Know The Coin: Factom Protocol’s Damien Nichols
Hello everyone, this is ChangeNOW and welcome to the Know The Coin series of interviews where we talk to various crypto representatives, devs and founders. They all have something to say and we are willing to listen. Today’s guest is Factom Protocol‘s Authority Node Operator and What The Fork?! podcast host Damien Nichols! In January this year, Damien sat with our Marketing Manager Pauline and talked about all thing Factom!
Thank you so much for tuning in and willing to talk to us and agreeing to talk to us, Damien!
Hi Pauline, and thanks!
Damien is also known as the host of ‘What The Fork’ podcast, so you may have already known about him. And he also is a moderator on the official Factom discord! So, shall we begin, Damien?
Yeah, sounds great, let’s do it!
The first question is our elevator pitch. Explain to us like we are five about Factom in just a couple of sentences – the most basic stuff.
Sure, happy to. So, the Factom protocol allows anyone to prove they have a specific piece of information at a certain time. And it does it by entering a fingerprint of the date into the blockchain. This fingerprint is called a hash and you can’t recreate the data itself from the hash, just like you can’t recreate a human being from their fingerprint. Anyone with a copy of the original data, though, can recreate the hash and check it against the blockchain to prove the data is the same as the original and when that data was entered into the blockchain.
Oh, yeah, that’s really cool. Actually, the reason why we picked Factom as our first interview subject* is because we have a lot of faith in the platform itself. And we believe that Factom protocol can actually change things in the way that we store data on the blockchain per say and we think that the protocol has a lot to offer, so…
Yeah, it’s fascinating.
Would you mind telling the readers a couple words about yourself and your background, and your team or your teams? I know that there are a lot of teams working on the Factom protocol – 25 of them, to be more precise, but maybe there are some that you would really like to tell us about?
Sure, yeah, so a few words about me first. I come to the crypto space from a bit of the past life of political and economic activism. When Satoshi’s paper dropped back in late 2008, I was living in Baltimore, Maryland, developing local paper currency called the BNote. So I saw this sort of digital currency coming and said, ‘Wow!’, you know, ‘Right place, right time!’ – we are doing this globally and it’s so exciting.
At this point, what i have as a podcast called “What The Fork” that explores life, society and blockchain, and it’s sponsored by one of Factom’s authority node operators, Sphereon. I’ve also got a small startup called ‘The Block Party’ with a partner. We’ve been exploring transformative use cases across the cryptoverse, mostly looking into economic innovations at this time, but we were taking our time and letting the field and the underlying protocol layers develop, as we’d sort of decide on which use cases to focus on.
I’m also a moderator of the Factom Discord server, which I became simply by being interested in the Factom Protocol, enjoying some of their social channels, and then just being an active member of their community. I really love the Factom community for being tightknit, welcoming, and helpful, and positive, and just so productive. And just by being there, and being a productive member myself, I was sort of invited a little further into the ecosystem, which is something I like to see in decentralised projects. So like you mentioned, there are 25 ANOs, authority node operators, that maintain the protocol and they really seem to be the star of the show right now.
A few examples: Sphereon, the sponsor for my podcast, is providing enterprise level integrations of the Factom Protocol with popular services like Alfresco and SharePoint. Another really exciting project is going on in some cities in the Netherlands, where they are implementing a very interesting government economic aid delivery service. Instead of the standard, like, paper coupon sort of thing, it can all be done digitally between the city government, the receivers of government aid and the business. They can then trade the services and trade back to the city for currency. It’s a really interesting thing; if it works, there are all sorts of uses for governments around the world and blockchain that Factom seems to be well suited to provide.
Another one is De Facto: they’ve been releasing some really exciting APIs, both open source and for private use, and just unboarded their first major client into the Factom Mainnet.
Then, there is Federate This: they are making rapid progress on a really amazing identity solution called Off-Blocks; that may provide some extended utility for the Factom protocol.
What’s really exciting to see with this decentralized network of many different operators coming together to steer the protocol, is that several ANOs are working together on the tokenization layer called the Factom Asset Token, or FAT for short. That actually makes possible to natively implement everything from stable coins to smart contracts in Factom. That was something that was sort of conceived of and has been built by these ANOs that just came on board just last year, which is sort of above and beyond the original scope that Paul knows and his co-founders at Factom Inc. come up with.
