The 2008 financial crisis was a devastating time for many, as the collapse of the United States real estate market caused ripple effects impacting the employment and livelihoods of millions of people.
According to TheStreet, one of the chief causes of the crisis was the opaqueness of the mortgage industry. Mortgages were bundled into packages called “mortgage-backed securities (MBS)” that could be bought and sold by banks and other investors who relied on rating agencies to determine how risky the securities were.
The banks sometimes “packaged AAA-rated securities with lower-quality ones, and these bundles were passed off as top-rated securities when they were sold to investors.” These investors didn’t necessarily understand that they were buying low-quality securities, which were likely to be defaulted on, leading to massive losses once the crisis revealed the truth.
According to Ralf Kubli, a board member of the Casper Association, this fundamental problem that sparked the crisis still exists, but it can be fixed through blockchain technology.
Kubli hails from both the traditional finance sector and the crypto industry. He has previously worked in various mergers and acquisitions, sales and executive management positions at Sika, Starmind International, BCM Europe, and other companies. In 2021, he joined the Casper Association board, a nonprofit promoting the Casper blockchain network.
He told Cointelegraph that tokenization of mortgages could allow them to become “observable, verifiable and enforceable” on a public blockchain, making the mortgage industry more transparent and helping to avoid the kind of surprises that arose during the 2008 crisis.
Interpreting paper agreements in a digital world
When financial agreements are written, they are put on “pages and pages of paper,” Kubli explained. Afterward, they are given to analysts and programmers who interpret these written documents as machine-readable code.
However, these analysts often have disagreements, he noted. Under normal circumstances, disagreements are small and can be resolved through negotiations. However, situations like the 2008 financial crisis show that disagreements can sometimes be considerable, causing catastrophic results. As Kubli explained:
“You have a written contract that then gets translated into computer code that then runs in these core banking systems, and after about 40 years when these core banking systems are still running, no one really remembers exactly…
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