Beyond Bitcoin: Tokenized Integrity
It was largely the mistrust of the financial system following the global financial crisis that gave birth to Bitcoin (BTC). BTC served as the first model of what distributed ledger technology could offer: highly durable, Byzantine fault-tolerant systems that propose to change fundamentally how we do business with one another. Wherever trust is scrutinized and proper process is mandated, we find another application for blockchain. There is perhaps only one thing more crucial to secure than money: information. The heavy burdens associated with securing the authenticity and history of data are well-known to several sectors.
Audits of many types are common to government, healthcare, transportation, financial, and other institutions. Information must not only be verifiable, but so must the history of that information. Entire departments are dedicated to compliance, risk, and business process management. The associated costs are massive, and the stakes even greater: a single error at any junction may result in fines in the range of millions, criminal penalties, or new regulations. Databases for these entities remain vulnerable to malicious attacks. Even in the absence of such an event, the burden remains with these entities to prove they have remained intact since their last audit. However, compliance may not come with such a high cost anymore.
An Immutable Solution
We realized that the essence of blockchain technology is a way to get a group of different parties to agree to what the truth is.... Gaining this agreement about money may be interesting, but it is only a tiny subset of the areas where we need to be sure data is correct and unchanged.
— Peter Kirby, Cofounder at Factom
Since 2014, the blockchain-as-a-service company Factom has been working on its eponymous open source platform out of Austin, Texas, USA. The company provides custom-built solutions that leverage the power of blockchain to provide three things: indisputable proof of existence, audit, and process. Distributed ledgers serve as a perfect historical record, as they can always be traced back to their first block: the genesis block. No entity can change history on a ledger, as there is no central authority that may become compromised. Even the most sensitive of data may be written to public ledgers by running it through cryptographic functions, a process called "hashing." Hashes can then be run through those functions in much the same way, creating a Merkle tree.
Factom has been described by Chief Scientist Brian Deery as a “mangrove of Merkle trees ... a tangled hierarchy of different subblockchains that have multiple cross references.” These trees act as incredibly lightweight, discreet fingerprints for data. These hash trees are then “anchored” to the BTC blockchain in 10-minute intervals. Factom selected this chain because it is secured by an insurmountable level of proof-of-work. (Note that Factom is truly blockchain agnostic — the project could migrate to another blockchain or run independently if need be.) These hashes serve as a validation of data integrity, as the hashes of information may be checked against those of the historical record. This helps solve one of the major pieces of the audit process, which would otherwise require a monolith of paperwork and labor.
Lightweight, Affordable, Compliant
Unlike with BTC, one does not need to work with the entirety of the blockchain to use it. Instead, Factom is designed to work with data that is only important to the end user. The data is written to the chain by distributed and unaffiliated nodes called "federated servers," which are checked and balanced by audit servers, each with strong economic incentives to operate appropriately. This shifts the need for most computational resources and the burdens of maintenance elsewhere.
Factom utilizes a novel two-token system. To use the chain, one must expend the native cryptocurrency — Factoids (FCT) — to generate Entry Credits (EC). EC are not transferable and have no value outside of allowing one to write to the chain. This is at once a measure to provide security for the user and to ease compliance woes. Cryptocurrency is recognized as valuable and is presently considered a capital asset. While FCT must be expended for EC, Factom can handle FCT behind the scenes and directly grant the user EC to use the platform. (At the time of this writing, US $200 purchases 40,000 EC.) Thus, there is no valuable currency to make the client a target. Furthermore, they will not be handling capital assets, which can bring on a host of complex tax issues.
Just as BTC became irrevocably synonymous with money, soon Factom will become inseparable from data. Easing the audit process is only a fraction of what the technology can achieve. The US Department of Homeland Security has awarded funding to the project. It is being investigated for its ability to verify data from Internet of Things devices, such as video surveillance cameras. Spoofing is a recognized vulnerability, and this may pose a threat to critical infrastructure. The advent of artificial intelligence's ability to convincingly modify video and audio, as evidenced by Deepfake, adds a chilling dimension to this issue. Factom provides a bulletproof solution to these threats.
Meanwhile, the Bill and Melinda Gates Foundation has funded a project to secure medical records using Factom’s technology. Healthcare is an excellent field for blockchain, due to the sensitive nature of patient information. As this information becomes increasingly accessible by health professionals on mobile devices — and to patients via client portals — there becomes a heightened need for security. In the future, we may come to wonder how we managed without distributed ledgers underpinning our most precious systems.
Perhaps the most compelling prospect about adoption of blockchain technology is the profound impact it could have on our society. The Russian proverb “trust, but verify” may become deprecated, where verification becomes the norm for everything from the food we consume to the baby monitors and other connected devices in our homes. “Backed by blockchain” could become as ubiquitous as secure checkout emblems when shopping online. People would no longer have to merely trust that businesses and legislators are acting in their best interests.