In a Nutshell: Blockchain is increasingly part of the enterprise conversation, both as a platform for cryptocurrency and as a method for recordkeeping. And the Factom Protocol is an open-source tool that partners with a solutions provider to help drive that technology toward the mainstream. The protocol’s dual-token, fixed-cost model meshes well with established business methods, while its services integrate easily with legacy infrastructure. Enterprises and large organizations interested in leveraging blockchain efficiencies can rely on the Factom Protocol to deliver results without complicating the process.
The advantages of blockchain technology — including decentralization, immutability, security, and transparency — are apparent in theory. But when many large organizations look out at the blockchain and cryptocurrency ecosystem, they see a labyrinth of competing protocols and tokens. That can make them more wary of blockchain, and less likely to use it for their mission-critical data.
The Factom Protocol and Factom data integrity solutions solve many of those problems. The secure, high-throughput protocol has a fixed cost for entry and optimizes blockchain data storage. And the Factom commercial blockchain-as-a-service (BaaS) product suite enables organizations to benefit from its efficiencies without infrastructure or compliance obstacles.
The U.S. Department of Homeland Security, for example, leveraged the Factom platform to store data gathered from IoT ground sensors and cameras. And the Bill & Melinda Gates Foundation has funded a Factom project to provide access to healthcare records on mobile devices.
On the enterprise side, real estate software provider Equator deployed the Factom Harmony BaaS solution to underpin its mortgage servicing platform. From healthcare to mortgage data and beyond, Factom BaaS solutions integrate easily with existing technology to help organizations manage data and transactions while preserving workflows and compliance.
David Johnston, who first coined the popular term dApp (decentralized app), has been instrumental in the development of the Factom Protocol and currently serves as Chairman of the Board at Factom. He co-founded BitAngels, the first and largest angel group in the blockchain space, and has been the Managing Director at Yeoman’s Capital since 2016.
“We’ve come a long way, and now there are billions of records on the network,” Johnston said. “It’s used by large companies and governments all over the world, and it secures everything from trust and copyright records to IoT devices and supply chain records — you name it.”
The Factom Protocol’s primary differentiator is that it is built to house data, existing as a layer above the well-established Bitcoin and Ethereum blockchains, and anchoring into both every 10 minutes. That anchoring mechanism drives security on the platform.
“Theoretically, someone would have to compromise Factom, Bitcoin, and Ethereum all at the same time to alter the records, which I think we can all agree is nearly impossible,” Johnston said.
A dual-token mechanism further protects data integrity while also allowing cost predictability.
Factoid tokens carry a variable value in relation to the U.S. dollar. They are rewarded to the platform’s Authority Node Operators (ANOs) in return for running the protocol’s servers and validating new data blocks.
Entry Credits carry a fixed price of one-tenth of a U.S. penny and can be purchased by organizations, essentially, in return for storage space on the system. Each Entry Credit allows an entity to write 1KB of data to the blockchain.
Another key feature is that Entry Credits are non-transferable, and they’re assigned to one public key on the chain and can’t move from there. From a security standpoint, that means there’s no incentive to steal them.
“There’s no monetary value — they can’t be sent to another address, and they’re actually not cryptocurrency, so they can’t be sold on an exchange,” Johnston said. “Effectively, there’s no monetary risk associated with a business storing Entry Credits on a device.”
And because Entry Credits are not crypto and can be purchased using any fiat currency, organizations can overcome any internal or external stipulations against holding or transacting in crypto.
“It is a very robust way of securing large amounts of data,” Johnston said. “Factom pioneered the idea of a stable cost for publishing to a blockchain, making it easy for corporations and others to plan their costs. And as far as fees go, a tenth of a penny’s not bad.”
The missing piece for many businesses is having a traditional business partner on the other side of a transaction with a discrete product and a sales contract.
Factom’s for-profit BaaS solutions provider performs that role, handling the complexities of software and tokens within a standard business relationship model.
“One of our advantages is that we started a for-profit arm that builds software on top of the open-source protocol, so businesses aren’t just presented with a foundation and an SDK — good luck,” Johnston said. “Instead, you get a group you can send an invoice to, or that can invoice you as a customer and that you can pay in traditional currency.”
David Johnston, Factom Chairman of the Board
What organizations are paying for is encompassed in Factom’s Harmony platform. Developers use Harmony Connect to build data integrity and trust capabilities into existing applications to support compliance, auditing, and collaboration initiatives. Businesses using Harmony Integrate obtain a blockchain-based data registry and verifiable credential model that makes data and processes independently verifiable.
“Factom’s founders really thought through how to build this in a way that served enterprises and governments,” Johnston said. “Even when organizations have a lot of interest, you’ve got to take those barriers out of the way.”
With Connect and Integrate, the names fit.
“They’re effectively APIs that make it easy to integrate into existing software,” Johnston said. “Instead of having to run a node and maintain a copy of the blockchain, you just call an API from your existing tech stack and say, ‘Publish this record,’ ‘Read that record,’ ‘Validate this document,’ or ‘Create that identity.’ By abstracting all the complexity away, Factom becomes just another tool developers can access.”
Johnston has long been a close observer of developments in the stablecoin space, as an original board member of the Mastercoin (now Omni) Foundation, which developed the technology underlying the Tether stablecoin. The Factom Protocol serves as the foundation for PegNet, a new kind of stablecoin and network that Johnston sees as a successor to the centralized coin architectures like Tether.
“It’s been interesting to watch the stablecoin trend take off,” Johnston said. “It’s clear that people want the currency they’re used to, but they want it with the blockchain’s speed and finality.”
While Tether once asserted that it held enough dollar reserves to back up its crypto on a one-to-one basis, in 2019, it had to adjust that commitment, causing much controversy and loss of faith among stablecoin proponents. PegNet addresses that with an architecture that dispenses with the need for a central reserve.
“PegNet pegs value without a shared pool of collateral,” Johnston said. “Users can effectively issue their own stablecoin in their own wallet without any other third party involved.”
Johnston sees a push for stablecoin regulation on the horizon, and PegNet is designed to withstand that.
“What made Bitcoin so successful was that there wasn’t a central reserve or collateral — it was built on an economic system of scarcity. The user was in charge, and there were no middlemen,” he said. “PegNet takes that same type of approach.”
As an additional use case for the Factom protocol, PegNet leverages all the efficiencies inherent in the network’s design. Meanwhile, Factom continues to serve public- and private-sector organizations looking for business predictability.
“A global community is building on top of the technology and using it for everything from supply chain to government contracts to enterprise and many other applications,” Johnston said.