> Is there anything about Bitcoin that prevents the existence of fractional reserve?
Fractional reserve itself is not impossible (a bank offering BTC denominated accounts could lend out some of the BTC and not retain enough on hand to cover all deposits.)
But because of the supply characteristics of bitcoin, you'd probably have to charge depositors to store money rather than giving them low-to-zero interest, and give loans at zero-to-low interest compared to typical major fiat currency rates for otherwise similar loans, and then why would depositors pay to store with you rather than keep coins in their own wallet?
So, fractional reserve is possible, but it may be tricky to make a viable business model out of it.
I hope we all realize that 'viable business models' in the world of finance requires merely that they last a few decades. Or at least until the oldest people forgot about the last scam / debt bust / ponzi scheme/ bailout / depression...
Secondly, assuming you're taking on risk, there's no reason at all you wouldn't be paid a fair amount of interest. I believe under the gold standard, government debt had a small but positive rate of interest, and other debt (and equity securities) were riskier and had a higher premium. (Graham and Dodd's Security Analysis)
But I agree that if you are just trying to save money without any risk, like people in the old days who just saved gold coins or paid off their mortgage, that's different and should not earn a lot or any interest. And trust banks at your peril.
Fractional reserve itself is not impossible (a bank offering BTC denominated accounts could lend out some of the BTC and not retain enough on hand to cover all deposits.)
But because of the supply characteristics of bitcoin, you'd probably have to charge depositors to store money rather than giving them low-to-zero interest, and give loans at zero-to-low interest compared to typical major fiat currency rates for otherwise similar loans, and then why would depositors pay to store with you rather than keep coins in their own wallet?
So, fractional reserve is possible, but it may be tricky to make a viable business model out of it.