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PaulSnow
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I am Paul Snow, the architect of Factom and chair of the Texas Bitcoin Conference. Ask me Anything!

Wed Dec 16, 2015 2:06 pm

I view Factom as a scalable way to secure meta protocols and private chains with the Proof of Work Bitcoin provides. I do not believe Bitcoin can act as a settlement layer (as many envision) without a number of meta protocols to support the processes that go along with settlement that exist along side exchanging value.

I also believe in the Bitcoin community. To that end I have been a meetup organizer, conference organizer, and have organized efforts to promote Bitcoin such as Passing Bitcoin Around the World. I have participated in both Scaling Bitcoin Conferences (Wonderful and effective events BTW).

Ask me anything!
Last edited by PaulSnow on Wed Dec 16, 2015 3:12 pm, edited 1 time in total.

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Re: I am Paul Snow, the architect of Factom and chair of the Texas Bitcoin Conference. Ask me Anything!

Wed Dec 16, 2015 2:16 pm

Dear Paul,

Would you like to start with what is the current status of things at Factom and what's next?
How is milestone 2 shaping up? Any rough estimate on completion?

Thank you.

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Re: I am Paul Snow, the architect of Factom and chair of the Texas Bitcoin Conference. Ask me Anything!

Wed Dec 16, 2015 2:37 pm

Dear Paul,
Would you like to start with what is the current status of things at Factom and what's next?
How is milestone 2 shaping up? Any rough estimate on completion?
Factom is a protocol to support applications that can make use of a public, immutable ledger of data. These applications can create their own data sets (chains with unique IDS) where they can write entries of any format at all, up to 10K in length each. Each 1K costs 1/10 of a USD cent ($0.001). Applications can prove the correctness (i.e. that it has not been altered) of the data using the anchors Factom places in the Bitcoin blockchain.

Factom released the protocol in September of 2015, running on a few servers that we manage. This was the first milestone, and it allows applications to write their own applications that rely on data secured by the Bitcoin blockchain, and organized by the Factom protocol.

Milestone 2 will have a couple of major components. First will be the deployment of a Entry Credit store, where users can buy Entry Credits (basically access to the protocol) without touching any sort of tradable token. The second will be the release of the consensus algorithm, the software supporting distributed processing of the Factom protocol. We are working to have the first release candidate of the consensus algorithm by the end of the year. We fully expect to release a few release candidates prior to going into production with the consensus algorithm early in 2016.

Milestone 3 is the last milestone. It will release the election protocol, which places the control of the federated servers in the hands of those purchasing Entry Credits. We intend to reach this milestone in the first half of 2016. In addition to implementation, it also relies on having enough diversity of use of the protocol to make the election process meaningful.

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Re: I am Paul Snow, the architect of Factom and chair of the Texas Bitcoin Conference. Ask me Anything!

Wed Dec 16, 2015 4:12 pm

So I've heard that Factom is pivoting from the sale of checksums to "Blockchain consulting'. At the top of this thread - you announced Factom as "a scalable way to secure meta protocols and private chains". When did you decide to pivot, why, and what's the plan now?

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Re: I am Paul Snow, the architect of Factom and chair of the Texas Bitcoin Conference. Ask me Anything!

Wed Dec 16, 2015 4:52 pm

So I've heard that Factom is pivoting from the sale of checksums to "Blockchain consulting'. At the top of this thread - you announced Factom as "a scalable way to secure meta protocols and private chains". When did you decide to pivot, why, and what's the plan now?
We have never planed to sell "checksums". The point of checksums is to detect errors in data transmission. Generally, they are cheaply computed because they are not intended to validate data integrity as much as detect transmission errors. Hashing is a related but more computationally expensive way to not only detect errors in transmission, but also validate data integrity (i.e. not even an intelligent malicious party can modify the data without breaking a hash).

Blockchain technology (Bitcoin, Ethereum, Factom, Ripple, and everyone else) rely on hashes to validate data integrity. Checksums might be used in transmission protocols in the network, but they have no role on the blockchain.

