[RedDevil]

No, seriously. We don't buy shares, we buy a digital representation of a share in the stock exchange system. Just like my salary is a binary pattern in my bank's database and only a fraction of it is ever converted to real money.

In the end it doesn't matter - it is even easier to buy things electronically rather than physically, especially of late. I don't know if my bank really has the money or not; but they do transfer money to the requested accounts whenever I issue a transaction, so it works. I'm fine as long as they can guarantee they'll always do that.

The point with naked shorts is that nobody can guarantee that the share will be bought back, despite the promise to do so.
If the value of the shorted shares would move higher than the party who wrote them can pay, and if they are blocked from compensating by writing new shorts, then you would not get the shares you thought you owned. At least, someone would not - probably the stock exchange itself?
If so, a short squeeze that goes to infinity would bankrupt the exchange (and still the stock owners get less than the formula entitles them to).

There can be moral reasons to ban naked shorting. Preventing the possibility of an infinity squeeze would be a practical reason.
it is nice when morality gets support from practicality