Fractional reserve is a practice of keeping only a fraction of reserve (such as
gold or cash) for customers, while the rest is invested for profit. The
rationale for fractional reserve is not everyone will withdraw their assets at
the same time, thus keeping 100% reserves is unnecessary. At iGolder, we
maintain 100% reserves and do not invest any of your gold.
Fractional Reserve Banking
Fractional-reserve banking is a form of banking in which banks are only
required to keep a fraction of their total deposits on hand. Most banks
around the world use this system, because fractional-reserve banking is what
allows banks to generate funds. It's also what allows people to receive
loans from banks, or open interest-generating accounts. The alternative
to fractional-reserve banking is full-reserve banking, in which a bank must
be able to hold all of its deposits on hand.