It has been only a decade since the world financial crisis of 2008, and many changes to fintech have followed this event. The crisis, while destructive, has had a significant influence in the world, especially when it comes to the creation and development of the blockchain technology.
The trust that was put in centralized institutions who acted as wealth custodians was not entirely justified and, as a consequence, the whole world ended up dealing with the financial fallout. Decentralization now had a chance at center-stage as cryptocurrencies came to be with Satoshi Nakamoto’s launch of Bitcoin (BTC).
Trust in the banks
Since the appearance of blockchain tech, it went through many phases of development and improvement. Even today, a decade later, we are not even close to uncovering its full potential. This has caused many to wonder whether the crisis could have been avoided if blockchain tech was used instead of centralized services.
Pundits and market prophets have started wondering when the next financial crisis is going to strike and to debate whether blockchain tech can prevent it. These are the questions being asked by crypto visionaries, like ex-Wall Street executive, Pang Huadong. He did not offer much detail regarding his observations of blockchain’s capabilities in this regard but he is certainly not the only one who thought about this.
The root of the problem lies in faith in financial institutions. They were afforded too much trust and they abused it by manipulating ledgers and accumulating and selling worthless assets. The banks managed to make a profit, while the rest of the world suffered, as can be seen from their earnings reports which predated the financial crisis.
Through their manipulations, their balance sheets became so complex that nobody was able to come up with anything but an educated guess regarding their earnings and asset market values. This is not unheard of in modern capitalism and it isn’t good for the big picture.
The solution is transparency
It was concluded that the reasons for the financial crisis involved overtrusting the banks and a lack of transparency. There is concern that these same issues might lead to another such event in the future. This is why one of the leading goals of blockchain is to increase transparency.
That way, cash flow can be monitored by regulatory bodies in real time, and nothing can change the truth behind the banks’ actions. Everything would be visible, and we wouldn’t have to depend on the accuracy of guesses regarding the health of any financial system.
Additionally, the development of blockchain tech has led to new applications for this technology. The tech may not yet be at the right stage to prevent a crisis now but the development is constant, and it should reach proper levels sooner rather than later.
