Blockchain is a big buzzword in technology right now. But when I talk to customers, it quickly becomes clear that many people don’t fully understand what blockchain is—or how to use it. To help shed some light on what you really need to focus on as you consider the adoption of a blockchain strategy for the coming year, review these three points:
Understand it’s a hammer, not a screwdriver
Since everyone is talking about blockchain, it’s easy for companies to latch onto the general concept without keeping their organization’s unique use case in mind. So if you think you might be interested in a blockchain strategy, the first thing you need to grasp fully is what blockchain is and isn’t. While I’m a big fan of blockchain technology, it’s not a panacea for every problem—to fully leverage its value, you need to know what this technology excels at doing, and what it doesn’t do particularly well.
In its simplest form, blockchains distribute data and once distributed, the information is persistent, redundant, and accessible. Persistent in that it is nearly impossible to remove data that has been published. Additionally, blockchains have this quality because all full nodes contain a complete copy of the full data set that makes up the blockchain. Public blockchains, like the Bitcoin blockchain, are also globally accessible. If you have internet access, you can view the Bitcoin blockchain. It allows digital information to be distributed rather than copied. You might think of it like having a spreadsheet or database that is regularly duplicated and continuously updated across a network of devices. Why is this important to know? Because it can help you hone in on what the actual benefits of blockchain are, and what specific problems you can solve with it. A key point is that the records blockchain keeps are easily verifiable and protected since the database does not have a single storage location that a cyber thief can access. As I’ll describe more below, this can be of great benefit in a wide number of industries, including the mortgage industry.
While you may be able to rattle off an impressive description of blockchain from a technical perspective though, the key here is to be sure that you know the best way to use the tool. Think about this analogy: You have a screwdriver, but you need to pound in a nail. While you can certainly turn the screwdriver around and start whacking the nail with the screwdriver’s handle, that’s not really what a screwdriver is designed to do. You can probably get a nail hammered in with this solution, but there’s a better tool available to help you do it. If you don’t use a hammer to pound in your nails, then you’re working less efficiently than you could be.
It’s the same with blockchain. I get a lot of questions from companies about whether they can “make” blockchain perform certain functions that it technically can do, but that it’s not really designed to do well. For example, since blockchain is conceptually a type of database, people often think they can solve database problems with it. The litmus test for this is to ask yourself whether you could solve the problem with Oracle. If you can, then just do that—it will likely be easier and cheaper. If not and you are looking to create persistent, redundant, shareable data, blockchain technology might be worth exploring. So as you consider implementing a blockchain strategy, your first goal is to use it for the right things. Look around your organization for screws that need tightening, not nails that need hammering. In other words, understand what blockchains are fundamentally best at doing. In the mortgage industry, that is the ability to provide the same level of preservation of information, document integrity, and tamper seals around documents without requiring e-signatures.
Know how deep you want to go
Once you understand how you can effectively use blockchain, the second point to consider with a blockchain strategy is, how deeply do you want to dive into becoming a blockchain subject matter expert? When it comes to blockchain integration, it’s certainly one option to just subscribe directly to public blockchain and then have your developers write their own code on top of these open-source projects.
But if you’re really considering doing this, think about how deep your R&D department really is. This level of coding is painstaking, highly technical work—most companies don’t have this capability, and for a good reason, since it’s expensive and not very practical to hire at this level. Most organizations neither want nor need to build their entire blockchain platform from scratch; they simply need access to existing business applications to solve their problems. The way to get to these solutions more quickly and efficiently is to look for a third-party blockchain company that already has built a platform to do what you need to be done.
The bottom line here is that you need to decide how committed you are to developing your own in-house solution for blockchain. You can’t really dabble in this type of technology. You must either be deeply committed to it and have the R&D depth in-house to support that commitment, or else you need to partner with a company that has expertise in this area to run your strategy for you.
I think this is a bit of a no-brainer in that blockchain technology is too new to make it cost effective to hire a team of experienced developers to play around all day and come up with concepts. A smarter strategy is to find a partner that offers a blockchain platform built to specifically serve your industry. This saves your own developers from reinventing the wheel to figure out how the technology works. If you’re an enterprise that doesn’t want to be in the blockchain business but simply wants to use blockchain wisely, then there’s no point wasting resources on the learning curve.
Sort the wheat from the chaff
After reviewing the two strategies above, you’ve decided that you want to partner with a blockchain provider. Today, there are thousands of blockchain companies pushing their wares. How do you choose? The answer is: based on the experience that they provide. Frankly, the vast majority of blockchain companies have yet to build anything and have no live customers. They may have an idea or even a proven concept, but only a small handful of these thousands have live blockchain solutions in production.
One of those companies is Factom—and we’re the only blockchain provider with specific mortgage expertise. Our product, Factom Harmony, uses both the transparency and the permanence of blockchain technology to help reduce expenses related to documentation, compliance, and litigation alike. In essence, Harmony helps organizations improve their coordination across multiple players in the mortgage arena—including lenders, borrowers, and investors. There are many applications for this, from allowing the lender to deliver final documents faster, promoting more efficient resource utilization, and reducing the risk of audit costs.
What does this look like in practice? The Harmony platform creates a single, permanent document catalog that ensures the final loan file is complete, accessible—and permanently unaltered. There’s no worry about lost documents or incorrect files since all document reviews, audits, and litigation prep take place using only the correct data. Also, because Harmony allows users to rely on a single document blockchain catalog that is secure and unalterable, as well as comprehensive, it saves time through consolidated document storage and reduces costs with document assembly. In short, this blockchain technology solution offers the mortgage industry a reliable and realistic backbone for compliance and document management in one well-designed and easy-to-use platform.
So whether you need a lost document solution, foreclosure documentation, due diligence, evidence of compliance, consumer protection, or litigation support, Factom Harmony is your hammer—no screwdrivers required. To learn more about the Factom Harmony Suite and how Factom blockchain technology can help solve common business problems facing the mortgage industry, visit Factom.com/products/harmony.