Factom is, in my opinion, one of the best crytpocurrencies currently available. And yet, it’s constantly overlooked and ignored by the masses. In this video, I look at what Factom is and explain why I think it’s such a brilliant token.
Don’t have time to watch?
Here’s a quick summary:
What is Factom?
Factom makes it easy for businesses to store their documents and data on the blockchain.
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.
How does Factom work?
The workings of Factom get fairly complicated, so I’m not going to write it all here.
If you want to understand how Factom works, either check out my video above (I feel like I did a reasonable job of explaining it), or read Factom’s white paper where they go into a lot of detail.
Basiclly, when users submit their data to Factom, they must also submit a ChainID which tells Factom what subgroup of documents to group that Entry with.
They then take the hash of that data, and all the other data in the Chain, to form an Entry Block.
Then, once a minute, the hashes of all Entry Blocks are taken to form a Directory Block.
Finally, once ten Directory Blocks have been created, a hash of all Directory Blocks is taken and anchored into the bitcoin blockchain.
Why all this complexity?
This complexity actually serves a useful purpose, it makes it far easier for anyone to audit documents in Factom.
Most users will only ever be interest in a small subset of Entries, so it would be incredibly impractical for them to have to download the entire blockchain to validate any Entries in just a small section of it.
Instead, users just need the Directory Block, and in this they just look up the Entry Block that is of interest to them.
Compare this to the bitcoin blockchain, where the entire blockchain history is required to validate a transaction.
Data is hashed at each stage to reduce the size of the data.
Hashes are one way encryption of data, where the same data will always produce the same hash but, without a private key, the data cannot be derived from the hash. Hashes always have the same size, no matter how large the data is that created it, so incredibly large documents can be stored in a relatively small space in this way.
By using hashes, Factom is making a far more efficient system than if they just stored the original data.
Factom has a very large team.
I counted 35 members, plus 4 advisors. They’re also distributed in offices all around the world, working in China, America and the UK.
Looking at the Linkdin pages of the main team members, there’s a lot of experience and good qualifications, and I certainly feel like they’re a very capable group that will make all of their ambitions become reality over the next few years.
Social Media Presence
This is undoubtedly Factom’s biggest weakness right now.
They have a Twitter page that the post to fairly regularly, but their Facebook get less attention, and their Youtube hasn’t seen a new video for over a year.
Their blog page is nice, but is only updated every 3 months or so.
On Reddit they have a reasonably large community, and it’s nice to see that some of Factom’s team members get involved in discussions and answer questions.
There was also one Reddit post where one of Factom’s leading team members admitted they had a shortcoming in the social media department and were intending to fix it, which is great to see.
Having said all this, I don’t think their lack of social media presence to cryptocurrency investors and speculators is all that important, as they are much more focused on advertising to and attracting big businesses to use their services. And so far they’re doing a pretty good job of that.
Factom already has some impressive clients.
They are working with the Department of Homeland Security to provide audit trails for data collected at US borders.
They are working with the Gates Foundation to store medical records of individuals in developing countries who are treated by numerous aid agencies. Now, these agencies can look up the individuals history on Factom’s blockchain and know everything they need to know about them, and they can be certain the data is correct and secure.
They are also working in China to provide storage for data generated by smart cities.
So, clearly they’re already doing a pretty good job of attracting big business and important clients to use their services.
Is is a good investment?
I certainly think so (though this isn’t investment advice, it’s just my opinion, and you should make sure you do your own research on Factom and come to your own conclusion here).
The thing to think about with Factom is how their currency can appreciate in value as Factom gets more users.
Whilst 73,000 Factom tokens (called Factoids) will be minted each month, starting sometime next year, to pay the servers running Factom’s network, Factoids get burnt (destroyed) to let users make Entries.
Note, the process isn’t quite as simple as burn the Factoid, make an Entry, and I explain all this in the video, I just didn’t want to go into all the specifics here.
As long as there are enough users of Factom’s network to burn more than the 73,000 tokens minted each month, then the supply of Factoids will decrease, causing the price to increase.
So far, it seems like Factom should see good use, based on the partners and customers it already has and how attractive a solution it is for other not yet using its services.
If they continue to see this kind of adoption, the price of Factoids could skyrocket as more and more businesses use Factom.
Clearly I’m very positive on Factom. I think it’s a fantastic crypto: It’s solving a very real problem faced by millions of businesses around the world, they already have a working product, and I trust in the team behind it to continue their great work into the future.
I also believe, at the time of writing, Factom is incredibly undervalued.
Of course, this is just my opinion - do your research and make up your own mind on this one.
But, in my mind, Factom is easily one of the best cryptocurrencies out there, and I’m certainly going to be increasing my investment in it in the future.
Thank you so much for reading or watching, and I hope you found this useful.