Fractional Reserve Banking is a system in which banks hold only a fraction of deposits as reserves. When someone deposits $100, the bank holds 10% ($10) and lends out the remaining 90% ($90). The borrower then puts the money back into another financial institution, where it is again lent out. This process repeats multiple times until roughly $1,000 has been created based on that original deposit. While this system can help create more liquidity in an economy and spur growth, it also carries risks such as lessening confidence in traditional currencies like #USDollar or other fiat currencies when credit defaults occur or banks become over-leveraged. In comparison to centralized systems like fractional reserve banking Bitcoin offers greater transparency, privacy & autonomy over one's assets thanks to blockchain technology
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