The point of Factom from the beginning is to support applications that can use the blockchain to document processes that execute over time. I had not intended to build Factom in the beginning, but to build an ID facility. Factom actually grew out of the fact that building a general purpose identification facility on the blockchain requires the documentation of a chain of entries. This is because identity is a fluid thing, involving many parties. Your identity is partly yours (i.e. involves attributes like your birth date, sex, height, etc.), but it also involves attributes assigned to you by other parties (i.e. your citizenship, employment, etc.).

Factom organizes data as a sets of entries we call Factom chains. Anyone can create a Factom chain with a given unique ID, then write entries into that chain over time. This means an identity can be updated, since attributes like employment, weight, height, etc. actually change over time. To the extent that they need to be accurate, you need to be able to add entries to some sequence to properly understand an identity.

This is just one application for Factom, but it was the original motivation for developing Factom. I will admit that I totally underestimated the difficulty of implementing such a facility on top of Bitcoin. And we do not yet have plans to tackle distributed identity.

So what seems to be a pivot from your perspective is really what we expected to do from the beginning. We wanted to build a general purpose data layer secured by Bitcoin. Then we wanted to build applications that used that data layer. We also wanted to build a protocol that was autonomous from us; we are not there yet, but we will get there in the next year. And with a dependable, autonomous, distributed protocol that secures sequences of data with only a small, fixed overhead on Bitcoin, other meta protocols would have a better place where they can be implemented.

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Re: I am Paul Snow, the architect of Factom and chair of the Texas Bitcoin Conference. Ask me Anything!

Wed Dec 16, 2015 4:59 pm

What are the incentives to running a factom server? How many factoids are being consumed per day right now, and what's the USD value of those factoids? How many servers are on the factom network being supported by these factoids?

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Re: I am Paul Snow, the architect of Factom and chair of the Texas Bitcoin Conference. Ask me Anything!

Wed Dec 16, 2015 5:14 pm

What are the incentives to running a factom server? How many factoids are being consumed per day right now, and what's the USD value of those factoids? How many servers are on the factom network being supported by these factoids?
Until the protocol has the target 32 federated servers, there are no incentives to run a Factom server. Once the protocol is being run on the 32 federated servers (along with an additional 32 audit servers), then about 73,000 factoids will be created per year and paid to those servers. Forever.

On the other side, users that want to use the protocol must have a public/private key pair that control Entry Credits. Assuming you have such a key set, you can sign messages to create chains and entries as long as those keys (what we call an Entry Credit Address) have the balance to pay for those transactions.

So how do you "charge" an Entry Credit Address? By converting factoids into Entry Credits. This removes Factoids from the supply. Entry Credits are not transferable, and do not pay federated servers. In some sense they are pre paid rights to use the protocol.

The Federated Servers set the exchange rate of Factoids to Entry Credits. They do so to maintain a constant real world cost for Entry Credits, around 1/10 of a cent today.

Someone that wants to use the Factom protocol never has to touch a tradable token. They can provide an Entry Credit address to a third party that converts Factoids to Entry Credits to charge their Entry Credit Address.

Also, the only way the Federated Servers can increase their compensation is to boost the value of their token. The only way they can do that is increase demand for the token. And the easiest way to do that is to promote the use of the protocol, which reduces the token supply.

The Factoid token was never intended to be used in commerce. The idea is to create incentives for the Federated Servers, and to do so from within the protocol. Using Bitcoin would require someone to hold an account and make payments to the servers. And while a structure of bonds and multisignature addresses might be able to do this, it would also increase the load on the Bitcoin blockchain transactions as the protocol grew. From the beginning we wanted only a fixed load on the Bitcoin blockchain. Under the current design, that is less than 13 MB per year.

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Re: I am Paul Snow, the architect of Factom and chair of the Texas Bitcoin Conference. Ask me Anything!

Wed Dec 16, 2015 5:23 pm

What are the incentives to running a factom server? How many factoids are being consumed per day right now, and what's the USD value of those factoids? How many servers are on the factom network being supported by these factoids?
Opps. Failed to discuss consumed Factoids.

Factoids are converted to Entry Credits. Then Entry Credits are used to access the protocol. So the accounting is ... odd. Cannot say how many are consumed per day, but we can give you the starting supply and the current supply. You can go to explorer (http://explorer.factom.org) and click the directory blocks to see the Factoid supply at that time.

