David Short
8.6K posts
@davidgshort
Product Manager | https://t.co/eXM7nuS8bQ podcast | bitcoin
STRC - Fully Reserved Bitcoin Banking A quote from Hal Finney from 2010: "I believe this will be the ultimate fate of Bitcoin, to be the ‘high-powered money’ that serves as a reserve currency for the banks that issue their own DIGITAL CASH. Most Bitcoin transactions will occur between banks, to settle net transfers. Bitcoin transactions by private individuals will be as rare as … well, as Bitcoin-based purchases are today." Consider the existing fractional reserve banking system. Each dollar is lent out 10 times, with the result that monetary units in the economy are debt notes backed by no assets. This is what enables the expansion of the money supply. STRC changes this paradigm, as it represents a high-yield savings account that is over-collateralized by the Bank (Strategy’s) balance sheet instead of under-collateralized. Before we went off the gold standard and before the introduction of the Federal Reserve, paper money represented a claim on the gold in a bank vault. Since neither the paper receipts nor the gold was publicly auditable, banks could make higher returns by overselling the claims on the gold. In the case of STRC, this is not possible because the public accounting for outstanding securities makes Strategy’s assets and outstanding liabilities fully transparent. Furthermore, the 24/7 traded nature of Bitcoin makes the liquid value of Bitcoin transparent. For these reasons, STRC is the most honest paper money that has ever existed throughout history. Using gold-backed paper notes as a historical precedent, I do think that there is a world in which Strategy’s amplification ratio increases. I don’t believe that STRC will ever be fractionally backed by Bitcoin because it would obfuscate the position for common holders, but I do believe that with reduced BTC volatility, there is a world in which amplification is taken up to 50/60/70%, a long time from now. This is my way of saying that, within our lifetime, @Strategy will become as important to the global financial system as @Fidelity or @BlackRock are today. Final thoughts: STRC will become systemically important to fixed income markets around the world. Its interest rate will be set by market participants, not by a group of economists at the Federal Reserve. This is the future of the free market setting the risk-free rate.
CAPTURE An investigation across four articles into how informal power over Bitcoin Core was assembled, exercised, and defended. Article One: The Network citadel21.com/the-network
