FACTOM - What Is Factom - How It Works - Factom Review
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What is Factom?
Factom uses blockchain technology from currency to allow businesses the opportunity to store data on the blockchain. In order to understand the ingenuity of this process, it’s important to understand blockchain technology.
Though it’s been around for a while, it still seems complex and confusing for many individuals. In essence, this technological marvel allows two databases to access the same bit of information at the same time. With regard to currency, this system is the way in which banks are able to maintain balances and transfers. On one side of the database, the funds are temporarily locked while a transfer or deposit is made, then the other side of the database is opened and the funds can move through.
Because blockchain technology ensures that identical bits of information are stored across a large network, it cannot be maintained or controlled by a single entity, and there is no one single point of weakness.
Factom is attempting to divide the inability of this technology to be changed by making it less expensive and user-friendly for businesses to store data on the blockchain by examining the three main issues surrounding the Bitcoin currency network – speed, cost, and bloat. It takes at least ten minutes for single confirmations of transactions to be issued with Bitcoin, and the cost of using the currency has increasingly rises since its inception. Perhaps most notably, the number of transactions Bitcoin is able to process has a finite number.
Factom can be easily audited because of the type of documentation and date it stores, which means that it costs less to use the currency.
Factom provides its users with two types of tokens – Factoids and Entry Credits.
Like most other digital currencies, Factoids can be traded freely among Factom users. The coins are designed to decentralize the Factom system, which means that it prevents users from spamming the network. The network only releases a specific number of tokens each month, which means they are all the more valuable.
Entry Credits can be purchased and are non-transferrable. They can only be used to pay for entries or to vote for Federated servers. However, they have very little intrinsic value. Once a user has stored enough Entry Credits, they can be used to add data to the Factom blockchain. Following use, they are removed from the system.
Because of its validation system, Factom is able to authenticate transactions far more quickly than Bitcoin.
The company has been working in conjunction with the Gates Foundation to help store digital medical records for countires where those services do not exist. It also works closely with the Department of Homeland Security. It currently has over 11 million users.
Why would they want to do that?
Some businesses still use paper records to store all their documents, these are difficult and expensive to store, maintain and audit.
Many have moved on to storing their files and data digitally, but this still has issues. Computers are vulnerable to hacking and digital tampering, ruining the trustworthiness of these documents.
Factom would allow anyone to store their files and data easy and securely. Once the documents have been entered into the blockchain, it becomes immutable and virtually unhackable.
So, Factom is far more practical, safer and cheaper than alternative storage mechanisms.
It’s also far, far easier for audits to be performed. In fact, the only time anyone need audit their data is when they enter it into the system. As long as the data is known to be correct at the time of entry, because of the immutability of the blockchain, anyone looking at the documents at a later date can rest assured the data is correct and unaltered.
When data is entered into Factom’s blockchain, it gets timestamped, so Factom can be used as a basic proof of publication.
It appears that the creators of Factom have done their research. This type of digital currencies seems best suited for businesses were lots of high value data changes hands often – doctors, attorneys, and accountants would likely benefit from using this type of currency because it’s so secure.
Even more importantly, when businesses such as these begin to rely on blockchain technology, it means that their information is that much more secure. Its blockchain approach to solving the issues with Bitcoin seem progressive and worth paying attention to, particularly as it continues to improve.