We started at 8759968.58633800

Currently we are at 8754356.73644919

So about 5000 factoids have been used to buy Entry Credits since September when the protocol went live. At about 10 cents a Factoid, that's about $500.

Right now about 23 to 26 entries are written into Factom every 10 minutes. Most of that is a data feed which documents the Bitcoin and Factoid prices from Poloniex. We are adding more data streams to Factom. These can be used by applications to access market data, and potentially be used as oracles in smart contracts.

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Re: I am Paul Snow, the architect of Factom and chair of the Texas Bitcoin Conference. Ask me Anything!

Wed Dec 16, 2015 5:37 pm

So currently your servers are making about $500 in two months. Are you concerned that at these rates, there will be no profitability in supporting 12 servers? If those servers ran on the benevolence of the factom foundation, would Factom then be a defacto centralized data store?

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Re: I am Paul Snow, the architect of Factom and chair of the Texas Bitcoin Conference. Ask me Anything!

Wed Dec 16, 2015 5:45 pm

So currently your servers are making about $500 in two months. Are you concerned that at these rates, there will be no profitability in supporting 12 servers? If those servers ran on the benevolence of the factom foundation, would Factom then be a defacto centralized data store?
We have only a hand full of applications currently running on Factom. The use of the protocol slowly built through September and October, with more use coming on line during the holiday season. So I am not too worried about the adoption rate.

12 servers... Not sure how 32 Federated servers and 32 audit servers became 12...

Until we have elections (Milestone 3) we are running a de facto centralized protocol. The data store is distributed to everyone running a node, and validated against the Bitcoin blockchain, so the data store is distributed today.

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Re: I am Paul Snow, the architect of Factom and chair of the Texas Bitcoin Conference. Ask me Anything!

Wed Dec 16, 2015 5:50 pm

RE: 32.
Good point. Must have been a mistype.

Are you concerned that the Factom chain has no work securing it? What happens if the chain is compromised between bitcoin's block times?

Say the 32 federation servers, which haven't been making any money, end up being compromised for a trivial fee. How will the network get back into sync, or will the malicious federation servers merely own the network at that point?

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Re: I am Paul Snow, the architect of Factom and chair of the Texas Bitcoin Conference. Ask me Anything!

Wed Dec 16, 2015 6:15 pm

First of all love Factom. It really is the future.

Can you clarify your fundraising a bit for me? I participated on BnkToTheFuture. On this press release http://www.londonstockexchange.com/exch ... 38849.html it states:

"As at 30 September 2015 Factom had total net assets of US$55,727." Did Factom have some prior debts? After raising $1M+ on Bnk why would you only have $55k left after a few months? What is your current burn rate?

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Re: I am Paul Snow, the architect of Factom and chair of the Texas Bitcoin Conference. Ask me Anything!

Wed Dec 16, 2015 6:16 pm

Will factom be secured by Bitcoin or will it have its own blockchain like an altcoin?
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PaulSnow
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Re: I am Paul Snow, the architect of Factom and chair of the Texas Bitcoin Conference. Ask me Anything!

Wed Dec 16, 2015 6:41 pm

Will factom be secured by Bitcoin or will it have its own blockchain like an altcoin?
Factom is a hybrid of a number of approaches. The 32 federated servers are selected ahead of time so there is no contention about what entity is ordering what part of Factom. Blocks are created every 10 minutes, every 10 minutes, on the dot. A merkle tree is created from the data collected in that 10 minutes, and the root of the Merkle Tree is written into Bitcoin. So the integrity of the Factom blocks are tied directly to Bitcoin.

One component of Factom is a token (that acts as an App Coin or Alt Coin). These tokens (Factoids) are paid to the Federated Servers at a fixed rate (73K per year). The token allows the servers to be paid from the protocol rather than some entity. This is required to be distributed and autonomous. But as discussed above, nobody using the protocol ever has to touch a tradable token. Factoids are converted into Entry Credits controlled by a public/private key pair (Entry Credit Address). Entry Credits are not tradable, so they are neither App Coins nor Alt Coins. Entry Credits are all you need to use the Factom protocol.

So Factom is secured by Bitcoin. And it has its own token. But users do not need to hold the token to use the protocol.

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Re: I am Paul Snow, the architect of Factom and chair of the Texas Bitcoin Conference. Ask me Anything!

