That's not how it works. You deposit 100$. They lend 90% of it, it gets deposited. They lend 90% of that and so on. It ends up at 10 times the original amount after many loans. It's not you deposit 100$ and they lend 1000$ right away.
OK, but the end result is still the same: only a Fraction is sound. Anyway: this should not be possible with Bitcoins. The amount is fixed. The only party which generates additional Bitcoins are the Miners. But as central Exchanges work off-blockchain they can in theory game/fraud the system until they are exposed and a bank-run will follow (as no one in Bitcoin's world will accept that). I really hope we will have decentralized exchanges soon (then no more MtGox).
How does the MtGox saga come into play in this? Probably missed that... I would think it's not that easy with bitcoin. Since the whole idea is avoiding double spending. So... all transactions on the ledge/chain are true bitcoin transaction. What you're saying is increasing of the supply by the exchanges... it's not the same. I'm sure if lending and massive short selling on margin would be happening that would create issues when you want to pull the bitcoins out of the exchange.. which would be a virtual bankrun. The exchange doesn't have enough coins to give out... Is that what happened with MtGox? Did they increase supply by massive lending on margin?
Actually in a way its' very much the same. With fractional reserve banking the banks lend out more than they have. When depositors want their money in their hands, and the bank doesn't have enough since it's lend out... it creates a bankrun. A bankrun in this sense is basically a liquidity issue, creating a short squeeze on whoever is short, which is the bank. So in a bankrun the bank gets squeezed in cash. With stocks lending, if done large enough... you can also create a short squeeze when all actual holders want their stocks.. which happens quite often, especially when there is a large shareholders vote coming up on for instance a takeover. You can't have more than 100% votes. But there are more than 100% holders... if there's a 50% short interest, there are 150% longs.. but only 100% can vote. This will create short squeeze, since all shorts are required to deliver the shares/votes asap. That's technically a bankrun on the shorts. Banks are short cash on long IOU's ... Same same... In bitfinex, it will work the same again. If I hold bitcoin on their exchange. And they lend out 100% of all bitcoins held. There are 200% longs and 100% shorts of bitcoins held at their exchange. If all 200% longs now want to 'withdraw' their bitcoins on the wallet... bitfinex is fucked since their short clients will get fucked because they will be squeezed. Someone needs to purchase real virtual bitcoins to deliver them to the 200% longs.... In any system where you can short through lending, a squeeze can happen... and this system inflates the amount of assets...
Pekelo, you continue to amaze with your ridiculous comments. You should just avoid posting about BTC altogether.
Optimists would ask, why would you want to poison a "supposedly" clean water well in the middle of a poisonous swamp? Cynics would ask, is a ponzi on top of a ponzi a better ponzi?
Charles Ponzi actually had competitors later on. His fame and success gave birth to copycat companies (just like alt-coins) and they opened up business in the same building where Charles operated. Imitation is the sincerest form of flattery... Still, the best modern day crypto based ponzi was the Chinese one using Litecoins. My hat is off to them. They only accepted Litecoins, so anybody who wanted to give them investment money, first they had to buy Litecoins artificially increasing the price.