Past and present

In 2008, the financial crisis shook the entire world economy. Now, after all this time, people are wondering what has changed since then, and how to avoid a similar economic crisis in the future.

What began as a crisis regarding the subprime mortgage market subsequently escalated into a massive global financial crisis and recession. From massive bankruptcy rescues to subsequent economic collapse, many have begun to question the stability and transparency of the global banking systems they previously trusted.


What happened during the financial crisis?

Also referred to as the worst economic disaster since the Great Depression, the 2008 financial crisis simply devastated the entire global economy. This led to the so-called great recession, which in turn led to falling house prices and a sharp rise in unemployment. The consequences were dire and still have an impact on current financial systems.

In the United States, more than eight million citizens lost their jobs, approximately 2.5 million businesses went under, and nearly four million homes were foreclosed on in less than 2 years. Many have lost faith in the system due to food insecurity and income disparities.

Although the recession officially ended in 2009, many continued to feel its effects afterward, especially in the United States. The unemployment rate reached 10% in 2009 and was only restored during the pre-crisis period in 2016.


What caused the great recession?

If you investigate the cause of its occurrence, you can identify many associated factors. A “perfect storm” was brewing, and just as it reached its breaking point, a financial crisis ensued. Financial institutions issued high-risk loans (mostly mortgages), which ultimately led to a large-scale bailout (a program to buy out distressed assets), which was financed by taxpayers.

It is quite difficult to determine the true cause of the 2008 crisis, but it was the American housing market that initiated the chain reaction, creating the first crack in the existing financial system. This was followed by the bankruptcy of Lehman Brothers, which had a devastating impact on the American and European economies. In turn, this episode made the public aware of the potential shortcomings of banks. It has also caused significant divisions around the world based on the interconnectedness of the global economy.


Why is this important now?

Eleven years have passed since the financial crisis, but problems still remain. The effects of the recession have not faded and the global economic recovery has been quite weak compared to historical standards. High-risk loans are being offered again, and although default rates are low today, they can change very quickly.

Regulators say the global financial system has been changed since 2008 and that security measures have been significantly strengthened. For this reason, many believe that the global financial system is stronger today than it was eleven years ago.

On the other hand, some are still wondering: could this type of economic crisis happen again? The short answer is yes, anything is possible. Despite numerous changes and new rules, the fundamental problems remained where they were.

It is worth noting that the 2008 financial crisis reminds us of the importance of politics. The events that occurred in 2008 were largely caused by decisions that regulators and politicians made several years earlier. From poorly regulated regulators to the influence of corporate culture, the Great Recession is nothing less than a part of our history that should not be forgotten.


Development of Bitcoin and other cryptocurrencies

While the 2008 financial crisis shed light on the risks associated with the traditional banking system, 2008 was also the year of the birth of Bitcoin, the world's first cryptocurrency.

Unlike fiat currencies such as the dollar or British pound, Bitcoin and other cryptocurrencies are decentralized, meaning they are not controlled by a government or central bank. Instead, the creation of new coins is determined by a pre-established set of rules (protocol).

The Bitcoin protocol and its underlying Proof of Work consensus algorithm ensure that new units of the cryptocurrency are released on schedule. More specifically, the creation of new coins depends on a process known as mining. Miners are responsible not only for introducing new coins into the system, but also for ensuring the security of the network by validating and confirming transactions.

In addition to this, the protocol defines the maximum available coin supply, which ensures that there will only be 21 million Bitcoins in the world. That is, there will be no surprises regarding the current and future supply. In addition, Bitcoin is open source, so anyone can not only check it out, but also contribute and take part in its development.


Conclusion

No matter how much time has passed since the 2008 financial crisis, people have not forgotten how fragile the international banking system can be. We can't be completely sure, but it's likely that this is one of the reasons that led to the creation of a decentralized digital currency like Bitcoin.

Cryptocurrencies still have a long way to go, but they are definitely a viable alternative to the traditional fiat system. Such an economic network can bring financial independence where there is none, and certainly has the potential to create a better society in the future.