Quick Overview: What is Factom?

Factom is an irreversible publishing engine (write once, never erase). Factom removes the need for blind trust by providing a precise, verifiable, and immutable audit trail.

Factom secures data for private and public organizations by publishing encrypted data or a cryptographically unique fingerprint of the data to Factom’s immutable, distributed ledger.

At a high level, Factom can be utilized for:

Enterprise level notarization Securing actionable data Provenance Publishing audit trails for business processes

Factom’s ledger is secured by placing a “Merkle Root ” into the Bitcoin blockchain every 10 minutes–a simple and effective way to piggyback off the Bitcoin’s network security. This time-stamped, immutable data serves as a “proof of existence” for all future business processes that build upon the secured data. Factom’s anchoring can be extended other public blockchains (coming soon to an Ethereum node near you).

Using Factom

Use Case 1: Authenticating customer communication

Most retail banks use promotional and transactional messages to target customers and prospective customers in electronic formats (email, text message, etc.). Currently, phishing is a major concern in this space. Perpetrators of fraud use the bank’s branding to acquire account information from customers. While there are ways for a bank and consumers to mitigate this risk, they are not foolproof or particularly user-friendly.

A blockchain-based solution can be used to certify and authenticate communications from the bank. Each message would display a unique, immutable, blockchain-based signature or a certificate to prove the authenticity of each communication.

At a high level, a cryptographic hash could be published to secure and prove the source, length and time of each communication. A Factom based certificate or code embedded/accessible via a link in the email/text could validate and provide a real-time proof of authenticity for the electronic communication.

Overall, Factom is an excellent fit for authentication of emails, messages, and websites. This would eliminate large costs and risks with third-party authentication solutions. Alternatively, Factom can allow third-party authentication solutions greater transparency and validation.

Use Case 2: Document Management, Data Lineage and Standard of Care

Factom can be used for controlling/monitoring document version of various documents/templates used internally and externally by financial institutions. For many processes, regulators require documentation of each template version (to prove data lineage). Publishing cryptographic hashes during each step of a mission-critical business process can provide an irrefutable “proof of existence.” Factom provides transparency in an otherwise opaque process.

According to one of the leading big four audit firms, negligence for using an incorrect version of a document template can amount to almost $1000/record in fines in the insurance industry. In this scenario, Factom can be used to compare and track the unique fingerprint of a document template being used to that of a template that’s supposed to be used. An audit trail like this allows financial organizations to reduce audit costs and prove a “standard of care.” Another example would be generating unique fingerprints for documents and photographs submitted for an insurance claim and proving that the same documents were indeed used to settle the claim.

Wealth Management divisions in most retail banks offer a wide array of services to high and ultra-high net worth individuals and families. These services involve a wide array of documents, including wills, trust agreements, and estate plans. While fairly static, there are modifications and addendums made to these documents. Changes to these documents can be tracked, notarized, and time-stamped using Factom. This process would ensure execution of most recent versions documents. Customers of Wealth Management services could know which chains are tracking their documents. When a new entry shows up, they can be alerted to the activity and can request more information about the activity without fear of loss of messages.

Use Case 3: System of Record

Large banks typically have massive systems infrastructure to support their banking operations. In some instances, data transactions between disparate systems contain incorrect or inappropriate data. Thus, initiating a reconciliation process and, subsequently, an audit review. As the number of systems multiply, each system has sway over some data set, settlement becomes increasingly difficult. Factom, as a shared ledger, could ensure that transactions and data shared with the core systems are consistent and error-free.

Instead of using multiple, micro APIs to connect disparate systems to track updated information. All systems would publish or read from Factom’s shared ledger (based on their privileges, managed by private keys). The disparate systems would use Factom as a decentralized, immutable data layer they all can blindly trust for storing both data or pointers for large data sets. Even if the data transport layer does not change, Factom can ensure that data provided by one system can pass between many systems without having to trust the intermediaries.

Factom’s immutable timestamp allows any system to recognize the latest state of the data related to a particular record without querying another system. Factom gives you the ability to know that you have all the data critical to a settlement. Factom can serve as an “Oracle,” a truth engine, for the rest of the systems infrastructure. Factom makes that process fast and inexpensive.

Closing thoughts:

Factom’s design (write anything, any format) is designed to drive usage in as many ways as one can imagine. It allows applications and use cases to evolve and grow via iterative processes without being restricted by the underlying blockchain layer. And that is the true power of Factom-simplicity.