The 2008 economic collapse is notorious in the history of blockchain technology and digital currencies as the linchpin for the birth of decentralized asset transfers. Digital currencies provide a transparent transaction of valued assets and they work in ways a centralized entity can never perform.
In other words, the 2008 crisis is one of the reasons Satoshi developed Bitcoin; to provide a consensus based common ledger to record all transactions, unlike the centralized methods followed by banks and governments.
Many falling financial firms during the economic collapse tried to obliterate their debts by building parallel asset ledgers. Sinking firms like the Lehman Brothers used the method of ‘repo transactions’, according to the fintech journalists Michael Casey and Paul Vigna, to stay afloat. Debts were simply postponed to a different ledger at the end of quarter.
There are several other techniques used by scammers to absorb public money and erase all records of transactions. It is not possible for a single entity to monitor all the records of a firm; at least it wasn’t possible back in 2008. A certain amount of trust in banks and institutional firms are still demanded from the public.
By using blockchain technology, all transactions can be made trust-less. There is no better example for a completely transparent network. Blocks are encoded carriers of valuable data and they are linked together by hash codes. Each block is linked to the previous block and so on. When a transaction is carried out on the ledger, or when a new block is added, the network records the transaction and time-stamps the event. No unregulated activity can occur on the platform without catching the attention of all members on the network. If a block is tampered with, it becomes invalid.
If blockchain technology is used to maintain the records of a bank or financial firm, there will be no chance or scope for an alternate ledger. Participants in the ledger will receive the entire history of the blockchain network and they can view their financial details from the moment of origin.
Ideally, banks and financial institutions should be switching completely to blockchain technology to maintain records. Many firms have already recognized the advantages of doing so; the ease and of access and low transaction costs of blockchain technology are attractive features as well.
We may be on the verge of completely preventing economic crises from a lack of transparency in financial records. Do you think the change will take place soon enough?