From Bitcoin to Blockchain: How ledger tech can morph the mortgage industry
By Debbie Hoffman and Matt Oguz @ Housing Wire
June 7, 2017
Blockchain offers advantages to industry, including document security and security breach protection

EXCERPT: Bitcoin — that is what most people think of when they hear the term blockchain. However, blockchain has morphed into an incredible technology tool that can be utilized across industries in a variety of capacities, including in mortgage lending. Blockchain is a ledger system stored on a decentralized database which can consist of one or multiple owners across many computers or “nodes” linked together.  Records are linked in the form of time-stamped blocks.  It was originally utilized in the technology used by bitcoin – the electronic cash system. When the open source code for bitcoin was released in January 2009, the technology of blockchain was brought forth.

This technology allows for documents to be stored and transferred in a process that cannot be altered or tampered with, enables validation and is less error-prone than current processes. The decentralized nature of blockchain can result in increased productivity since multiple parties can access the network and are able to work on files simultaneously.

WHAT DOES BLOCKCHAIN HAVE TO OFFER? 

Blockchain promises many advantages; two of the most important ones are cyber breach protection and document security, both critical to the mortgage process. For mortgage lending, this could mean saving millions of dollars.

First, in addition to a more streamlined and technology workflow, there could be a reduction in the cost of using third-party vendors due to automation.  Second, blockchain allows for transparency in the storage of data.  Entries on a blockchain ledger become time-stamped blocks which means that there cannot be hidden alterations to the chain. By using blockchain for document management, such immutable data could help in regulatory compliance tracking and ultimately in customer confidence because of the transparency of such data.

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Another benefit to using blockchain is the characteristic of document authentication which confirms that data being placed upon the network belongs there.  When data is placed on the network, the document blocks are coded with specific hash sequences which must match the specific hash sequence of the network.  If the sequence does not match, the data will not be saved onto the blockchain.

Blockchain technology is highly versatile and can be applied to many industries, including those that utilize payment and money transfers, stock trading, voting capabilities and reliance on secure storage of data.  Such industries include law, healthcare, insurance, car leasing and sales, online music, stock trading, supply chain management, storage and, of course, mortgage lending.

THE DOWNSIDE TO BLOCKCHAIN 

While blockchain offers many advantages, there are a few factors that need to be considered, including the “51% attack,” energy consumption of the networks and regulatory oversight. The proposition that blockchain offers a secure network relies on the principal that the network cannot be tampered with by cyber criminals unless they have the energy resources to hack into a majority, or 51%, of the computers on the network to gain control of the blockchain.

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