Factom project purpose and description
What is Factom?
Factom is an open source blockchain project that was designed to offer data and system security, by improving on the shortcomings that Bitcoin has, and superimposing the benefits of blockchain technology.
More often, Factom has been described as an audit and publishing engine. Users can write data on the Factom ledger, but for a small fee. Any information that is entered into the Factom database cannot be removed, and this is why it is a useful resource for editing purposes.
Factom was designed with layers of redundant security that you might not find in any other blockchain. While Factom is anchored on Bitcoin, it solves a lot of problems that are associated with Bitcoin. By anchoring on Bitcoin, Factom is able to benefit from Bitcoin’s secure hash rate.
What is the problem that Factom Solves?
Factom, like most of the cryptocurrencies that have come after Bitcoin, was designed to address some of the flaws or challenges that exist in the Bitcoin ecosystem. Satoshi Nakamoto indeed is a revolutionary in this dimension. Bitcoin has changed the way people view currency, and might even usher the world into a new future of decentralized trustless ledgers. However, this also created opportunities for improvements and this is where Factom comes in.
There are three problems that are intrinsic to Bitcoin that Factom improves on, speed, cost, and bloat.
Bitcoin uses a decentralized, proof of work (PoW) consensus. For this reason, it takes at least 10 minutes to make adjustments and confirm transactions. In the case of applications that would require heightened security, you would need several confirmations for the transaction to be completed. In fact, on average, you need around 6 confirmations, which can take more than an hour, just to complete a single transaction.
By default, the exchange price for Bitcoin is one of the most volatile in the market, all through the history of the cryptocurrency. When the price goes up, the same applies to the cost of transactions. For applications that handle a lot of large transactions, this eventually proves to be a stumbling block. Besides, the exchange price for Bitcoins is not easy to predict, since it is not attached to anything. Other than that, there are other factors that might also conspire to increase the cost of transactions, including reward halving and constraints on the block size.
In the Bitcoin ecosystem, there is a limit to the number of transactions that can be carried out per second. This throughput is limited to the size of a block. If you have an application that needs to store or add information using this blockchain, you will be adding traffic to an already congested street. As a result, there have been calls to raise the block size limits so as to reduce the bloat and make the system more efficient.
How does Factom Solve the problem?
Factom, as a design protocol, addresses the three problems above by creating a protocol for applications whose features and functions go beyond handling transactions involving currency exchanges. Factom built a secure, efficient and standard foundation where users can run their applications faster, in an affordable manner and without bloat.
Instead of tracking coins, Factom provides a distributed ledger where you can write complex data to support your business. Entry credits are the only way you can write data into the blockchain. This is important in that it helps overcome the problem of slow speed, and other bottlenecks that are evident in traditional blockchain systems.
By using entry credits, Factom separates the process of implementing business functionality from coins. Since each coin can only be spent once, this solves the problem of performance because you do not need the entire blockchain to process the coins.
At the same time, you no longer have to scan the entire blockchain to prevent double spend. The credits are only available in one address. As a result, you can write to the blockchain at incredible speed, which also helps parallel processing across the network.
Factom applications do not need wallets of tradeable tokens for execution. In fact, wallets are usually one of the targets of hackers. Eliminating wallets, and using entry credits that cannot be transferred is another step towards enhancing security in the Factom blockchain.
What makes Factom better than the competitors?
Factom is all about using blockchain technology to solve real-world issues, especially by pushing business applications. It is a system that is built on transparency in order to carve a niche in the future through software. The mission behind Factom is to become an industry leader in providing blockchain data solutions at all levels.
Given that there are already other players in the market, Factom has positioned itself above the rest by design. It is built ready for enterprises. The Factom blockchain was designed to solve problems that other blockchains struggle with. Hence it is a proactive and efficient blockchain, and not a copy or clone of Ethereum or Bitcoin as most systems currently are.
When using Factom, you are not limited to conduct a specific number of transactions per second. In fact, this ecosystem is built to accommodate high volume transfers comfortably.
Factom uses a two-token system, which means the cost of writing entries to the blockchain is predetermined. This predictability of costs helps in planning. Factoids are not used to buy entries into the Factom blockchain as would be the case in other cryptocurrency models. Instead, Factoids are used to create entry credits. You use entry credits to buy data in Factom. The cost of entry credits is fixed, so it does not rely on the unpredictable price of a coin.
In Factom, you cannot transfer entry credits. In fact, you can use them as a product over currency use. This is ideal especially for entities that do not use cryptocurrency.
Complexity and speed
By design, Factom was built to support complex data. By using Chain IDs, users can create organized private, public or hybrid blockchains. There is no specific data format that you have to meet for your data to be accommodated in the Factom blockchain.
