Imagine you go to the casino and you have a token and you gamble. You gamble the token, if you lose, the token is gone, and if you win you gain another token. Simple right? Now imagine you go to that casino with the same token and your friend says he needs a token. You have only the one token, and he has no token, a problem arises. Through some jewish magic you create two tokens, BUT there's one small issue, there must always be one "real" token for the fake one. And through more jewish magic the number of tokens created can be a binary multiplication of the original (1 goes to 2, 2 creates 4, 4 creates 8). No one knows where the real token is, simply that such a token exists, and there is only one way to check this token, and that is to take the token and verify it is real. After some time, a player says he's had enough and cashes out his tokens, however the cashier only takes "real" tokens and invalidates the fake ones. Well, let's do the math here. One real token netted 1 fake token, and that one fake token netted 2 tokens, and those 2 tokens 4. This was done until a thousand tokens were created. But in the process you now need 10 "real" tokens because you made some gains at the blackjack table. So 9 new "real" tokens need to be created to replace the 9 fake tokens, which were created out of thin air. This is in summary what fractional reserve banking is and does, and why a digital bank run is such a disaster even if no hard cash is ultimately required. Those tokens have to be RELEASED from their underlying assets to make it back to the customer, but no one has a clue what those assets are, where they are, or what they do edit: you may be wondering how all of this was possible if one real token needed to be given for the fake tokens, and that's because the origin source of the base token was "real", hence all the next generations still satisfy the even through inheritance of the base properties