Wed Dec 16, 2015 9:44 pm

One of the observations continually made against raising the block size is the growing centralization we are seeing in the Bitcoin network. Specifically, the falling number of full nodes.

Today we have about (less than) 6000 full nodes https://bitnodes.21.co/

In my opinion, the following factors contribute to the decline of full nodes:
  • Okay, I'll give you block size. Not sure it really does at current levels, but let's not split hairs.
  • Difficulty of setting up and running a node. This slows down "on boarding" of new nodes, which must balance attrition to state stabilize or grow the number of nodes.
  • Lack of feedback. A full node is mostly a lump. It should provide reporting, graphs, and other indications of what is going on in Bitcoin. Today most full nodes just sit there.
  • No incentives. A full node, by itself, doesn't reward the individual running it. So other features must provide the reward.
  • Steady and falling price of Bitcoin. Bitcoin hasn't much grown in price since the end of 2013. Two years for the most part. A lack of excitement can boost attrition.
  • Fear and doubt. The fact that we cannot as a community deal with block size limits does not make people warm and fuzzy about Bitcoin.
  • Hitting a hard limit will shift Bitcoin into a zero sum game where your transactions are recorded at the expense of mine, as only so many can be recorded. This will further discourage full nodes.

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Re: I am Paul Snow, the architect of Factom and chair of the Texas Bitcoin Conference. Ask me Anything!

Wed Dec 16, 2015 9:53 pm

Hi Paul,

Congratulations on getting Factom to milestone one. Are there any companies using Factom in production applications? Also, the price of Factoids has declined by over 90% since trading went live. How does this price decline impact those that purchased Factoids in the crowd sale or the viability of Factom?

See you in Miami!

Wayne

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Re: I am Paul Snow, the architect of Factom and chair of the Texas Bitcoin Conference. Ask me Anything!

Wed Dec 16, 2015 10:31 pm

Congratulations on getting Factom to milestone one. Are there any companies using Factom in production applications? Also, the price of Factoids has declined by over 90% since trading went live. How does this price decline impact those that purchased Factoids in the crowd sale or the viability of Factom?
Blocknotary is an IPhone application that can hash a picture and place the hash into Factom.
https://itunes.apple.com/us/app/blockno ... 52799?mt=8

We are deploying a number of applications that are placing market data into chains in Factom. The Bitcoin and Factom prices from Poloniex have been recorded into chains in factom for a few weeks now. We are adding other data streams before the end of the month.

We have some projects that will be starting in January, and we will make press releases as appropriate.

The starting price of Factoids was about 10 cents, and the final price of a Factoid during the token sale was 15 cents. Factoids have been very close to 10 cents for a while (and in fact came very close to 14 cents yesterday for a while). As a very young project, trading is very, very thin and volatile. So yes, we might have seen a dramatic fall from the open price on Poloniex. But I do not read a great deal into the token price at this point, and with as thin a market as it was in the first few days, hardly any Factoids traded at that high value. As we onboard a number of sizable applications next year, and as we flush out the rest of the protocol, I believe the token price will take care of itself.

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Re: I am Paul Snow, the architect of Factom and chair of the Texas Bitcoin Conference. Ask me Anything!

Wed Dec 16, 2015 11:25 pm

Hi Paul, I'm happy to see you're doing good progress with Factom. Our organization (Bitnation) is more focused on DIY notary services (amongst other self-governance services). In what way, if any, do you think the two approaches could work together or benefit from each other?

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Re: I am Paul Snow, the architect of Factom and chair of the Texas Bitcoin Conference. Ask me Anything!

Thu Dec 17, 2015 12:03 am

Paul, I would like to hear an answer to @factomrocks question. That seems like an important point.

I would also like to understand why you sold factoids rather than allowing federated servers to simply sell entry credits for Bitcoin? Is the obfuscation simply so you could call them software licenses and do a crowdfund, or was there some other reason they were needed for the purpose of consensus?

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Re: I am Paul Snow, the architect of Factom and chair of the Texas Bitcoin Conference. Ask me Anything!

