Factom: Bringing Bitcoin Authentication

If the world were a completely transparent, open and scrupulously honest place in which everyone considered the needs of others, never misinterpreted anyone elses words and would never dream of taking untoward advantage of anyone else, there wouldnt be much need for police officers, attorneys or investigators. Or for the services of Paul Snow and his cohorts at the open source project known as Factom (from the Latin “factum,” meaning “anything stated and made certain”).

But that dreamworld isnt here yet. So while were waiting for it, Factom provides an elegant and manageable tool to create airtight authentication for a wide range of legal and financial processes. Short of this authentication, interested parties have to rely on vague and ambiguous documentation of the kind that often descends into mostly fruitless “he saidshe said” scenarios in lawyers offices and courtrooms around the world.

“Essentially, we provide a clear proof of process to validate each transaction through the entire history of a process.”

Longtime Bitcoin entrepreneur Snow founded Factom in May of this year after seeing clearly that the ingenuity of Bitcoin blockchain technology had forever solved the problem of how to provide decentralized, secure and verifiable data for all the parties in a transaction. The fact that no details could be counterfeited or reversed had implications for many other types of transactions in the world, he realized.

One example: By now, most everyone has heard of Bank of America, Wells Fargo and other banks in the pantheon of global finance who have recently been paying billions of dollars in fines for certain “irregularities” in the way they managed mortgages and foreclosures in the wake of the 2008 banking crisis. Those mortgages were snipped up and passed around so many times and the follow-up on them became so fragmented that in many cases, no reliable record-keeping existed that could document what did and didnt occur as the banks tussled with homeowners over the details of their mortgage terms and payment history.

The result was that even if the banks activities had been beyond reproach, the lack of verifiable data doomed them to be on the losing end of multiple judgments.

The lesson being, says Snow, that there is no substitute for solid, unalterable data to trace the history of countless transactions that take place every day, and there is no better tool to fully authenticate it than the blockchain technology utilized Factom.

“We can record the hash (which is like a small digital fingerprint) of every single document in a transaction into a Factom chain so that it cant be replicated or altered in any way,” Snow says. “Now any party can go through an entire history of a mortgage and know that they have all the documents they need—even if those documents come from a range of sources.”

“Essentially, we provide a dear proof of process to validate each transaction through the entire history of a process. Using the mortgage example, we create a system of record despite the many systems involved in managing a mortgage over its history. That level of certainty in record-keeping didnt exist before blockchain technology made it possible.”

The security factor looms large for multiple reasons, Snow says. “You can get everything you need to validate a history of transactions with just the Factom Chain. That means you dont have to engage a trusted central party, or to download tons of data. And while the Factom Chain can validate a process, it provides none of the actual data, so it poses no security risk.”

“Our norm and continual goal is complete transparency and complete security for all transactions”

Factom is funded by seed money from the DApps Fund for building decentralized applications, so true to form, it is a protocol like Bitcoin itself, completely open source and with no owners. Snow is the core developer leading a team of cryptocurrency veterans to establish the protocol and participate with others in harvesting the tokens that will come of their efforts. Combine that with Snows status as founder and president of the Texas Bitcoin Association, and the groups pedigree in the cryptocurrency world is as solid as can be.

“Our norm and continual goal is complete transparency and complete security for all transactions,” Snow says. “And we now have the means to achieve it, so it is no longer pie in the sky. Open source and cryptocurrencies are changing the world, but were just at the beginning of their ultimate applications, which can extend into virtually every business process one can think of—and many we havent even thought of yet. The most exciting days are still ahead of us.”