So, I think it’s really exciting as a decentralized system stuarded by companies voted into their positions of truth. I’ve watched a lot of these ANOs come together for the good of the protocol to sort out all manners of critical issues from governance to marketing, to exchange list things in a way i haven’t seen in any ecosystem. It’s difficult and often thankless work and I’m pretty proud of this serious effort they’ve been putting in to get us where we are today.
How did Factom actually came to fruition like that? How did it emerge and who was the initiator? Maybe there was an initial set of ANOs who were there from the start?
Paul Snow was the primary inventor of the Factom Protocol. He initiated it in 2014 with the founding of the blockchain innovation company called Factom Inc. Paul and Factom’s co-founders recognised Bitcoin’s limitations to be a practical blockchain for enterprise data solutions. Generally, distributed records information and documents have been difficult to protect, challenging to synchronize and impossible to truly verify, because of the manual effort involved. In response to those challenges they’ve built the Factom blockchain as open source, reaching full decentralisation in May 2018 with the election of the first Authority Node Operators. Then, they kind of stepped back into the role of just one of these ANOs and in that position they supported the investment in the adoption of the protocol.
So, just like I’ve said, it was basically all in Factom Inc.’s hands until May of last year, where they were finally ready to activate what they’ve called M3, which is where they held an election and brought in the first ANOs to decentralise the protocol. And in just the last year the ANOs had really come together and done so much work. I think that some people in the Protocol may think that it took a little longer then we should, but it’s bearing fruit and I’m excited to see the progress.
Well, when people start talking about how a team is taking a really long time to accomplish something, it’s kind of counterproductive – when you rush a thing it inevitably turns out that something was not taken into account, something was botched, and then you end up with an unfinished, raw product. That’s just not right.
Oh, yeah, and it can be absolutely devastating to the project of this nature too. We’re talking about the integrity of data and decentralising such a thing. If there is a critical failure in your protocol, it’s not gonna end up any better than the centralised means of data that we often see today.
And then you start getting into things like money, where the currency underlying is actually worth money. If there are some critical flaws like what we’ve seen in the last two years, it can cost millions, if not billions of dollars.
We really do need to take our time. And then, on top of that, it seems like people are so anxious and so frustrated with their coins of choice and the pace of their development that they do not acknowledge that no one got that far, you know, aside from arguably Bitcoin. Everyone’s still working their asses off to built that core usable foundation, upon which you will start seeing very polished slick viral applications. We just have to adjust our expectations and be realist here.
It’s really cool that you took your time to truly refine the product, so that you ended up with a really slick polished thing that is actually usable and that just works. And there are no hidden kinks that you have to work out.
There are none that we know of. And there are, of course, a lot of things that are required for the Protocol; we are still working on the scaling solutions and everything else. However, we are super confident that Factom was designed from day one with sharding and scaling solutions in mind. That means that it will be a lot easier for us to get there then the most others. The only reason we haven’t done it yet is there are other aspects of the protocol that needed to be ready. Scaling is what we are bringing in for the large clients and now that we’ve got the protocol in a pretty decent place, we’re refactoring the code so it’s easier to continue building up into the future. We’re seeing scaling solutions as the priority as of about a couple of months ago and we expect to see the transaction percentage increase every quarter exponentially. And we don’t really see an upper limit yet on what Factom can do.
How many core contributors are there actually? Those that are actively maintaining the code and introducing updates?
So, there are currently 7 core developers. And I can be wrong about this, but they are either all or almost all from Factom Inc. And in the last grand round which happened in November, we allocated some funds to Sphereon specifically, so they can bring some core developers, because this is a very critical phase in decentralising the ecosystem. We anticipate more core developers coming on other time because it’s an absolute priority for us. And if you wanna see who those folks are you can go to Factomise.com/ forums/major-contributors/core-developers.
As for the ANOs we have been mentioning, there are 25 of them and you can find them on Factomise.com/forums/major-contributors/ANOs.