Thu Dec 17, 2015 2:07 am

Hi Paul, I'm happy to see you're doing good progress with Factom. Our organization (Bitnation) is more focused on DIY notary services (amongst other self-governance services). In what way, if any, do you think the two approaches could work together or benefit from each other?
Factom is intended to build a data layer with its own incentives which is none the less anchored to Bitcoin to prove its ledger. This means the same proof of work that secures Bitcoin also secures the historical ledger for Factom. So applications (like DIY notary services) are easily supported by Factom. The challenge is to build an application that provides the end user with an intuitive interface. This is certainly doable.

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Re: I am Paul Snow, the architect of Factom and chair of the Texas Bitcoin Conference. Ask me Anything!

Thu Dec 17, 2015 2:39 am

I would also like to understand why you sold factoids rather than allowing federated servers to simply sell entry credits for Bitcoin? Is the obfuscation simply so you could call them software licenses and do a crowdfund, or was there some other reason they were needed for the purpose of consensus?
Yes junseth, we could have built a centralized protocol. The set of servers would have to choose what servers can be in the federation and who cannot not. And they would have to coordinate how they sell entry credits and how they share revenue. If the right to sell entry credits was desired by some other party, they would have to negotiate with the Factom servers, and make arrangements for that process. This is pretty much how the current financial system works, so it is possible. But not without centralized control by one more more parties.

But to build a decentralized protocol, the incentive must be paid out by the protocol itself. As we have built it, each server gets paid the factoid token, and they can in fact never hand them to anyone at all, and sell Entry Credits by converting said tokens into Entry Credits as they make their sales. But notice they cannot sell more Entry Credits than they earned, so they cannot abuse the rest of the network by over selling Entry Credits.

Furthermore, the protocol can be used to select servers and boot servers out. Because the code is managing all of this, no coordination with the servers is required to participate, and no coordination with the servers is required if a server leaves.

But if a server didn't care to go into that business, they can transfer the right to sell Entry Credits to someone else that does. How? By simply selling their factoids to the aspiring Entry Credit store. And again, the store cannot over sell Entry Credits, since the factoids naturally handle the accounting.

This is because Factoids neatly represent the right to obligate the protocol.

And Entry credits neatly represent the right to use the protocol.

Nice, clean, and tidy.

Edit: Let me add why we did a crowd sale. Yes we did do it to help raise money. Of the tokens distributed, only 30% went to early contributors (i.e. developers and founders like myself) and the rest were purchased either in the pre sale (20%) or in the crowd sale (50%). The numerical number of tokens everyone actually received was determined by the number sold in the crowd sale, with these percentages fixed.

The result was a bit over 4 million tokens sold, so the total supply now stands at a bit over 8 million.

This is a more fair way to distribute tokens than doing no sale at all. If you do no sale at all, it will be the parties that are issued the tokens first (like early Bitcoin miners) that will corner the majority of the tokens. In some cases this will be the developers. When this is done today, you get floods of "parasitic" miners that run in to mine early coins for that reason. Well, we don't have mining, so we would have been dictating who got the tokens by the selection of the initial set of Federated Servers. Instead under the current plan, most of the tokens went to people that bought into the project to make it possible. Some tokens went to the developers (like it would have in the mining scenario, only less so). And the Federated Servers get a paid a fixed schedule of tokens from now till forever.

The token supply can grow (if speculators drive up the price) until the price stabilizes. And the token supply can fall (if speculators drive the price down) until the price stabilizes. But in both cases, the stable price is when the value of the token matches the money real applications are spending to buy Entry Credits in order to put data into the protocol. That is because the 73K factoids generated each year naturally trends to the value of the factoids drained from the supply to write into the protocol. If people are spending 1 million dollars to put data into factom per year, then 73K factoids should be worth 1 million dollars.

This equilibrium is best kickstarted with a reasonable body of tokens to begin with. This is because all tradable commodities are subject to speculation, so that is a fact of life. But if the purpose of the token is to drive a protocol, it is important that its value be tied to that use, and not to speculation.

I hope this additional information helps.
Last edited by PaulSnow on Thu Dec 17, 2015 6:28 am, edited 1 time in total.

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Re: I am Paul Snow, the architect of Factom and chair of the Texas Bitcoin Conference. Ask me Anything!

