Shared Hosting is kind of like Fractional Reserve Banking

fractional reserve banking

I want my bandwidth!

Think shared hosting deals are too good to be true?
Upset about “overselling” of network resources?

That’s fine, you can pay more and get 100% of everything 100% of the time. But if you want to hold this opinion consistently, you might need to go withdraw all of the money from your bank accounts because modern banking – Fractional Reserve Banking – works the same way.

You see, the banks take your money as a deposit and they hand you a receipt saying they’ll pay it back to you, but they only have to keep about 10% on that on hand. If enough people went down to your local bank and demanded deposits equaling 15% of the bank’s total obligations, they’d have to shut the doors and stop honoring their promises.

Most of the time, this doesn’t happen. Most of the time, people only withdraw the bandwidth, processing, or cash that they need at the moment so the system runs smoothly. And in many ways, its way more efficient than “safer” alternatives. If you have a small site and a private hosting server, you can be almost certain that you’ve purchased more resources than you need. If you hold cash on hand or under a mattress, you give up the physical security at the bank and any chance at earning interest.

The run on the bank or… data

Of course, the worst thing that can happen is that everyone goes to the same bank or the same website on the same day. The tellers and routers won’t know what to do, this isn’t the volume we’re used to!

Well, the risk of failure on shared hosting is pretty small compared to its fractional banking counter-part. Maybe your site goes crashes and you really do need to upgrade to get it going again. Even this risk can be offset my optimizing your server processes for bursts of traffic.

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