How much money do you have in your bank account? $100? £1000? 666€?
The real answer is that there is no money and has never been. The balance of your account states how much money the bank owes you.
Banks work by borrowing money from consumers and businesses with low or negative real interest rate and lending it to consumers and businesses with higher interest rate. At any given time the bank does not have sufficient funds to pay all its debts. Unlike many in the crypto community I don't see this as a that big of a problem but I too see the value in actually owning the money you've worked for.
The service banks give us for funding their house of cards is electronic payment system. Driving around town with a sack full of cash in order to physically pay your bills with cash would be impractical and currently impossible.
Before electronic payments the service banks provided for us was checks and I think that once there was actual gold in the vaults.
In other words: we give up the control of our money to banks to do as they will and become dependent of them in exchange for the ability to be a part of modern society by doing transactions electronically.
But now there is a way to make electronic payments faster cheaper and without the banks ever getting their hands on the money. If my landlord and electric company accepted cryptocurrencies if would need fiat only at grocery and liquor stores.
So when Bitcoin or some other cryptocurrency surpasses the inferior technology and the need to interact with banks ends what will become of the commercial banks?
The common man still needs a loan to buy a house or a car after all. One way for banks to get the funds would be paying higher interest but then the common man would have to buy smaller house. Or maybe investment banking will take some functions of commercial banks? Or maybe this all falls to the ground in flames and some sort of crypto finance takes over?
I'm writing this because I really have no idea and I want to hear your thoughts.
Like I said, I don't have a problem with fake money created by banking and in fact a tiny inner neo-keynesian commie within me thinks that banking and credit expansion might even be beneficial to some extent but I don't see them providing any additional value relative to cryptocurrencies.