EB52 – Paul Snow & Peter Kirby: Factom, Proof of Existence, Proof of Process, Proof of Audit

Transcript

hello and welcome to epicenter Bitcoin the show which talks about the Technologies projects and startups driving decentralization and the global cryptocurrency Revolution my name is Sebastian cuccio and my name is we're here today with Peter Kirby and Paul snow Peter bactum uh he also started previously a consumer goods company and was also working for cointara the mining company and Paul snow I saw the first time a really cool video of him wearing his Texan cowboy hats and inviting everyone to come to Texas when we were organizing a hackathon here in Berlin that was

leading before the Texas Bitcoin conference now we're here today to talk about factum so perhaps let's have you guys introduce yourself so briefly and talk a bit about sort of the big picture of Paxton because it's a complex project uh Paul do you want to go first certainly uh my name is uh Paul snow I'm a long time programmer I I worked on uh PostScript back when PostScript was the big thing and I implemented uh some post-fix programming languages

um with some other people at the dawn of time um also uh worked on the Texas tears project uh building a rules engine that processes eligibility for Health and Human Services on programs and uh now got into the Bitcoin space um organized the Texas Bitcoin conference which will have another conference in March and the 28th and the 29th and um and I got involved with factum and uh design this uh system for creating arbitrary immutable ledgers

fantastic uh my name is Peter Kirby this is my sixth startup I began my career in the real estate world and ran a real estate and mortgage and a development company uh later I started consumer Products company and I was also one of the early people at quinterra did uh Jesus everything that was business there for a while I've been in the Bitcoin space for uh just about two years and I joined factum in September uh just basically at the Inception when it went from being an idea from to a company fantastic so I guess we can start off by uh going over the sort of big picture

and and and in Broad Strokes uh Paul if you could explain to us what is factum and and then what are the goals that vacuum is trying to accomplish well factum is his program is a layer that will lay over Bitcoin and use and Leverage The blockchain to allow um clients um using factum to create arbitrary ledgers um and by arbitrary ledgers I mean a ledger that has the information in it that is useful to the client's application

um that could be exchanges of value the way Bitcoin exchanges value or color coins or mastercoin but it could just as easily be logs of information um hashes of data that um validates the state of that data at a point in time and gives you a sequence of data points so that you can essentially create cryptographic audits of business processes so um so factum is is basically this uh general purpose thing that allows you to record and document pretty much anything

um yeah just to build on what Paul said and simplify pretty soon pretty quickly uh the blockchain provides an incredible permanent accounting Ledger that you can build cool stuff on top of and fact and provides a layer on top of that that allows you to build applications that are fast and cheap and actually you know don't bloat up the blockchain right and so this is one of the goals of phantom uh sorry Brian go ahead yeah so um can you tell us a bit is is that the primary motivation is it to avoid uh Bitcoin blockchain blow do you also appeal this is more it's a better way to do it a more efficient way

um yeah I mean what I was looking at with uh factum is there are many many Bitcoin 2.0 applications and those Bitcoin 2.0 applications get stifled because the first thing they have to do is create their own blockchain or they have to try to encode their information into Bitcoin transactions and um either mechanism provides a layer of complexity that is above and beyond the actual goal of that application so um if somebody for instance wants to trade gold um and they want and and thus they go

out and they try to create a gold currency um and then they have uh perhaps if they are creating their own coin they're recruiting miners if they're not creating their own coin and they're using some of the protocols that run on top of Bitcoin like mastercoin or counterpart part of your color coins then they are restricted with to the um uh what they can record in a Bitcoin transaction that we are looking at uh the transaction volume going up and and beginning to bump that one megabyte block limit um certainly uh Bitcoin is going to address those problems and perhaps increase the block size or raise

transaction fees to limit the number of transactions that occur but um they that's a lot of complexity for someone just trying to build something to trade uh gold to have to deal with if they had an immutable Ledger they can Define their uh ownership via digital signatures and then they just need to have the record of the transfers and from that record of the transfers then they can determine the ownership and they're done so factum seeks to essentially enable all those applications by taking on the complexity of how you create immutable ledgers and

