The Bitcoin Lending Bank
Free Banking in Bitcoin Chapter 9, continued
Last month in Free Banking in Bitcoin, I introduced the concept of banking on a bitcoin standard and described what it could look like. This week, we dive deeper into the analysis by discussing the first iteration of a bitcoin deposit bank and presenting the bitcoin lending bank.
The system that I’m proposing involves a bank fully disclosing its intent to lend out its customer funds, which is precisely the reason that it can pay interest on deposits. We know that lending matters for economic growth. So, let’s find a way to make lending work.
The first iteration of this bitcoin bank already exists, based on the model of a deposit bank that accepts bitcoin deposits and charges fees for holding that bitcoin. Just like the original gold bank, you can deposit your bitcoin by sending it to the bank. When you want to redeem it, the bank will send it back to you. This may irritate a true Bitcoiner who believes that this requires a trusted third party, namely, the bank. Let’s unpack that argument.
