Replying to Avatar techjunkie

So technicalIy with lightning its not possible, but with anything running on top of lightning it is possible. A custodial lightning wallet could 'make up' sats and be similar to fractional reserve banking. Nobody will notice until their is a run on the wallet.
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Marks 2y ago

How would those fiat sats make their way into wallets? Are you referring to a third layer like an ecash built on Lightning?

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techjunkie 2y ago

A custodial wallet could act just like a bank with fractional reserves. In other words the cumulative amount of sats showing in the app of all their users are more than the balance of their underlying lightning/onchain btc wallets. Only if there is a run on the wallet someone will notice.