We’ve all heard the hype over Bitcoin as its value has surged in the cryptocurrency market. Well, it is tied directly to a new type of internet technology known as blockchain. In a basic sense, blockchain is essentially a decentralized network that allows digital information to be distributed and shared rather than copied from network to network. It was originally developed specifically for distribution of cryptocurrency (or “digital currency” if you prefer), but people are already wondering how it can be used for so much more.
How a Blockchain Network Works
Blockchain technology could change the way that transactions are made online because it established a person-to-person user network and uses algorithms to verify information. Each block of data is added to the chain with every transaction, and this blockchain represents the transaction ledger between any two parties. These data blocks and chains are identical across the entire network and not controlled by any one user. Transactions are immediate and not subject to bank regulation or interference.
A good analogy for blockchain technology is how Google Docs works. In the past, you would have to send a Word document back and forth for multiple parties to edit it. Google Docs allows you to create shared documents that any parties who have access can edit at any given time. They can even work on it at the exact same time. Blockchain is a similar concept applied to the financial transaction industry that removes the need for a bank to briefly lock access to one account as they make a monetary transfer to or from it.
How Else Could Blockchain Be Used?
The possibilities are there to use blockchain for other purposes beyond financial. All business and legal documents could be shared entities in the same way as Google Docs or Google Sheets. In theory, blockchain prevents data from being controlled by any one singular entity and also eliminates any single points of failure.
The idea is that it is full transparency of data that is embedded into the network itself and any attempts to hack would be difficult because someone would have to infiltrate the entire blockchain network instead of just one controlling entity like a bank. Obviously, it’s not without some flaws and it may be some time before this technology is used on a wide scale, but it a very interesting topic to think about.
Future Mortgage Industry Impact
When it comes to the mortgage industry, I can see it definitely disrupting the way things are done. Blockchain would likely impact the title industry first and then eventually mortgage. It could change how mortgage loans are secured, processed and managed. Cryptocurrency has already been used to buy real estate in a few isolated cases. However, the idea of major user-to-user loans (without banks) is probably much further away from reality at this point. If banks ever find a way to adopt this kind of technology without sacrificing all control over the data, though, it definitely would revolutionize how all financial transactions are managed.
I always like to stay in touch with what’s happening, especially if it’s something that could impact the mortgage industry someday. What do you think about the idea of blockchain technology and decentralized cryptocurrency? I’d love to hear what you think. Email me at firstname.lastname@example.org