When George Washington was 6 years old, his father gifted him a hatchet. The first thing the boy did was run around the farm chopping stray pieces of wood. Eventually he tested the blade on a young cherry tree. His father discovered the felled trunk and confronted George. The boy immediately confessed: “I cannot tell a lie, I did chop down the cherry tree.”
Washington’s mishap is pure fiction, but the tale illustrates how highly we value honesty in our interactions. Modern society extends this far beyond personal relationships. Trust and transparency are foundational elements of business, government, and financial transactions.
Factom is a blockchain data layer service that maintains trust in document management and accountability. It allows entities to track changes to stored records while maintaining full transparency, all while leveraging decentralized blockchain technology for speed and cost effectiveness.
Challenges of Transparent Record Keeping
Record-keeping has a long history that stretches back more than 5,000 years. Some of the earliest examples of written language are documents recording payments made to merchants for rice and grain supplies.
As business became more complex, so did our methods of documentation. Keeping data on sheets of paper instead of clay tablets was a welcome leap forward. Auditing was still difficult, however, as physical documents needed a vast index and countless hours of labor to physically sift through them.
Digital document storage was a revolution in record-keeping. Computers could maintain intricate indices and search through millions of files in seconds. Exponentially larger amounts data were generated as we transitioned into the information age, turning record-keeping into a cornerstone of business transactions.
Our modern hybrid system of digital and physical documentation presents all new problems. Among them are synchronization issues and the ability to accurately track and monitor changes to vast amount of data. Authority across disparate sets of records is also fragmented, leading to frequent auditing errors.
Tied to the realm of document auditing lies the issue of trust. Every time a company or an individual submits a piece of data to a centralized third party, they trust that entity to keep the information secure. Auditing businesses have formed to ensure accountability, although, as we found with the Cambridge Analytica-Facebook scandal, those efforts are not enough.
The Factom whitepaper sums up the situation in a single chilling phrase:
In today’s global economy trust is in rare supply.
By introducing transparency and real-time auditing features, Factom hopes to alleviate that pressure point.
Trust Through Blockchain Technology
Blockchain technology offers a secure mechanism to lock in data and make it verifiable. Bitcoin’s blockchain is the most trusted immutable data source in existence, which makes it a prime foundation for Factom’s services.
Factom’s protocol sits on top of the Bitcoin blockchain to allow businesses to take advantage of the network without suffering from the speed and cost issues associated with cryptocurrency transactions. Factom accomplishes this by creating a dedicated protocol for its applications that works outside of currency transactions.
Only a single hash is generated for an entity’s data, each one representing information collected over a 10-minute timespan. The hash is stored in Factom and written to the blockchain once, allowing the layer to work quickly without adding bloat to the Bitcoin network.
This system allows for real-time auditing of documents in a completely trustless environment. No centralized authority is required for Factom to operate, and transactions can happen without delay.
Factom’s Core Offerings: Harmony and dLoc
Factom is capable of handling a wide variety of data, everything from medical records to legal documents, film scripts, corporate strategies, employee information, and more. Two of Factom’s main products represent the bulk of the platform’s offerings, which we take a closer look at below.
One of Factom’s core products is Harmony, a system designed to manage and track document changes while reducing auditing time and preventing costly disputes.
Think of Factom Harmony as a blockchain bridge between document storage entities. Each party retains documents in their own secure data centers. When a file is accessed, a change is made, or additional documents are added to the cloud, Harmony adds this information to the blockchain’s immutable ledger.
When an audit is necessary, Factom Harmony makes it easy to track down information and answer questions about the documents in question. When did a certain change take place? Which entity made the change? Harmony streamlines the process and keeps it fast, efficient, and reliable.
The video below shows Factom Harmony in a real-world use-case scenario involving the mortgage industry.
dLoc System by Linxens
Factom has partnered with Linxens to offer dLoc, a method of document authentication that lets users secure and audit physical documents using blockchain technology.
dLoc’s core use case includes authenticating essential information such as birth certificates, land titles, and medical records. Any institution holding vital records such as this can leverage Factom’s technology to protect the integrity of their documents
The dLoc system works using seals applied to documents a company wants to track. These stick-on chips include secure information that can include everything from biometrics to images of the documents, all held securely so only authorized parties can access it.
Once a document has a seal attached, users can scan it into the system and manage it through a private key and customizable dLoc mobile app. Changes and access records to these documents are maintained in the blockchain’s ledger. When an audit needs to be carried out, users can easily fetch each document’s history.
Creating Business Partnerships
The concept of Factom was born in 2014 with a conversation between Paul Snow and David Johnson about blockchain technology and distributed identities. The pair released a whitepaper soon after, outlining the core principles of Factom, followed by the FCT token launch in early 2015.
Since its founding, some of Factom’s most laudable moments are tied to partnerships forged with businesses and government organizations.
In 2016, Factom signed a deal with consulting firm iSoftStone to collaborate on a smart cities initiative for several regions in China. Factom would apply blockchain technology to allow for electronic data storage and notarization, key features the firm believes necessary for the success of future communities.
In mid-2016, the U.S. Department of Homeland Security awarded Factom a grant of $199,000 for a proposal titled “Blockchain Software to Prove Integrity of Captured Data from Border Devices,” which could bring blockchain auditing to verify documents at border entry points.
Factom has also received grants from the Bill & Melinda Gates Foundation to secure medical records on the blockchain, making them instantly and reliably available to medical facilities around the world.
Factoids (FCT) and Token Economy
Factom’s infrastructure is fueled by 2 types of digital currency: Factoids and Entry Credits.
Factoids (FCT) are a freely traded cryptocurrency that can be bought, sold, and traded on exchanges. They’re given as rewards for servers and auditors who contribute to keeping the system running, just like any other platform token.
Factoids can be converted into Entry Credits (EC), which is a fixed-value internal currency clients use to pay for Factom services.
Users holding FCT can set up a storefront service that converts currencies into EC. This allows businesses to buy Entry Credits using Bitcoin or fiat, separating Factom’s application uses from its token’s value and operation.
Utilizing this dual token system allows Factom to operate without weighing down the Bitcoin network. A business could also take advantage of Factom’s services without accessing a single cryptocurrency, if desired.
Factom doesn’t maintain a long-term roadmap or release timeline. Instead, the team focuses on cementing partnerships and refining its offerings in key sectors of business. New features are announced without prelude, but so far the developers have shown a consistent drive to keep the platform expanding.
Factom has two active product offerings–dLoc and Harmony–and offers customized solutions for private government and business use, such as the 2015 land registry contract with Honduras. Its closest competitors include blockchain projects like Tierion and WaBi, neither of which offer the same variety of services or are as mature as Factom.
Factom’s solution to the issues of trust and transparency in modern record keeping is fast, efficient, decentralized, and entirely autonomous. George Washington’s father had to rely on his son?s truthfulness when he asked about the cherry tree. Factom would have made the enquiry as simple as auditing the orchard’s digitized records.