Would you mind telling me a little bit about the two-token system? To my knowledge, Factom is one of the first projects to implement such an idea and have it working. Could you please explain the mechanics in more detail?
This system is truly something that brought me to this platform and told me it was designed in an incredibly thoughtful way for an average enterprise user, which is not the same thing as a token holder or trader.
So, Factom uses two tokens: the first is the Factoid or FCT for short. The Factoid is transferable, i.e. a tradable token used as a means of value transfer on the network. Factoid’s inflation is used to pay Factom’s ANOs for decentralizing the protocol and managing the access to the blockchain. It is necessary to burn, read destroy, Factoids to create the second of the two tokens which is called Entry Credits.
Entry Credits or EC for short are non-transferrable, i.e. non-tradable tokens used to pay for network use. They’re created by burning Factoids and they are non-divisible units that can each pay for up to 1 Kilobyte of data storage on the Factom blockchain. Entry Credits are completely destroyed once they’ve been used and are not transferred anywhere.
There is a variable exchange rate between FCT and EC. This exchange rate is determined by the network protocol which is currently operated by Factom Inc. The purpose of the variable exchange rate is to always try and get a consistent cost of 100 entry credits for 1 dollar regardless of how much Factoids are worth.
Targeting a stable entry credit price allows businesses to accurately budget the protocol, otherwise they wouldn’t be able to do it at all. This is why a lot of enterprises dont touch cryptocurrency at all, even if there is a good use – they can’t accurately budget for it, which is a huge priority for anything approaching a lot of enterprise.
So, Factoids and Entry Credits combined together create a mint-and-burn system. The cost associated with the network are paid for the minting process and the use of the network resources insures continuing demand of those tokens by their necessary destruction.
So, if a corporation or any kind of company decides to implement the Factom Protocol into their business, the sort of currency they are going to operate in is Entry Credits, correct?
So, it actually makes the use of blockchain not really expensive?
That’s right. I mean, it depends on the use case, but, of course, for most things like fingerprinting data, this is an incredibly cost effective solution. And you don’t need to worry about the fluctuating value of the crypto token. Whether Factoids are worth 1 dollar a piece or 10,000 dollars a piece, if an enterprise needs to buy protocol access through the year on January 1 and they need one billion Entry Credits, they can buy them on the spot for 1,000 entry credits per dollar without having to worry about the varying value of Factoids.
In fact, they can do so directly through several online stores set up by several ANOs, where they don’t need to touch the Factoids at all. They can buy Entry Credits from the webstore, and the operator of the webstore can burn Factoids in on their behalf and just send the Entry Credits directly to their enterprise wallet. They never have to touch them. It starts looking a lot more like a webstore, where you just buy a product and ends up in your wallet or inbox.
That’s actually pretty amazing – most blockchains don’t have real use cases because it’s really expensive to use them. Blockchain is pretty slow and expensive – so when we’re talking about storing data on it, it’s not cost-effective at all.
Yeah, we think so too. Governments or enterprises can not play, and not just from a budgetary standpoint, but also from a regulatory standpoint. They can’t play with something that might not considered to be secure and it’s gonna fluctuate in value. It’s just not practical.
Are there any limitations for the data that can be stored on the Factom blockchain? Also, how do you go about storing the data?
The data itself would be in the blockchain, and the way you would do that is if you want a program preference, it would be through products and services that other people have developed to interact with that blockchain: for instance, Sphereon’s enterprise level of integration or De Facto’s APIs.
The protocol itself is designed actually to store small pieces of information which are the hashes – they serve as proof that you have a piece of data at a specific moment of time. You can actually store the data yourself and recreate the hashes at any time to check against the blockchain entry. Entries into the blockchain are made up of two parts: the header which makes up the blockchain itself and the payload where the data can be stored. It’s possible to store up to 10 kilobytes of data in each entry where each kilobyte can cost one tenth of a cent.
You can store data like files if you want on the Factom blockchain, but it might become prohibitive, because you’re looking at a dollar for a megabyte. So you wouldn’t exactly want to store a master version of your 4k feature length film on the Factom blockchain. However, you can fingerprint it for pennies and then it does seem like we have a blockchain-based decentralised storage solution coming online.