Thu Dec 17, 2015 2:51 am

Can you clarify your fundraising a bit for me? I participated on BnkToTheFuture. On this press release http://www.londonstockexchange.com/exch ... 38849.html it states:

"As at 30 September 2015 Factom had total net assets of US$55,727." Did Factom have some prior debts? After raising $1M+ on Bnk why would you only have $55k left after a few months? What is your current burn rate?
First off, sorry for the delay in answering. And thanks to Junseth for pointing out I'd missed your question.

The amount quoted in the press release was from the accounting period before the close of the funding round, not after the fund raising. It's a bit confusing because the report came out after the funding, but was referring the the accounting period before the funding amount was included.

To be clear Factom, Inc. still has the majority of the funds raised in the seed round still in the bank for our 2016 budget period. This of course is augmented by contracts that are beginning to come on line.

Our burn rate varies, but is significantly below 200K per month.

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Re: I am Paul Snow, the architect of Factom and chair of the Texas Bitcoin Conference. Ask me Anything!

Thu Dec 17, 2015 6:13 am

I will be happy to check here from time to time over the next few days and answer any questions that might come up.

I am certainly happy to discuss Factom, its design, goals, uses, etc.

I am just as happy to discuss anything going on in the Bitcoin community. I have opinions about the block size debate, censorship in some of the forums, scandals in our little segment of technology, the future of technology, lighting networks, segregated witness, etc. etc.

Sadly, most of those topics are as yet untouched.

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Re: I am Paul Snow, the architect of Factom and chair of the Texas Bitcoin Conference. Ask me Anything!

Thu Dec 17, 2015 9:09 pm

Hello Paul

I was re-reading Antifragile by iconoclast thinker Nassim Taleb recently. He writes
"Never ask anyone for their opinion [...] Just ask them what they have -or don't have- in their portfolio"
I have come to think it's a very relevant question and you can better weight people's opinions having an idea of how many Bitcoins they hold (or do not hold.) So Instead of asking their opinion on bitcoin, I'm now asking every participants the same question:

- Do you mind to tell us which percentage of your personal net worth and/or liquid assets you hold in Bitcoins ?

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Re: I am Paul Snow, the architect of Factom and chair of the Texas Bitcoin Conference. Ask me Anything!

Fri Dec 18, 2015 12:02 am

Hello Paul

I was re-reading Antifragile by iconoclast thinker Nassim Taleb recently. He writes
"Never ask anyone for their opinion [...] Just ask them what they have -or don't have- in their portfolio"
I have come to think it's a very relevant question and you can better weight people's opinions having an idea of how many Bitcoins they hold (or do not hold.) So Instead of asking their opinion on bitcoin, I'm now asking every participants the same question:

- Do you mind to tell us which percentage of your personal net worth and/or liquid assets you hold in Bitcoins ?
Most of my investment is tied up with Factom, followed by capital assets like my home and cars. Bitcoin makes up nearly all my liquid assets. I'm not sure I can give you a percent of personal net worth, but that would be small. As a percentage of liquid assets, it would be majority of them.

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Re: I am Paul Snow, the architect of Factom and chair of the Texas Bitcoin Conference. Ask me Anything!

Fri Dec 18, 2015 10:42 am

I'm sorry think you actually explained this, but I couldn't really understand clearly... Why can the protocol just pay the Federated servers in Entry Credits which they can sell again?

I get that they cannot sell more than they have, that is fair, but I don't see how the presence of Factoids mitigates this issue at all. In fact, it seems on the surface level that factoids and entry credits are quite orthogonal. Entry credits can be sold by a federated server so that the buyer can use the protocol (and enter data onto the protocol, which will be a shared load onto all the federated servers).

Is the point of Factoids simply so that the USD paid to use the protocol is equally distributed to all the federated servers by way of deflation of everyones factoids holdings?

If the answer is yes, then I don't see who transferrable Entry Credits would serve exactly the same purpose. One Fed server selling their stock of ECs would reduce the supply, making the price of entry credits from the others worth more.

Is Factoids simply just to prevent hoarding of Entry credits (if they were used directly to obligate the protocol)?

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Re: I am Paul Snow, the architect of Factom and chair of the Texas Bitcoin Conference. Ask me Anything!

