This is a transcript of Factom’s introductory video. Speaking is President of Factom, Peter Kirby.
The Bitcoin blockchain is one of the most amazing technologies we’ve ever come up with. It allows us to write a permanent system of record of basically anything, and it’s stored in a distributed way, with ten thousand different nodes protecting it. So, of course, everyone is really excited about all the opportunities to develop on top of it. Unfortunately, the blockchain has a couple of core puzzles that developers are still trying to figure out.
The first one is speed. Every block is recorded every roughly ten minutes, which means if you want a confirmation of three to six times, sometimes it can take up to an hour. Now obviously 21st century technology can’t function on an hour per transaction time.
Second is cost. At five bits or roughly half a penny per transaction, it becomes astronomically expensive to write thousands of transactions at a time.
And finally is the bloat problem. Because we have a one-megabyte block limit, it works out to be about seven transactions per second. We can’t write thousands and thousands of different transactions with this seven-per-second limit.
So these are the problems that Factom’s trying to solve by trying to build a protocol on top of the blockchain, which gives [users] the ability to do faster, more cost-effective, bloat-free transactions.
Let’s talk about the actual speed problem of Bitcoin 2.0 applications: an hour is just too long for an application like a wallet. The way Factom solves this is we can take transactions in much smaller increments of time, we can record them basically at whatever time the application feels confident with it.
The longer the time, obviously, the more degrees of confidence you have, but you know—a few seconds, a few minutes—whatever’s appropriate, we can speed it up. And then every ten minutes we can just finalize that recording in the blockchain. So what that gives you is the ability to run transactions as fast as your application feels comfortable.
So there’s a really significant cost problem when you start talking about Bitcoin 2.0 applications. Half a penny per transaction doesn’t sound like a lot, but when you start doing thousands and thousands and thousands of transactions, suddenly it adds up to real money.
What Factom allows you to do is take maybe 100 transactions, apply them to the blockchain, where you basically secure them for a single half cent. So a hundred times less costly basically translates to real effective cost savings.
So one of the other big puzzles of Bitcoin 2.0 is the problem of bloat, because we cap the Bitcoin blocks at one megabyte. There’s not enough space for all the transactions that we want to put in there, but working with the Omniwallet, for example, Factom can take a hundred transactions every few minutes, and secure that with a single hash. That gives them the ability to store vast amounts of data with a very small footprint.
The other puzzle in the bloat space is that Bitcoin transactions are very, very stratified as to what they allow you to put into the blockchain. With Factom you have a tremendous amount of flexibility. You can add much more metadata. You can add additional information to the Factom block, which allows you then translate that to a single hash. With Factom, you can custom-design your transactions for maximum flexibility and still store it in the blockchain.
What are some of the cool things we can do with Factom? One of the projects that we recently did is we partnered with Omni Wallet and secured, literally, every transaction they’ve ever done with a single hash and we put that hash in the blockchain. That’s proof-of-existence.
Bank of America
One of the magic things about Bitcoin is that it makes financial transactions honest. Let’s talk about an industry that really has struggled with this particular problem—the banking industry. Bank of America recently paid US$17 billion in fines because basically, they lost track of the chain of records of mortgages. What that led to was them taking peoples’ houses that they probably shouldn’t have and caused quite a bit of chaos.
How would that look different if you ran it through Factom? Well, every single mortgage contains a whole slew of documents—hundreds of pages—all secured in Factom, and then stamped with time and proof-of-existence, so you could see the chain of them.
So you could see this is what the records looked like on day one of your mortgage, this is what the records looked like on day sixty of your mortgage, this is what the records looked like ten years later.
So what that does is that proves with a third-party system that’s trustless—you don’t have to rely on Bank of America’s word—exactly where your mortgage is at every stage. This could have saved Bank of American that US$17 billion fine, and probably saved a lot of people their homes.
Other Use Cases
Many organizations have approached Factom with some interesting applications—things that they’re really struggling with. Thoroughbred horses have a system of records problem. There are many different governing bodies that are all trying to provide records, and it’s hard to tell the sequence of them. Art has a similar problem. You need certificates of authenticity, and what you really need to do is prove them at moments in time and tie that directly to a piece of art.
One of the really interesting puzzles that is really mission-critical is the deep-horizon gulf issue, where basically they dumped billions of gallons into Gulf of Mexico, causing a huge amount of environmental degradation. Turns out what happened was, several contractors basically weren’t doing what they needed to and not meeting the requirements that they said they were.
So with Factom you can provide a system of records that would prove at every stage who did what, and in a situation where they didn’t do it, you would have proof, because you wouldn’t have that document recorded in Factom.
Right now what happens is it all devolves into trailers full of paper dumped on top of you, and finger-pointing and lawsuits, and in that situation you would literally have a record of everything that happened, solving a huge problem.
One of the most valuable things you can do to be involved is be a community leader. We’re looking for physical geographies of developers who talk about Factom, play with the technology, learn the APIs, and learn from each other how to work within the system. It’s really useful and it helps build a true community of people, and not just about Factom.
Another great way to get involved with Factom is to read the whitepaper. Challenge us, push us. We’re looking for security holes and ways to make the technology better. You can find our whitepaper at Factom.org.
Another way you can reach out to us is through our Skype groups. We have a community of thought leaders who are talking about Factom, answering questions about Factom, thinking through the ramifications of the technology. You can be a part of that Skype group. Just reach out to us and ask for an application
And the final way to get involved with Factom is find us at the conferences, talk to us about what we’re doing and how you think it can help your project. Thanks.
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The Bitcoin blockchain is one of the most amazing technologies we’ve ever come up with. It allows us to write a permanent system of record of basically anything, and it’s stored in a distributed way, with ten thousand different nodes protecting it. So, of course, everyone is really excited about all the opportunities to develop on top of […]