To make things easier for users, Factom only publishes the hash of the data set, including the metadata. This is supposed to serve as proof of the existence of the data at a given time in the blockchain. In a technical capacity, this is supposed to avoid unnecessary clog of data in the blockchain, thereby making the network run faster and efficiently.
To write data on the public Factom blockchain, users do not require any special permission. For private data, you can use Factom Harmony. Factom Harmony provides a private blockchain where you can write private data, then anchor it to the public Factom.
All the information that is contained in the public view is written with a hash. This is to make sure that only those people who have the keys are able to read that data. As a result, Factom offers solutions to real-world problems by offering support in dynamic business environments.
How can Factom be categorized?
Factom is an autonomous, distributed layer right at the top of the Bitcoin blockchain. It is built from layered data structures, which is simply a hierarchy of blocks.
The highest blocks in this hierarchy are the Directory Blocks. Directory blocks are made up of compact references, and they form a micro-chain. These blocks are very small in size. To maintain their size, every reference in the block is a hash of the Entry Block and its Chain ID.
Entry blocks contain references that are linked to all entries made by a specific Chain ID that have arrived. For each Chain ID, the entry block becomes part of the micro-chain. Most of the data held in Factom (the entries) is held at the leaves. The hash power in Bitcoin makes this data structure hierarchy unchangeable. The layers in this concept can, therefore, be addressed as follows:
- Directory Layer – Organize entry block roots
- Entry Block Layer – Organize entry references
- Entries – Holds a hash of an app’s private data or its raw data
- Chains – Organizes all entries that are unique to an application.
What’s Factom’s vision on Security?
Unlike Bitcoin, Factom records events including those that are not of a monetary nature. There is a minimal rule set for creating permanent entries in Factom. Most of the data validation requirements are handled on the client’s end. This means that the only validation that is enforced by Factom are the ones that involve Factoids. These are validations that:
- Convert Factoids into Entry Credits
- Are needed to trade Factoids
- Make sure Entries have been paid
- Make sure Entries have been recorded
There are rules in place that guide incentives on tokens, guide internal consistency and help in running the Factom network. However, even with these rules in place, Factom is unable to verify the statements that are recorded in the user chains.
In Bitcoin, transactions are limited to transfer of value from inputs to outputs. For validity, a transfer has to meet the script requirements of the input only, which is often a number of signatures. This validation process once automated, simplifies the auditing process. In the case of Factom, however, Factom only records the process that has taken place, instead of validating transfers.
Factom does not validate Entries. Instead, this is done by users and applications. The user or application must understand the rules the chain should follow. If this happens, an invalid entry would not cause unnecessary distortion in the ecosystem. In fact, any entry in a chain that does not meet the rules of the specific chain will be disregarded.
Factom also offers identity management. This is hard-wired into the blockchain code to enable users to define cryptographic identities for resources, documents, people and any other item that they might engage in the blockchain. Identity management essentially creates verifiable histories, which help in auditing.
Any change that is made to a specific identity is written permanently on the blockchain. Through hierarchical identity keys, it is easy to manage identities especially when low-level keys have been compromised externally. Such keys are then revoked and replaced with high-level keys. Through identity management, so many of the Factom cases are facilitated, especially smart contracts.
Examples of Factom use cases/applications
Factom is technology specifically designed for use by applications. It is about publishing data by new or existing applications through Factom API calls to the Factom blockchain. With this in mind, Factom is a protocol where applications can serve features and functions over and above traditional currency transactions.
There are lots of users who can appreciate the Factom ecosystem, in the process scaling their businesses and operations.
Developers who design business applications or any other application for that matter will find Factom coming in handy for their normal tasks. Through Factom, you can create a robust audit trail. This makes it easier for you to identify problems with the applications you build.
Other than that, developers can also use Factom as a means of communicating changes in the system. For apps that require a central server for the internal processes to work in unison, a developer can replace the central server with Factom. This way, you save a lot in terms of the cost of acquiring, running and maintaining a central server, and instead, use the secure Factom ecosystem.
Banks also find Factom useful for their normal operations. Ideally, banks are simply an amalgamation of databases of different kinds. To maintain the credibility of their databases, banks cannot trust their peers to be honest with the data they store. However, Factom erases the need for this. Through Factom, banks can synchronize their databases safely. In fact, it is impossible for anyone to tamper with any information in the bank database without leaving a trail of evidence behind. This helps in auditing.
Other than banks and app developers, Factom is built to support a wide range of services and applications in security, coordinating record systems and databases, asset management, asset trading, proof of publishing and so much more.