lending with a deflationary and one of one asset?
Crypto can replace some banking functions, such as payments, electronic transfers, and lending/borrowing.
One could argue that crypto eliminates the need for traditional checking accounts since you have full control over your funds with private keys. However, this doesn’t account for the legal safeguards and protections that banks provide.
> Am I going to get a mortgage in BTC?
I don’t recall seeing mortgage services in crypto yet. However, there are borrowing platforms like AAVE, primarily used for leveraging crypto investments or speculation. These platforms are decentralized, with strict collateral requirements, typically limiting borrowing to 80% of your collateral.
> If narrow banking, why give them my btc at all instead of holding myself?
Not sure I fully understand your question, but typically, when you lend your crypto to a service, you’re seeking to earn a yield in exchange for the risk of lending your assets.
> Does that even work on blockchain?
Theoretically, yes. You could create a narrow bank using crypto, but you’d need a decentralized mechanism to verify the bank’s holdings. This could involve creating an oracle (ex: Chainlink) service to confirm asset reserves.
> How do you do fractional reserve lending with a deflationary and one of one asset?
Instead of using deflationary assets like BTC, fractional reserve lending could rely on stablecoins, which are better suited for such systems. That said, not all stablecoins are equally reliable.
