Factom Outlines Record-Keeping Network That Utilises Bitcoin's Blockchain

A Factom white paper outlines a way to prove the authenticity of records or other data on the blockchain.

AccessTimeIconNov 19, 2014 at 11:28 a.m. UTC
Updated Mar 6, 2023 at 3:26 p.m. UTC

A new white paper from the Factom team outlines a conceptual framework for a system that secures and proves the authenticity of records, documents or other important types of data that are later enshrined on the bitcoin blockchain.

The concept of using the blockchain to cryptographically prove the 'truth' of a piece of information is one of the cornerstones of the crypto 2.0 movement, and the concept itself has been implemented in the past.

Factom, however, proposes a new architecture that exists outside of the bitcoin network, but relies on the digital currency’s globally distributed computing power to keep cryptographically secured information both transparent and globally accessible.

The white paper, written by Paul Snow, Brian Beery, Jack Lu, David Johnston and Peter Kirby, explores an infrastructure in which record keeping – particularly records of ownership – can be moved from a fragmented, primarily manual process to a more digital, automated framework.

A number of well-known reviewers, including Ethereum creator Vitalik Buterin and bitcoin mining expert and developer Luke Dashjr, were cited in the paper.

Avoiding blockchain bloat

Factom envisions a peer-to-peer network in which top-level servers build data chains and, after cryptographically processing the information, enshrines them on the bitcoin blockchain using a Merkle root.

The benefit of this approach, the authors say, is that it takes advantage of bitcoin’s cumulative processing power while avoiding the overaccumulation of data – known more commonly as 'blockchain bloat'.

Factom argues that its concept is a solution to situations such as the mortgage claim crisis that took place in the aftermath of the Great Recession in the US.

At the time, originally paper-based titles were mishandled or lost during digital transitions and, as a result, homeowners from a number of states were incorrectly foreclosed and, to this day, thousands of those affected continue to face legal challenges because the chain of title was effectively broken.

Near-term applications, according to the Factom team, include providing a mechanism for improving transparency among existing players in the bitcoin space. Peter Kirby, who serves as Factom’s president, noted during a Reddit Ask Me Anything (AMA) session that his team is already undertaking discussions with interested parties who are looking at his firm’s infrastructure as a potential solution to their problems.

He explained:

“Making exchanges honest is one of the first projects that's being done on Factom. You can run a proof-of-audit on steroids – letting you produce a true audit trail of every transaction at every moment. That'll really get businesses to sit up and notice. The other application that will pop up right away is title records – because they secure such a large portion of a country's wealth.”

While the paper acknowledges that some elements are still under development, including the protocol by which the architecture achieves consensus, the Factom concept constitutes another approach to expanding the capabilities of the bitcoin network.

Multi-layer infrastructure

According to the proposal, the Factom system will ultimately consist of a four-tier architecture designed to both produce verified chains of information and secure that data within the bitcoin blockchain.

This infrastructure is responsible for verifying ownership of 'entry chains', updating the data when changes to chains are made and, at the end of the process, embedding information onto the bitcoin blockchain.

As shown in the diagram below, the proposal calls for the scaled creation of hashed data strings called 'entry blocks', which are managed by the Factom infrastructure and constructed into chains.


The paper explains:

“Chains in Factom are sequences of Entries that reflect the events relevant to an Application. These sequences are at the heart of Bitcoin 2.0. Chains document these event sequences and provide an audit trail recording that an event sequence occurred. With the addition of cryptographic signatures, those events would be proof they originated from a known source.”

In order to power this network, Factom plans to deploy a P2P network of nodes that act as global mechanisms for keeping the system running and efficiently processing Chain updates. Fueling the top-level system will be in-house tokens known as factoids that will be exchanged for Entry Credits that are then used to input data into the system.

Co-author Paul Snow told CoinDesk that the Factom team is designing its infrastructure to handle high transaction volume and that the architecture itself will be comprised of both full nodes containing systemic data and partial nodes that only carry information for certain chains.

Snow continued:

“The Factom node network will be completely distributed, just like bitcoin. Users will be able to run either a full node replicating all the data ... or a partial node replicating only the data needed in specified chains. We are looking at incentives to ensure that data is replicated across the nodes, but all the data does not need to be in every single node.”

Potential applications

The Factom team suggested that its proposal could be leveraged to execute some of the crypto 2.0 functionalities that are beginning to take shape on the market today. These include creating trustless audit chains, property title chains, record keeping for sensitive personal, medical and corporate materials, and public accountability mechanisms.

During the AMA, the Factom president was asked how the technology could be leveraged to shape the average person’s daily life.

Kirby responded:

“Factom creates permanent records that can't be changed later. In a Factom world, there's no more robo-signing scandals. In a Factom world, there are no more missing voting records. In a Factom world, you know where every dollar of government money was spent. Basically, the whole world is made up of record keeping and, as a consumer, you're at the mercy of the fragmented systems that run these records.”

Follow-up comments focused on the legal implications of creating a system by which titles can be cryptographically proven to both exist and be tied to a certain date and time. The team repeatedly invoked the robo-signing scandals, pointing to that crisis as the catalyst for the creation of trustless title chain networks.

Kirby suggested at one point that at least one governmental body, as well as private interests, has established contact and is interested in what the proposal has to offer in terms of potential solutions to problems with legacy title management schemes.

“We've already had a country reach out to us about building a title application using Factom and the bitcoin blockchain,” he said.

Development continues

Several elements of the Factom protocol, as well as mechanisms for incentivizing the node structure, remain in development. Yet, according to the team, the release of the white paper – along with the latest version of the API and a frequently-asked-questions sheet – are intended to spark a conversation that could produce additional insights into how Factom might develop moving forward.

During the AMA, Kirby revealed that the decentralized cloud storage platform Storj, which raised 910 BTC during a crowdsale in August, is weighing whether or not to utilize Factom as a record-keeping mechanism.

Kirby called Storj founder Shawn Wilkinson, who serves as an advisor to the Factom project, an early supporter who “knew about Factom before it was cool”.

The scale of Factom, according to Snow, is also expected to grow, both as the project initially takes shape and in the future. These changes, he told CoinDesk, are incumbent on transaction volume and could require larger servers and a broader node network to handle the data flow.

The Factom team, in both its white paper and during the AMA, suggested that the project could evolve as more developers bring ideas to the table for utilizing the system.

Ultimately, the team writes, the goal is to try to develop a vehicle for the solutions offered by the bitcoin protocol to be brought to market without creating impediments to the healthy growth of the network itself.

As the paper states:

“The dream of many is to extend the honesty inherent to an immutable ledger validated by math to chaotic, real-­world interactions. By allowing the construction of unbounded ledgers backed by the blockchain, Factom extends the benefits of the blockchain to the real world.”


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