Published on Feb 21, 2020
Blockchains are great at cutting through the Gordian Knot of paper-based verifications and intermediaries. This use case is addressed by Harmony, the latest application to come of out Factom, which specialises in providing a data layer for the blockchain by which users can manage data.
Factom Harmony provides a single permanent document catalogue that eases the pain and cost of audits, file reviews, lost documents, post-closing and litigation.
Blockchains are clunky databases, so why would you want to use one? Traditional systems have inherent flaws that make them easy targets for corruption of data. A Factom® system gives a single version of the truth through a Decentralized Network of Authority. Once everyone can agree on a single version of the truth, then the truly game-changing applications can be built.
Bitcoin limits transactions to those moving value from a set of inputs to a set of outputs. Satisfying the script required of the inputs (generally requiring certain signatures) is enough for the system to ensure validity. This is a validation process that can be automated, so the auditing process is easy. If Factom were used, for instance, to record a deed transfer of real estate, Factom would be used to simply record the process occurred. The rules for real estate transfers are very complex.
For example, a local jurisdiction may have special requirements for property if the buyer is a foreigner, farmer, or part time resident. A property might also fall into a number of categories based on location, price, or architecture. Each category could have its own rules reflecting the validation process for smart contracts. In this example, a cryptographic signature alone is insufficient to fully verify the validity of a transfer of ownership. Factom then is used to record the process occurred rather than validate transfers.
How Factom Servers and Auditing Servers Validate Entries
Factom splits the two roles that Bitcoin miners do into two tasks:
1 recording Entries in a final order and
2 auditing Entries for validity.
1 The Factom servers accept Entries, assemble them into blocks, and fix their order. After 10 minutes, the Entry ordering is made irreversible by inserting an anchor into the Bitcoin blockchain. Factom does this by creating a hash of the data collected over the 10 minutes, then recording the hash into the blockchain.
2 The auditing of Entries is a separate process which can be done either with or without trust. Auditing is critical, since Factom is not able to validate Entries before they are included in the Factom dataset.
Factoids are the main internal scarcity token used to moderate and reward the system actors. The right to put Entries into Factom is represented by Entry Credits. Factom separates the two valueholding mechanisms, as they serve different purposes. Factoids can be converted into Entry Credits, but not vice versa. Factoids are implemented in much the same way Bitcoin is implemented, allowing for multisignature security, multiple inputs, multiple outputs, etc. Factoid transactions are managed on a special Factoid Chain.
This Factoid Chain is handled more restrictively than other Chains. Entries in the Factoid Chain must be valid Factoid transactions, or the Factom Servers will reject the Entries. Factoids are included into the protocol to completely decentralize Factom, and to reduce bloat and spam in both Factom and Bitcoin. Factoids can be converted to Entry Credits in the protocol, and payed out to Factom servers from the protocol. They also help to bind consensus. If consensus is lost, then the Factoids will fall in value.
