Basics of Trading and Finance (Part 18) : Solution to the Problem of Fractional Reserve Banking with Cryptos (Problem with interest system)

in Tron Fan Clublast month

Intro

As a moderator of the Tron Fan Club community, I regularly write various tutorials on crypto blockchain and Tron related matters. The main purpose of these tutorials is to make our new users aware of these topics. In continuation of that I am writing tutorials on trading and finance. Hope you can easily learn some details of trading and finance through this tutorial series.

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The current world monetary system operates through an interest based economy. It has several problems. That is why many countries and companies are trying to work on introducing alternative currency systems. To understand why an alternative monetary system is necessary, one must first understand where the problem lies with the current monetary system. Basically the problem of printing i.e. in the case of fiat currency printing, it is not certain whether the amount of assets that are supposed to be deposited is being kept by the central bank. Due to this uncertainty, central banks of various countries are printing money and the amount of money they are printing is creating inflation.

We see inflation from country to country and money printing is a very important factor behind inflation. After the currency is printed, it is paid to the government or any other bank with interest. Then it changes hands and comes back to the public through interest. New currency has to be printed to pay off the interest. And if you don't do that, there is no chance of that amount of new currency coming into the economy, so many people will go bankrupt. The relationship between inflation and money supply is very close. The higher the money supply, the higher the inflation.

Again we see currency prices fall when supply increases. If a system can be developed where the supply is limited then such difficulties must be overcome. There should be a system where there is no chance of oversupply because when and how much will be supplied will be fully controlled. Anyone can join this system because the entire process will be open and transparent to everyone.

Then one has to participate in the mining system from within the specific system. There is no opportunity to do anything extra. Due to this, the supply can be controlled here, so the currency will gain value. Where we see our currencies losing value but in such a system the price will increase exponentially. As is the case with Bitcoin. Inflation due to interest and printing of money every year is a big problem nowadays. How the solution is in Bitcoin or something else will have to wait until the next post because there I will try to explain the possible solutions with examples.



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thanks for talking about this very important issue and this is the problem that harming the many crypto communities in the world. many governments are not cooperating with crypto communities and they want to eradicate crypto.

Wonderful article indeed only if there is a system where over supply is restricted to the bare minimum it would help in greatly reducing inflation and create a more stable economy. Thanks for sharing.

Wow.. outstanding I learnt something new today, definitely take out time to check out the tutorial from the beginning

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