Fri Dec 18, 2015 6:00 pm

I'm sorry think you actually explained this, but I couldn't really understand clearly... Why can the protocol just pay the Federated servers in Entry Credits which they can sell again?
Let me answer this question, and if we need to go into more depth, we can do so.

The goal of Entry Credits is to create and manage an "account" that allows access to the Factom Protocol. An Entry Credit is tied to a particular Entry Credit Address, and cannot be transferred; it can only be used.

This is a theme that comes up time and time again in the design of Factom. We segregate different aspects of the system away from each other, so that processes that are concerned with one part of the system do not rely on other parts. In this case we have segregated the need for a tradable token from the need to access the protocol.

What does this enable?
  • An application that needs to write to the protocol doesn't need a tradable token, and thus it doesn't need a wallet. So if you are a bank, and you are writing hundreds of thousands of entries into Factom, you do not have to worry about buying an asset that might involve special reporting (for example, under Bitlicense you might become subject to all sorts of regulation). Because an Entry Credit isn't tradable, it isn't a cryptocurrency.
  • A business that wants to sell Entry Credits can also avoid Money Service Business or Money Transfer Business regulations. Because the purchase of a cryptocurrency doesn't trigger the regulations. And the sell of a non-tradable asset does not trigger them either.
  • We want to reduce bookkeeping overhead. Since Entry Credits are not tradable, there are no inputs or outputs to calculate their balances. This pretty much halves the overhead of accounting for payments to use the protocol.
  • Entry Credits also represent use of the protocol, since they cannot be recycled. So they become a basis of "Proof of Use" to use to elect servers. Since the conversion to Entry Credits is a one time event, we can count that Entry Credit purchase as a right to assign support to elect servers, and we can age it so that after 6 months or so we no longer consider your purchase. Thus Servers can be elected by those using the protocol, and using it now.
  • Because Entry Credits are the only mechanism to pay fees, and they are not recycled, the overhead of trying to figure out where they go after use simply goes away. This simplifies the protocol significantly.
  • Because there is no mechanism to "pay a server" in the transactions handled by Factom, there isn't any way for Servers to extort users of the protocol for higher fees.
  • By allowing servers to set the conversion rate from Factoids to Entry Credits, Entry Credit value can be kept absolutely stable relative to dollars (or some other currency) in the real world, no matter what happens with the Factoid token. This is important for applications, because it allows them to plan their costs over time without worry about currency value fluctuations.

jabo38
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Re: I am Paul Snow, the architect of Factom and chair of the Texas Bitcoin Conference. Ask me Anything!

Tue Dec 22, 2015 6:09 pm

Hi Paul,

Thanks for doing the AMA.

I'm sure you are aware of the Proof of Existence website that has long been available to stamp fingerprints of documents on the Bitcoin blockchain.
https://www.proofofexistence.com/

Can you briefly tell me some pluses of Factom over a proof of existence like website?

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PaulSnow
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Re: I am Paul Snow, the architect of Factom and chair of the Texas Bitcoin Conference. Ask me Anything!

Wed Dec 23, 2015 4:44 am

Can you briefly tell me some pluses of Factom over a proof of existence like website?
Factom allows the user to build a chain of entries. So you can not only place a copy of your will on the blockchain, but every update you might make afterwards.

Most documents are not static things. They change over time. Factom allows that to be tracked.

Also, Factom consolidates all the entries submitted to the protocol over each 10 minutes, and creates a Merkle Tree and puts the root into Bitcoin. This means that any amount of data can get a proof of its existence at the cost of just one hash every 10 minutes. This is a completely scalable way to provide support for Proof of Existence as well as meta protocols that need Bitcoin's proof of work but do not need its exact transaction model.

qsmeng
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the number of copies for an entry in factom network

Wed Jul 12, 2017 2:54 am

Dear paul,
I want to know how many copies there are for an entry in Factom.
Based on the following proof, I think there is only one copy on the its ower peer.
1. In its website faq part, it is said" If you lose your document, you can not get it back from a hash stored in Factom."
2. In the white paper, it is said "the Entries would only exist once on the Distributed Hash Table".
However, also in the white paper, it is said "each server has all Entry Blocks, all Directory Blocks, and all Entries."
Now I am confused how many copies there are for an entry.
Thank you.
Regards,
qsmeng

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