From "The Big Short" to Blockchain: What Did the 2008 Crisis Reveal, and What Has Blockchain Changed?
We kicked off our newsletter talking about the world of Web3 and how we got there. Now, let's dive into the core of that world: blockchain and Bitcoin.
We kicked off our newsletter talking about the world of Web3 and how we got there. We even touched on NFTs and SocialFi (Decentralized Social Media). But we haven’t talked about blockchain, which I believe is a cornerstone of what we call Web3, or its first and most significant example, Bitcoin. So, let’s take a look at Bitcoin and blockchain: What are they, really? Where did they come from?
2008: The Burst of a Bubble
You might remember the chain of events from “The Big Short”: the surge in real estate demand in the 2000s, easy mortgages, the sector’s growth, and then Wall Street giants creating risky financial instruments based on these mortgages, laying the groundwork for a massive collapse. No one thought these mortgages, with their interest rate changes and the dollar’s depreciation, could be so vulnerable or that the system could crumble. But when the loans couldn’t be repaid, everything fell like dominoes.
At its core, the issue was a lack of transparency. The collapse wasn’t sudden; it was a series of interest and value changes. Yet trust was placed in central authorities (banks, insurance companies, credit rating agencies). During all these market and economic shifts, these institutions didn’t maintain transparent records, nor were they audited impartially. When the backbone institutions and authorities acted wrongly, society ended up paying the price.
System Failure: Lack of Transparency and Trust Issues
The 2008 crisis wasn’t due to a single mistake or bad actor. It was the way the system operated; a structure where people couldn’t fully see what was happening, with information asymmetry.
Incomplete, incorrect, unverified records, and selectively shared information to create a desired perspective all piled up to create this crisis.
🔸 Rating agencies gave wrong ratings.
🔸 Banks kept packaging and selling risks.
🔸 Authorities ignored the fragility within the system.
And the result? The system collapsed.
The Birth of the Blockchain Idea: Before Bitcoin
The foundations of blockchain technology actually date back to before Bitcoin. In 1991, Stuart Haber and W. Scott Stornetta proposed a system for protecting digital documents with timestamps. This was an early step toward blockchain logic. Then in 1998, Nick Szabo developed a concept for a decentralized digital currency called “Bit Gold.” But these projects didn’t reach a broad audience due to the technological and social conditions of the time.
After the 2008 Crisis: A Search for a System Based on “Code,” Not Trust
The crisis that started in America in 2008 quickly spread to the global economy. And after the crisis, people worldwide began asking:
❓ “Why are we so dependent on intermediaries?”
❓ “Why do individuals pay the price when these institutions make mistakes?”
Right around this time, a mysterious person or group named Satoshi Nakamoto published Bitcoin’s whitepaper at the end of 2008. The message in the whitepaper was clear:
“A purely peer-to-peer version of electronic cash.”
This message was a direct answer to the questions raised after the crisis: If there are manipulable intermediaries in the system, stop trusting them and design a system that doesn’t require trust.
Bitcoin Whitepaper
Blockchain: Ensuring Trust Through Transparency
This is where the core feature of blockchain technology comes into play:
✅ Transactions are transparent.
✅ Everyone can audit the network.
✅ Rules are written in code and are immutable (code is law).
✅ Trust is based not on an authority, but on the system’s functioning.
So, as we saw in “The Big Short,” the lack of transparency, information hoarding, and manipulation that led to the system’s collapse are minimized in blockchain-based systems, at least, that’s the ideal.
Has Bitcoin achieved this ideal? Is the system really practical and transparent enough to carry the entire financial system? These questions have been debated since the whitepaper was published at the end of 2008.
Web3: A Paradigm Shift Beyond Finance
The approach that started with Bitcoin has found various technological and conceptual spaces over the years in structures like Ethereum, DeFi, NFT, and DAO. It’s begun to reshape not just finance but also areas like art, identity, and governance with the principle of decentralization.
In short: What happened in 2008 exposed all the system’s vulnerabilities. Satoshi offered an alternative solution to those vulnerabilities.
Even though the foundations of blockchain technology date back to the 1990s, did the 2008 crisis accelerate its adoption? Can trust crises be catalysts for technological revolutions? What do you think?