What Is Factom?
Factom is an enterprise-grade blockchain layer. It acts as a crosschain solution that allows independent nodes to communicate with Bitcoin through the Factom protocol. Instead of storing entire records on the blockchain, it acts as an encrypted, immutable directory. Factoids (FCT) are the native cryptocurrency coins used by the Factom blockchain.
Industries like real estate, law, technology, and healthcare need to store and transfer data regularly, and a documented chain of ownership is important. Record-keeping is important, and it’s hard in large organizations to track who did what when to a document without extensive documentation.
When these industries dipped their toes in blockchain technology, scalability issues were quickly found. Leading blockchain networks like Bitcoin and Ethereum got bottlenecked in the wild, and issues with transaction speed and cost didn’t help.
But there are still industries looking to adopt blockchain technology, and Factom was created in 2014 in Austin, TX to relieve bloat and scalability issues using the Bitcoin blockchain itself.
Since then, the team (lead by cofounder and CEO Paul Snow) gained major partners like the Bill and Melinda Gates Foundation, which awarded the project a $500,000 grant in November 2016, and the U.S. Department of Homeland Security (DHS), which granted the project another $200,000 in June 2018.
Factom brings military-grade, end-to-end encryption to a cloud-like blockchain storage solution. It supports individual access levels, system tracking, and other enterprise tools on its own servers while cryptographically hashing records to the Bitcoin blockchain.
Long story short, it’s an elegant solution to technology’s key problems. And companies like Equator (a business unit of Altisource) are already on board with Factom’s Harmony Blockchain-as-a-Service (BaaS) platform.
This focus on enterprise helped FCT prices rise in late 2018 while most of the cryptocurrency industry plummeted. But will it be enough to sustain in a crowded and competitive crypto market?
Cofounder and CTO left Factom in July 2016 to found Wanglu Tech, which created Wanchain in 2017. While different projects focused on different markets, they’re effectively competing for enterprise and consumer buy-in. Both projects have different goals, however, so they’re not direct competitors.
We’ll start our exploration of the Factom project by analyzing the crypto market impact of Factoids (FCT), the proprietary cryptocurrency coins used by the network.
FCT Token Cryptocurrency Summary
FCT reached its peak trading price so far on January 8, 2018 at $75.64, and because it’s an OG crypto, we have several years to see how it compared pre- and post-crypto bubble. It started around $1 USD in 2015 and is currently reaching toward a steady $10 range in 2019. This increase is a sign that network adoption is steadily (albeit slowly) increasing over in the project’s first decade.
The Factoid supply is unlimited, and it’s not mineable. A fixed rate of approximately 73,000 FCT is released every month. FCT is earned by Federated Servers, which act as the communication channel between other nodes (called Audit Servers and Follower Servers) and the blockchain.
Factom’s ICO token presale was held March 31, 2015, pre-dating most ICO tracking databases. Over one million tokens were sold in exchange for 2,278 BTC (worth approximately $1.1 million at the time) within 24 hours.
FCT is used to buy Entry Credits (EC) on the Factoid platform. ECs can’t leave the system and are used to pay for Entries and vote for Authority nodes (more below). FCT is burned whenever EC is purchased, even if its purchased with another cryptocurrency. In that case the crypto is used to buy EC on the open market so it can be burned.
Factoids are traded on several cryptocurrency exchanges so far, including Poloniex, Bittrex, Upbit, Livecoin, and Bit-Z. Approximately $200,000 worth of FCT is traded on a daily basis, and BTC is its only trading pair to date.
Factom has its own Enterprise Wallet available for desktop platforms. It’s also supported by the Ledger Nano S and Eden.
Facts on Factom
Factom works a lot like existing BitTorrent technology, in which an Entry Block is created by hashing together a variety of smaller, 10KB files. These Entry Blocks, which contain summaries of each Entry file, are then themselves hashed and indexed into Directory Blocks.
Directory Blocks are anchored to Bitcoin’s blockchain, so 10 blocks are created every 10 minutes as Bitcoin is mined. This creates an effective sidechain solution that minimizes the amount of data needed for each block. In a way, this is how your computer or smartphone works. The icon you select on the graphical UI is just a link back to the original, much larger file.
Verification and other network processing is done by a series of nodes. There are three types of nodes:
- Federated Servers – Federated Servers run the Factom blockchain and receive FCT in exchange for writing data, processing, and verification. These servers gather data from Audit and Follower Servers to verify and write to the blockchain. Attendance is regularly taken through scheduled pings, and nonresponsive servers are removed. A vote then takes place to elect a new Federated Server among available Audit Servers
- Audit Servers – When a Federated Server is demoted, it becomes an Audit Servers. These nodes perform the same work as Federated Servers, but they do not receive block processing rewards. Think of them as the understudy in a stage play or a bench player in basketball. You’ll need to pay your dues and prove your worth to play in the actual game.
- Follower Servers – Follower servers forward transaction requests to the Federated Server. They act as the engagement entry point for external nodes to feed data into the blockchain.
These three pieces form the Factom blockchain and enable its crosschain interoperability. It’s a sleeker, faster solution than Bitcoin. The team is focused on leveraging this tech to become the leading decentralized, open-source data integrity protocol.
Factom has a lot of buzz for its partnerships, which include the U.S. government and the Bill and Melinda Gates Foundation. The team has effectively verified its data integrity technology in use cases related to law, government, real estate, finance, and more.
- Factom provides a secure and reliable smart contract network that indexes hashes to enable interoperability with both legacy and blockchain-based platforms.
- Factoids (FCT) and Entry Credits (EC) are the proprietary cryptocurrency coins used to tokenize transactions on the Factoid platform.
- Factom is continuing to upgrade its protocol in response to real-world uses and has high-profile investments that should keep it running for years.
With these pieces in place, Factom is a venerable, but powerful force in the blockchain industry. Its B2B focus and successful implementation with influential partnerships will likely work in its favor moving forward.