What is Factom
Factom is a blockchain protocol that separates the immutability of blockchain technology from the cryptocurrencies associated with it. This division allows commercial companies to place their data on the blockchain easier and cheaper.
Factom is trying to solve the three main problems that the Bitcoin network is facing:
- Speed. A single Bitcoin transaction confirmation takes at least 10 minutes. With a standard of 6 confirmations for complete transaction processing, many of them take more than an hour.
- Cost. Bitcoin transaction fee is increasing and may continue to grow as the flow of transactions increases.
- Blockchain bloat. With a block size of 1MB, the number of possible transactions per second is limited. Even the introduction of Segregated Witness (SegWit) and the Lightning Network may not be enough to solve the Bitcoin scaling problem.
In addition, documents and data stored with Factom can be easily audited, thereby reducing the cost of safe and secure data storage.
Factom is especially useful for enterprises whose important data are regularly changed hands. Documents such as land subsidies and medical records must be accurately certified each time they transfer from one owner to another. Placing such data on the blockchain is of great value to such companies. Keeping paper documents is a rather costly and inconvenient business, and traditional electronic repositories are vulnerable to hacking and falsification of documents. Factom solves both problems.
How does Factom work
Factom uses two tokens on its network:
- Entry credit
Factom tokens have a separate chain for Factoid tokens. This token can be freely traded, like most existing cryptocurrencies. These coins decentralize the system and prevent user spam on the network.
Factom servers receive Factoid as a reward for maintaining the network. The network issues these rewards in a fixed amount (about 73,000 per month), regardless of their value.
Entry Credits (EC)
Factoid is used to purchase Entry Credits through the protocol. These tokens cannot be transferred: they are used only for payments for recording (Entry) and for voting for control nodes.
Entry Credits tokens have no other use, so they can be stored in weakly protected areas, since the theft of these tokens does not make much sense.
Entry Credits spend on adding data to the Factom blockchain. When you spend Entry Credit, the Factoid tokens used to purchase them are deleted from the system (burned).
The separation of Factoid from Entry Credits opens Factom to users who either do not understand or do not want to use cryptocurrency. They can simply buy Entry Credits using their own currency of preference, after which the Factom blockchain buys Factoid on the open market and then burns them to cover the purchase amount.
Each verified entry (Entry) has its own Chain ID number. This number determines which subgroup a particular record should fall into. The maximum recording size is 10KB, however you can use multiple records by combining them into large files.
A sequence of records forms a chain. The chain keeps track of the order of entries in the audit trail. Simply put, conversations are folders, and records are files that are in these folders.
An Entry Block is a group of hashes of all records with a specific Chain ID. It is important to understand that a record block contains only hashes, and not the record data itself.
Every minute, Federated Servers create a Directory Block by combining the hashes of Entry Blocks created in that minute.
When 10 directory blocks are formed (this happens every 10 minutes), the hashes of these blocks are attached to the blockchain. The control node that will perform this action is randomly selected.
The network is designed in such a way that auditing records is as simple and cheap as possible.
In Bitcoin, to verify the transaction, you need the whole history of the blockchain. In the case of Factom, this is not necessary. Using directory blocks and Chain ID numbers, you can significantly reduce the bandwidth spent on auditing each record.
Three types of servers
Factom uses a consensus algorithm similar to the Raft algorithm. Using it, the network reaches consensus by randomly selecting a leader from a pool of federated servers.
Federated servers are the primary servers running on the Factom network. These are the only servers that can record blockchain data and receive rewards in the form of Factoid.
These servers send a so-called “heartbeat notification” so that network members can verify their existence. If the federated server stops sending this notification, network participants immediately begin the election of a new federated server to replace the old one.
Audit servers double-check the operation of federated servers. If a federated server makes a mistake, it becomes an audit server, and one of the audit servers takes its place and becomes a federated server.
Audit servers do not receive remuneration for the work they do.
Finally, follower servers can only make transaction requests. When they receive a write request, they forward it to the federated server.
The network itself does not audit the initial records, so you need to conduct an audit before you submit your record to the system.
Team and Progress Factom
Factom was created at the beginning of 2014, which makes it a fairly adult project in comparison with the rest of the blockchain world. Since its launch, the Factom team has been steadily demonstrating its development.
The first version of Factom was released at the beginning of 2015, and the preliminary sale of tokens took place in the middle of that year. In August 2015, Factom was recognized as a Plug and Play FinTech accelerator, and in May 2016 it was selected as one of Austin’s top startups from list A.
The bulk of the team is based in Austin (USA). Many team members have many years of experience in the blockchain industry.
The team is managed by the executive director and founder of the project, Paul Snow. He is also the founder of the Texas Bitcoin Conference and the main architect of the open source project DTRules.
At the moment, Factom boasts 11 million records and several serious partners. For example, the team works in collaboration with the US Department of Homeland Security, providing audit trails for information collected on US borders. Factom employees also work with the Bill Gates Gates Foundation, keeping medical records of people from developing countries.
In June 2018, a Chinese court used the data posted on the Factom blockchain as legal evidence, thereby giving impetus to similar practice in the future.
In May 2018, the Factom team completed the last big stage indicated in the whitepaper of the project. With the introduction of M3, management servers have switched from Factom-managed servers to independent operators in nine countries. Moreover, the team made significant progress in accelerating the work of the blockchain, increasing throughput by 5 times and reducing the confirmation time by 600 times. They also added support for the Ethereum blockchain anchors.
The company has several direct competitors. The largest of them is the NEM project, which released its whitepaper in 2017. Like Factom, Apostille specializes in notarization and temporary stamps of data and documents.
Where to buy FCT
You can buy Factom cryptocurrency (FCT) on the Poloniex, Bittrex and Upbit exchanges in a pair with Bitcoin.
To purchase FCT on these exchanges, you need to have the necessary amount of Bitcoin, which can be bought on other exchanges such as Yobit or Exmo. Then you can transfer the acquired Bitcoins to the specified exchanges and exchange them for FCT.
CoinMarketCap lists all exchanges and trading pairs available for acquiring Factom.
Where to store FCT
There are two recommended options for storing FCT:
- Secure (Encrypted) Enterprise Wallet
- Ledger nano s
Enterprise Wallet is available for Mac, Windows, and Linux users. You can find instructions for downloading and using the wallet here.
FCT can also be stored on the Ledger Nano S. hardware wallet. Ledger is one of the most reliable and secure wallets trusted by the crypto community.
So far, there are not many wallets with FCT support, but there are more and more of them. Exodus’ new Eden wallet supports FCT. However, for now, the wallet is in the pre-release phase, so now there is a chance of problems with its use.
Factom is a well-established project that solves a big problem in several industries at once. Although the team is clearly not focused on marketing, it works great in the shadows, building new partnerships and continuing to improve its products.
The Factom team has not only years of joint work, but also extensive experience in the blockchain sphere.
As the project grows, it will be interesting to see how the FCT price tag will respond to the general market situation, and what will happen to it when the deflation point is reached.