The Basics of Free Banking

In a free banking system does the currency have to be backed by something or can it be a purely fiat currency like we have now? That depends whether or not anybody will accept it. The trouble with bitcoin from that standpoint is that just like a gold standard you're using real resources to produce your money. Because the constraint on bitcoin is you've got to do a bunch of mathematical process they can order to be allowed. I find it hard to think of applause when they're doing it but what is true is that a commodity system where the fractional reserve is a low fraction is very close to a Fiat in terms of cost because you only have 10% of the gold.