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Comment by fh973 | Hacker News Reader

I can half answer that and hope somebody can complete the story.

What you have in your bank account is not digital cash. It's effectively a note that the bank owes you cash.

This may sound like a technical detail but as far as I understood without physical money there would be no bank accounts. That's what I always wondered about: how could an economy go 100 percent electronic banking, if banking is built on the existence of physical cash?

This is the missing link. With those accounts you actually would be able to own electronic cash.

That said I have no idea how this would work in practice. Maybe you would have the payment option to pay with this electronic cash. But why would you pick one over the other?

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Bitcoin is not 'electronic cash' as you define it here - it's a shared ledger - there are no coins. The only difference with a current account at your bank is central ledger vs distributed consensus ledger.

Also why would a bank require physical cash? Banking is based on savings and loans, debt and credit, not cash. The money in your bank account is not backed by real coins somewhere in a vault.

There's a big difference. The bank is able to create money from thin air when you deposit funds, thanks to fractional reserve banking. Banks typically only need to hold 10% (or less) of total funds deposited. The rest they loan out, which always finds its way back into the banking system, so that effectively, banks are able to loan out about 10x what their depositors have in their accounts.

Holding Bitcoin, on the other hand, is more like gold in that there is only so much of it.

The amount of bitcoin on the ledger is increasing all the time, it has not reached the limit yet. This is also defined by software rules which can be changed.

> What you have in your bank account is not digital cash. It's effectively a note that the bank owes you cash.

Yes.

> as far as I understood without physical money there would be no bank accounts.

I'm not sure why that would be the case. I've never withdrawn a physical dollar from my bank account.

> how could an economy go 100 percent electronic banking, if banking is built on the existence of physical cash? This is the missing link.

I don't think that's the point of CB digital currency. The point of CB's digital currency is to reduce the indirection between policy and business/consumer behavior.

NB: this includes both fiscal and monetary policy. So e.g. provides a mechanism to cut the retail banks out of things like covid relief funds.

Right, and also provides a mechanism to directly punish political opponents.

Cash is also not cash by that definition. A dollar bill is what is called a banknote, which represents that the bank (or really the government) owes you a dollar.

Money today is already 'mostly digital'.

And yes, your bank doesn't have all the money required to pay everyone out at the same time. That's 'fractional reserve lending'.

But at the same time, the money it does have is not all cash.

[1] https://en.wikipedia.org/wiki/Money_supply

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