Factom is a Blockchain-as-a-Service (BaaS) company developing blockchain-based data management and security solutions, built atop the Bitcoin ledger, for a range of government and industry clients.
Factom is a blockchain and open source protocol that enables enterprises, governments, and other organizations to package and store large amounts of data on the bitcoin blockchain, to ensure security and transparency. While the bitcoin blockchain lays the foundation for decentralized, immutable record keeping, it was originally intended to be a basic payment rail for sending transactions from one location to another. This design limits its ability to effectively package and secure large amounts of data without the use of an accessory solution like Factom. Factom intends to be a data layer that extends the Bitcoin blockchain’s value proposition to satisfy this more advanced functionality, and overcome current constraints of speed, cost, and bloat.
Factom Inc. is a C-corp based in Austin, Texas, that offers “blockchain as a service” type products to enterprise level clients and governments, while the Factom Foundation is a non-profit based in the United Kingdom that maintains the open source codebase and network. The project started in 2014—it was originally called Notary Chains—and the first version of Factom was launched in early 2015. Factom conducted a token sale for one of their two native currencies, Factoids, which began on March 31st, 2015 and successfully raised 2,278 BTC, valued at the time at at $540,000. The company went on to raise $1.1 Million as part of an equity crowdsale launched on the BnkToTheFuture online investment platform, and later raised a $4.2 Million Series A in October 2016 led by venture capitalist Tim Draper. This series A was later extended and $8 Million was successfully raised in early 2017. Factom is a member of the Linux Foundation’s Hyperledger project.
Factom’s founder and current CEO Paul Snow has a long history in technical and corporate leadership positions. Active among the bitcoin community, Paul founded the Texas Bitcoin Conference in 2013, and has been known to respond directly to questions on the Factom Reddit channel. In late 2017, Factom brought on CMO Jay Smith, who has 25 years of experience designing and building systems in financial services firms. Jason Nadeau, originally brought in to lead Factom’s mortgage strategy has since departed for a role at Fidelity National Financial, though he still serves as executive advisor at Factom. Other leadership includes Laurie Pyle as COO, Brian Deery as Chief Scientist, Andrew Yashchuk as VP of Product Development, and Abhi Dobhal as VP of Strategic Partnerships.
Factom intends to be a data layer that can overcome the Bitcoin blockchain’s current constraints of speed, cost, and bloat, making good on its potential for ‘immutable record keeping.’ To the extent it succeeds, Factom is positioned to support a variety of use cases that include tracking mortgage or medical records while enabling multiple parties to access them according to prespecified permissions, managing land title ownership, empowering voting systems, or even securing the human genome. Factom is targeting industry niches that rely heavily on paper documentation, as their primary method for recording data, where multiple parties inefficiently pass paperwork back and forth collecting signatures, verification, edits, and addendums. By leveraging cryptography, Merkle trees and the bitcoin blockchain itself, Factom intends to bring efficiency, speed, security and increased auditability to workflows made archaic by blockchain technology.
Factom aims to solve these three limitations by applying their open source protocol as a data layer that sits above the bitcoin blockchain, where their own network of servers organize data submissions from users before anchoring them to the bitcoin blockchain. Factom uses three types of servers with their own consensus mechanism to operate its blockchain, in a process where raw data is hashed, repackaged it into blocks, rehashed, repackaged, until a single hash representing a large amount of original data files is anchored to the bitcoin blockchain. Factom is indifferent to the types of data submitted to its network, allowing applications and users to cryptographically hash documents, photos, videos, audio files and beyond. The hashes serve as a “digital fingerprint” representing the underlying content, and are auditable by any party externally monitoring the Factom blockchain and performing tests according to their own individually defined audit ruleset.
Two tokens, “Factoids” and “Entry Credits”, animate the Factom data network. Entry Credits afford users and applications the right to submit a fixed amount of hashed data to the Factom network. To submit data on the network, users must first obtain Entry Credits, either by purchasing them outright with USD, or converting their earned Factoids into Entry Credits. Entry Credits are non-transferrable and serve no purpose other than submitting data to the Factom network, which is designed to make theft less attractive to malicious actors. Paying to submit data to Factom also prevents DOS attacks, where an attacker could otherwise flood the network with submissions, thereby paralyzing it with an overwhelming volume.
Factoids are the protocol’s native currency, and are used to compensate federated servers for writing data on the blockchain and maintaining the network. Servers are randomly selected to perform this task from among the pool of available Federated servers. To prove their existence, and by extension eligibility for leading the next block, they must produce and send what Factom calls a “heartbeat message” to other servers on the network. Federated Servers rotate responsibilities every minute, and each has limited control over the system as a whole. Every four hours, the Federated Servers are ranked according to the results of a user vote.
Audit servers function as a backup pool to the Federated servers. If a Federated server fails to send a heartbeat, acts maliciously, or otherwise doesn’t uphold its duties, then an audit server is promoted to Federated server status. The purpose of an Audit server is to verify that the work done by Federated servers is correct, though they do not receive token rewards for their contributions to the network. The network also employs follower servers, which are only capable of requesting transactions. They collect requests for entries from users or applications and then forward those on to Federated servers for processing. Like Audit servers, Follower servers receive no compensation.