However, if I am right (and the so-called mining narrative seems to require that I am) then the blockchain has no capital left in it because the only sum available to make settlement to the Bitcoin miner will be the coins they have created. Except that, according to the blockchain, those coins are now still in the system. That can only be explained by the blockchain being a single entry system where the consequence of the capital in the system having apparently already been extracted to pay the Bitcoin miner is ignored. That is concern number one, and logic seems to suggest it must be right. After all, if there was capital in the system continual mining of new Bitcoins to clear transactions would, surely, not be needed? It is because there is no liability that can be cleared through the payment system (as happens in conventional banking, where cash can be and is cancelled on loan repayment, which is a possibility that does not appear to exist in Bitcoin) that requires the continual creation of new debits because there are no credits in the system.
This then presents the second conundrum. This is that the payment system in the blockchain is, if I am right, a continual system of reallocating the debits. Now I accept that it can be argued that this is a debit and credit process, and of course in a sense it is, but subject to the massive overall condition that all the sums must be part of a continually accumulating overall sum of Bitcoins in existence, or the miners would generate no continuing value. This is not then a system of true debits and credits in because net credits are not apparently allowed. This means that the blockchain is not remotely close to a proper banking system where the process of creating simultaneous debits and credits that remain on the balance sheet until loan repayment, giving rise to account offsetting and so cancellation, is the fundamental process that singularly identifies the existence of a credit creating bank.
Ritchie’s just used double entry book keeping to prove that you can’t do fractional reserve banking in bitcoin.
First, the blockchain, about which so much is said when Bitcoin is discussed, does not appear to be a credible accounting system. It seems to be single entry at best and such systems were rightly abandoned many centuries ago because they did not allow proper risk appraisal.
Yup. It’s part of the design Murph, part of the design.
One is that it attempts to mirror the operations of the gold standard, which proved to be little short of an economic disaster during its period of use in the twentieth century.
Yup, part of the design.
It’s not an accounting system. It’s a ledger. A property ledger, that’s all. A list of who owns what.
The consequence is that Bitcoin appears to be a claim on nothing at all.
Yes! you’ve got it!