The qualified possessed dreams (
They could use Magic Formula even in the world without any Magic Element, and they could also detect other qualified. Their souls were being slowly absorbed into the Boundary, which made them weaker. Drives also make their possessors weaker.
Since Ragna the Bloodedge was not a qualified, and he was born without a Drive, his capacity for Magic Element allowed him to remove the qualifications of others by consuming their desires, making them forget about their dreams, with his Soul Eater. As all the characters lost their desires and qualifications, they turned into Magic Element, but the only way to stop the Day of Ruin was for someone to obtain the Blue.
Ragna obtained it, and used the Master Unit to create a new world from all the desires he consumed.