Factom: Honesty and security for all forms of record keeping
By Scott Sidders @Crypto WorldWide
Before I begin, I am not paid by Factom nor has Factom, or anyone for that matter, asked me to write this article, so what you get here is my interpretation of the business with my opinion. That being said, I do endorse the use of this service and will explain why it is valuable for the world in general, as well as specifically for investors. Factom is, in their words, ‘a scalable data layer for the blockchain’ which basically means it is a method for securely storing data on the blockchain that can work on the global scale. The problem Factom solves is that with current blocksize limits of 1MB we cannot store the amounts of data that demand would require. This is solved by creating the Factom layer on top of the blockchain which, without getting into too technical of details (since I don’t understand them), allows storage space for however much data needs to be stored.
What’s interesting about Factom, is that they are entirely open source and decentralized. The project has no single point of failure because it is powered by the Bitcoin blockchain which is powered by thousands of computers all over the globe. To destroy the project, you would have to destroy the internet. Therefore, no matter how disruptive this project becomes, nobody can stop it just like Bitcoin. The code is open source, so anyone can use it to create their own version of Factom or try to improve upon it. Now as an investor, I instantly began wondering, how can Factom be decentralized and still profit like a business? Their approach to receiving compensation for their work is by creating an alt coin called Factoids which are used to by entry credits to the Factom data layer. For any entrepeneurs or business owners seeking more information on how to monetize decentralized businesses, I encourage you to check out this white paper written by David Johnston about Decentralized Applications (Dapps).
These factoids were entirely premined by the company and are being sold in crowd sales events in order to retain earnings for the work done on the project. Now some of the profits from the crowd sales, as I understand it, go to a separate non-profit fund used to pay future developers doing work on the software. This is fascinating to me because, and I’m sure it’s been done before by other businesses, they found a way to monetize a decentralized business that will run itself.
So, why does Factom matter to people? Think about issues we’ve seen in the banking sector where companies “cook the books,” or i.e. they fudge some numbers on the accounting books and individuals take those profits for themselves. Think about government spending and how often scandles arise where some government official spends tax payer dollars on personal expenses. Time and time again, we see these types of occurences and Factom provides a transparent way of solving this fraud and corruption. Company and government audits are suppose to be public information, so recording all the public data on the public ledger, the blockchain, economically forces people to remain honest in these sectors. There is also a way to store auditable data on the blockchain via Factom that remains secure and private, so that sensitive data can be made auditable, but kept private to those who should see the data. This is all done without a trusted third part as well, the Factom team cannot access your private data, hackers can’t, nobody can unless they have the private keys.
From the investor perspective, this is great because any contractual agreements you make with a company or person, the records can be stored immutably and privately on the blockchain so that if any legal dispute were to arise, you have hard evidence for what agreements were signed and at what date. For that reason, I will be using Factom as a service in the future. Now, Factom as an investment opportunity, you may be too late. Factom had a pitch on the crowd funding website, BnkToTheFuture.com, where they had hoped to raise a minimum of $700,000 USD and up to $1,000,000 USD. However, rather impressively, they raised $1,118,959 USD for 7.8% equity in the company. Congratulations to Factom on this acheivement and best of luck going forward. I will be following the project as it progresses and will gladly post press releases on this website.
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