The Birth of ₿itcoin: 2008 Financial Crisis

In the heart of Wall Street, the atmosphere was electric in the summer of 2007. Investment bankers in fancy suits rushed through the busy streets, their minds racing with the latest financial innovations. Among them, the buzzword was “subprime mortgage.”


Little did they know, the very foundation of their world was about to crumble, leading to one of the most devastating financial crises in history.

As the crisis unfolded in 2008, the global economy teetered on the brink of disaster.

When the Big guys (banks and governments) fuck-up, ordinary citizens bear the burden.
7.5 million jobs were lost, over a 100,000 were homeless and the suicide rate sky-rocketed.

The root causes were many, but a lack of transparency and the concentration of power within a few large institutions stood out as critical failures.

The first block of the Bitcoin blockchain, known as the Genesis block, contained a message that read: “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.”
This inscription served as a commentary on the state of the financial system at the time and underscored Bitcoin's purpose as a response to the failures of traditional banking. It symbolized a break from the past and a new beginning for financial transactions.

1. Transparency: Shining a Light on Financial Transactions-

One of the key factors that resulted in the 2008 crisis was a lack of transparency in the financial system. Complex financial instruments, such as mortgage-backed securities and credit default swaps, were poorly understood by investors and regulators alike. This opacity allowed risks to accumulate unchecked.

In contrast, blockchain-based financial applications offer unprecedented transparency. All transactions are recorded on a distributed ledger that is accessible to all network participants. This transparency extends to the underlying assets and the flow of funds, making it much harder for risks to build up in opaque corners of the system.

2. Decentralization: Reducing Single Points of Failure-

The 2008 crisis also highlighted the systemic risks posed by the concentration of power in a few large financial institutions. When these "too big to fail" entities encountered trouble, it threatened to bring down the entire system.

Blockchain networks, by their very nature, are decentralized. There is no single point of failure or control. Instead, the network is maintained by a distributed network of nodes, each with a copy of the ledger. This decentralization makes the system more resilient to shocks and less vulnerable to the failure of any single entity.

3. Trustless Transactions: Reducing Reliance on Intermediaries-

The 2008 crisis was exacerbated by the high degree of trust placed in financial intermediaries, such as credit rating agencies and mortgage brokers. When these intermediaries failed to perform their duties diligently, it led to widespread losses.

Blockchain-based financial applications, by contrast, are designed to operate in a "trustless" environment. Transactions are validated and recorded on the blockchain through a consensus mechanism, without the need for a trusted third party. This reduces the reliance on intermediaries and the risks associated with their potential failure or misconduct.

In a future where blockchain technology is integral to the financial system, every transaction is recorded on a public ledger, visible to all. Transparency is the norm, and the lessons from the 2008 financial crisis are the foundation of a more robust and resilient system.

Sarah and Tom, a young couple looking to buy their first home, no longer need to navigate a maze of paperwork and mortgage brokers. Instead, they log into a decentralized finance (DeFi) platform, accessing a transparent marketplace where they can interact directly with lenders.

Each mortgage option is linked to a blockchain record, detailing the loan's history, terms, and risk assessment. This transparency allows Sarah and Tom to make informed decisions without hidden fees or complex jargon.

Meanwhile, regulators monitor the blockchain network in real-time, spotting trends and potential risks early. If a lender starts issuing risky loans, regulators can intervene before problems escalate, reducing the risk of systemic failures.

As Sarah and Tom finalize their mortgage, they appreciate how different this process is from the stories of the 2008 crisis. Their trust in the system is based on the technology itself, with the blockchain verifying every transaction. This creates a trustless environment where they can confidently engage in financial activities, free from hidden agendas.

I hope you enjoyed the story and saw how blockchain technology could have prevented the crisis and is poised to shape the future.

Thank you for taking out time to read Why Web3 by Central DAO

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