Effects of Blockchain on Mortgage Tech

December 13, 2020
Antonio Flores

One of the biggest inventions of the past decade, the concept of the blockchain, originally developed to provide structure to the bitcoin and cryptocurrency systems, has provided a new model for decentralized systems of all sorts. Since their inception, blockchains have been used in areas from banking to government identification to the Internet of Things, to provide large-scale coordination without sacrificing privacy or security. In fact, blockchain is so secure once established that, to use the original example, it is mathematically impossible to falsify Bitcoin, so the cryptography provides better security than almost any other system developed. However, blockchain failed to live up to its initial hype due to the complexity of the concepts involved, which limited the number of people who could use it effectively, and the inflexibility of the system, which limited its uses. However, there are still many advantages of deploying blockchain, and here we will be discussing the one which most applies to the mortgagetech market, the distributed ledger technology (DLT) system.  

The blockchain, to describe it in a sentence, is just a series, or chain, of informational nodes (which are called blocks). The concept of the distributed ledger simply means that in every single block, every transaction from every block is automatically recorded, which is to say that there is a ledger of all transactions distributed among every single block. This technology both decentralizes data storage, and makes all data immediately available to every node in the chain, which means every user of the blockchain. This leads to unprecedented levels of security, as parties no longer have exclusive data access with which to manipulate financial information, as well as efficiency, as every piece of information is verified automatically. This process most obviously eliminates the legal middlemen of notaries and such entirely, as an entire unchangeable and unfalsifiable record of all transaction data is already created without the need for outside parties to verify the information. But another party replaced in the blockchain is that of the broker: the lenders and their offers can already be immediately visible to any user of the blockchain interested in their services. Distributed ledgers in and of themselves allow for revolutionary changes to the famously conservative mortgage industry. 

To conclude, the potential of the blockchain system for distributed, decentralized verification has many organizational and mathematical advantages which allow for greater efficiency, transparency, and profit for people in the mortgage industry.


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