Factom: Digital Fingerprints Tackling Banking Fraud

B Holmes , 19 Dec 2014 -

http://www.youtube.com/watch?v=DbRVPBFiy64

Peter Kirby, President at Factom took time out of his day to discuss aspects of Factom with BraveNewCoin. Kirby has been in the Bitcoin space for 2 years, initially attracted to the mining aspect of Bitcoin he helped run a mining hardware company in 2013. Later, Kirby discovered his fascination with decentralized applications, and the potential of extending the blockchain’s capabilities to all kinds of business applications.

- Kirby

Factom was inspired by a conversation between David Johnston, Chairman of the Board at Factom, and Paul Snow, CEO and Core Developer at Factom. Together they were trying to deduce what tools would be required for decentralized applications to function efficiently.

Kirby explains that, “Blockchain technology is really amazing, but it has some key limitations: a) 10 minute blocks are TOO slow for applications b) cost becomes a serious barrier when you’re looking at millions of transactions c) the blockchain can only handle 7 transactions per second and will seriously run out of space before it becomes useful.”

Kirby goes on to advise that through their discussions, Johnston and Snow realized, “The most important part of the puzzle that was missing was a data layer where applications could store immutable records of what they’d been up to. A layer would also allow for a true audit trail of all processes. That was the core idea that became Factom.”

Factom will be using three core ideas:

  • Proof of publications: A document existing in this form at a certain time
  • Proof of process: The document that exists is then linked to the updated document
  • Proof of Audit: An updated document can be verified to have changed according to a set of rules.

By incorporating this layer, Factom are able to use the blockchain to secure millions of real-time documents using just a single record, in the form of a hash. hash can be used to map documents, or data, of arbitrary size to digital data of fixed size, with slight differences in input data producing very big differences in output data.This allows Factom to overcome the current limitations of the blockchain, while still garnering the safe, secure and global benefits blockchain has to offer.

Using their recently released video, Factom outlines how their system may have been utilized to prevent the foreclosures of 2010. The mishandling of mortgage documents resulted in $17 billion fine for the Bank of America, the largest in history. Mortgages are a bureaucratic process that rely on floods of documents to keep everything in order.

– Factom

The entries, which can only be pulled if they are relevant to the creator, are then filed into the Factom directory blocks and secured every ten minutes on the bitcoin blockchain with a single hash. These can be audited in real time and instantly verified.

Bank of America could have run a full Factom audit when they acquired millions of documents from absorbing Countrywide Homeloans in 2008. This according to Factom, would have ensured all the records were clean and unchanged.

In a forum related to the video, Soveriegn_Curtis points out that it, “Doesn’t make Bank of America obsolete enough. Try harder.”

To which Factom responded, “Banks are going to be around for a while longer... But Factom could at least help prevent the next mortgage scandal.”

The team at Storj, the decentralized cloud storage network, are currently in discussions with Factom in order to utilize the platforms benefits. ““It's a great idea, even at Storj we are thinking of using Factom to store metadata for our network" StorjX explains, "it will allow us to scale our network up when needed while keeping data on the blockchain to a minimum.”

The applications for Factom reach far and wide, as Kirby explains:

Kirby describes a second project using Factom, focusing on electronic medical records secured using blockchain technology:

“This would allow for patients to manage their own records and supply access levels to only trusted physicians. It would also allow for systems of records around patient care, so as a doctor, you could prove that you followed all of the appropriate steps necessary before administering an expensive procedure. A functioning blockchain solution could increase the level of care and save the industry $billions. “

Factom states they will be able to remove the need for blind trust in corporations to do their jobs properly, with the first precise, verifiable and immutable audit trail, The Factom crowdsale will be taking place in early 2015. Factoids, the access token for the Factom project can be purchased. They will be automatically converted into Entry Credits that are non-transferable and can only be used to place entries into Factom. Kirby advises, “we’re looking at solutions to make it simple for people to purchase tokens using credit cards (through a service like Circle or CoinBase) and to send USD with tools like Tether. We’re also excited about Vennd payments in other types of tokens.”