<i>For example, if anyone can create money by lending it</i><p>That&#x27;s... not <i>quite</i> how it works.<p>I can lend $20 or $2000 to a friend, and no money is created.<p>Money is created by aggregating a large number of relatively small accounts into a shared pot, and pretending that pot is larger than it really is (which you generally do by making loans out of that pot <i>without telling any of the individual accounts that their available balance has gone down</i>). Money is created by the possibility of bank runs.<p>If the borrowers all run off with the money, <i>someone</i> will be left holding the bag (or the empty pot). If you borrowed from yourself, that someone will be you.<p>.<p>Bitcoin allows for debt exactly as much as cash allows for debt. There has to be <i>something</i> to make sure the borrower will (usually) pay back what&#x27;s owed -- some concept of personal honor, risk of damaged friendships, legal liability and positive real-world identification, whatever. That mechanism is distinct from the currency used. That mechanism also probably can&#x27;t allow for anonymity.<p>.<p><i>setting up the rules for a fully distributed fractional reserve system would be non-trivial</i><p>There needs to be something at stake, which (1) the borrower can <i>lose</i> if they don&#x27;t pay back the loan, and (2) is worth at least as much (to the borrower) as what was borrowed. There needs to be a reason to believe that a rational or mostly-rational borrower <i>will</i> pay back the loan.<p>There also needs to be some reason to believe that the borrower <i>can</i> pay back the loan.<p>Both of these are ties to external systems.<p>...getting back to the required shared pot, what does &quot;distributed&quot; mean here? Lack of central control over who can create the shared pots? A &quot;marketplace&quot; interface for finding shared pots to contribute to &#x2F; borrow from? Automated selection of the &quot;best&quot; shared pot given your choice of criteria? A standard API for shared pots?