Hi hivers, if you are looking for the information regarding fractional reserve banking VS crypto reserve models, then you have landed in the absolutely correct place. What is the core of money? That is the trust. When it comes to trust, both Crypto World and traditional banks differ. No doubt that Crypto Reserve models are evolving, and the old model is a fractional reserve banking, and it is not a Few years old, it is a century-old model. So I am going to break down this information on this topic.
So what is fractional reserve banking It is all about keeping fraction Of the depositors And it is something around 10% and you know this particular system Is fueling the economic growth Yes crypto reserve model is evolving but that is currently a main Model However there is a hidden vulnerability That we have to understand And The growth has seen because of the credit system. We have seen the great disaster in the financial system in 2008, and then that was a reason for Bitcoin's birth. This happened because sometimes they don't have enough liquid money to provide for the users. So cash in hand is a big issue for them.
Now, here comes the Crypto Reserve models. So it depends on the protocol, and we can see a similar system in the centralised exchanges in the Crypto. And still there is a fractional system, and we cannot guarantee that they are transparent because they are centralised too. Now let's talk about a decentralised approach in Crypto, so there are decentralised stablecoins that provide safety. It is obvious that every decentralised Platform provides transparency in the Crypto, which provides verifiable evidence of their holdings, and this is what builds trust.
There is a big problem in fractional reserve banking, and that problem is the belief that they have, and that belief is not everyone is going to withdraw at once, and this whole model runs in air and it depends on the belief. So this is the reality. In other words, you can say this is based on the line because when all the users withdraw funds together, the whole financial system will collapse. other side, the decentralised Model of Crypto is totally pure and also there is a mathematical transperancy and that is what user wants transparency and that is what user wants. For example, this is my Hive wallet, and you can see my balance, my transfers where I am transferring from where I am receiving my crypto, everything is there. So that is why crypto is pure; it is not based on lies. It has a real value. Even the user can withdraw the whole fund. For example, if I want to withdraw now, I can take out my whole fund without any tension.
So both of them are important, but here I prefer crypto reserve models. Here I want to know your opinion regarding this topic. Please share your opinion below in the comment section. I have shared both the benefits and the Negative sides. Now it is up to you how you prefer. Now I am signing off.
@faiz19711