One of the main underlying protocols for that would be the interplanetary file system. So, because Factom plays so well with others and can be integrated with into more robust solutions, I fully expect to see things where you’re fingerprinting large data objects on Factom, but storing them, also decentralised, perhaps in another protocol area.
Could you talk a little bit about the Factom governance? Who is responsible for the blockchain aside fron the ANOs?
We do also have 5 elected positions: they’re called Guides. Guides are the ones that are actually doing the governance documentation. Guides are elected to one-year positions with the terms of the task to determine the most pressing government issues that must be addressed, drafting documentation based on the feedback from the community.
Let’s talk about mass adoption. For that question, I had the Factoid in mind, but maybe you could talk more about the blockchain itself?
The adoption of Factom Protocol seems to be going pretty great already, if maybe a bit quietly since, we don’t really hype in our community.
One thing that we are looking forward to in the near future, hopefully, is word on the final phase of US Department of Home Security’s grant that Factom Inc. have been working on for a couple of years. Word is that a more then a few government agencies have been taken a look at Factom because of their work with the Department of Homeland Security. That’s a pretty big deal. The current grant is about border security and I’m pretty sure what they’re doing is they are using Factom hashes to have the data coming from their cameras and whatnot on the border – that’s a really big deal. It was a 4-phase grant program by the US homeland security and Factom is the only one who’s actually gone all the way into phase 4. It looks promising.
Another great type of adoption is Equator which is major US mortgage default processor announced a few months ago. It will be offering the Factom Protocol to their clients for document tracking and integrity. They work with 4 or 5 largest mortgage servicing banks in the US, so the potential here is huge. Each mortgage document can take thousands of hashes, because a hash requires any sort of engagement whatsoever, from origination for paying a bill to sending out a late pay notice – every single action associated with it would require a hash. And it times millions and millions of mortgages. That’s potentially a very huge case for utilisation and adoption; you’ve also got Spherion working with city governments in Netherlands to implement a solution for streamlining aid delivery – they’ve been building Factom integrations in their major enterprise software that makes it easier for entities to utilise, and these are just a few examples of a World Class blockchain solution without having interact in any with complications of cryptocurrency and private keys and fluctuations of values.
Will we be able to see any updates anytime soon?
That’s the thing – like i’ve said, there are 25 NOD operators, and we get developers finding their way into our Discord every once in a while and start working on stuff – we are constantly getting updates.
Just the other day we had one ANO releasing an open API; we had the marketing committee releasing their branding guidelines and messaging guidelines; we had the exchange committee telling us that they officially submitted an application to Binance for listing the Factoid; just a couple of weeks ago we got a reporter from, I think, CNN, dropping in, talking about drones and drone footage that we can Factomize; the very next day the crazy London airport drone curve thing happened – some mystery drone ended up attacking a plane in the London airport, and all of a sudden we’ve been interviewed on the news as being the way to prevent that sort of thing from happening. There are constant updates coming out – those who are interested can follow us on Twitter, Facebook, LinkedIn, Reddit, GitHub – you can also come hang out in our Discord server and ask us questions! We are super helpful, and we are super welcoming, and we love ya!
So people can just come over and reach out and maybe have a chat! Maybe they will have something new to add or to learn! Thank you so much – is there anything you’d like to add?
Yeah, I’m gonna add a little pep talk, it’s really short. Look beneath the surface of decimated market caps, poorly written articles, sketchy websites, shilling, and FUD. Find communities you resonate with, solve problems you care about, have a thick skin and a critical eye, but ideally also a positive attitude. From here, we can rapidly build the world we want done right. Wealth is short to follow. I really appreciate you having me, Pauline! I had a lot of fun.
Thank you so much – that was actually really well said! I hope that we will hear more about Factom and I hope this really big thing that you are building will be spread around, so everyone will be chanting the Factom name from now on!
I just hope it will benefit not only us, but everyone, you know.
Thank you so much for reading – stay tuned for more Know The Coin episodes soon!
*This actually was the first episode of Know The Coin ever recorded back in January. Check out the full version on YouTube!