how you use Bitcoin to secure them yeah I thought it was a very uh and very elegant then we will go into more detail later about how exactly it works but I was very elegant in how it sort of does away with all that and and kind of uses the security of the blockchain uh without sort of having to try this either Squeeze In by using transactions in a weird way or building some sort of complicated layer on top is it seems to be a very sort of clean and simple solution I I well moderately simple it's still a very complex project

and perhaps we can move to some to some examples of where do you think this will be most used for um so let me go ahead and take that uh yeah there's a whole lot of things that you can do with factum um that are really exciting uh basically all business processes have a system of record problem and the system of record problems cost them an awful lot of money so for example Bank of America recently paid 17 billion dollars for uh the mortgage Scandal that involved Robo signing and what happened was they basically lost track of the system record uh that mortgage was issued by some small mortgage broker that

transferred it to Countrywide they transferred it to some Wall Street Bank that got that packaged it up into some big you know uh credit debt obligation package and then the mortgage got transferred etc etc and along the line people who own this mortgage you know sort of lost track of that record and what that led to is them foreclosing on people's houses and not recording payments correctly and all sorts of you know really horrible stuff so in a factum world a company like Bank of America could record that mortgage and basically date stamp um at that moment in time every single record that went into it you know there's probably a thousand pages in a mortgage and prove that that existed exactly as it was at that State of time

and then moving forward every payment could be recorded if there was a foreclosure uh situation they could record every piece of Court documentation and prove that they had that entire record from start to finish um and then you know when somebody went to contest a foreclosure they could prove that it happened or they could also prove uh the people who got foreclosed on could prove that Bank of America didn't have that document and they couldn't go back and sign it later after the fact so in that situation Bank of America would have had the entire record and not you know been liable for that very very very large fine so in effective World business processes can be a hundred percent honest which is

really exciting um can I add can I add something to that I mean um it should be clear that when you when you record a hash of a document into a phantom uh chain into a ledger that that uh a bank or someone like that is creating that hash is means nothing to anyone looking at that list you know because factum is very much like Bitcoin it's a it's a publicly auditable uh chain it's just that in this public Ledger they would just simply be some hashes but when I took those documents and I hashed them and compared them to the hash that's in the Bitcoin blockchain then those fingerprints which are very uni that are

um for all practical purposes unique to every uh document when they match I know I had that document at that point in time and and so you have both privacy as well as security and and an immutable Ledger so I guess that solves the problem of uh proof of ownership of a document at some point in time but how does it address the actual ownership of the document and record keeping of that document does it or or is that do you rely would you have to rely on some other uh technology to do that but your biggest problem that you have in these situations is is that the system of record as long as the system

of record exists then you can always go to the system of recording validate and verify the information and that's that's essentially the system we use today um different banks and different institutions have their own system of record but after 2008 we had this failure of one institution after another and so there were all kinds of holes in terms of missing systems of record that had to exist in order to document these mortgages now in the factum world if those organizations had been digitally signing the data then that data could be moved along from one system to the next but when you went to validate it you

wouldn't have to validate that you know it wouldn't be your system of record saying that the data is valid you would be able to go back to that hash that that's been recorded that basically those other systems that may not exist now um that they went on record saying this was the data at that time so you're able to ensure that you have all the data and you have and you're able to ensure that all the data is still valid as it as it was recorded by the institutions at that time even if those institutions go away and that's the real key that's what cleans herself so um if I could just sort of play out how

what this would look like I presume this means that a bank would have its software right where you save documents in maybe a loan applications it and then maybe a feature of that software would be that it at the same time takes that data and takes those documents and it sort of enters it into fact and to prove that ownership right and then I guess later when someone could go and rely on that for to have a sort of objective outside verification yeah exactly exactly it's a um it's the bank can prove that anything existed without um

uh without you know with a true third-party verification system um so like it's as Paul says it's immutable like nobody can change it it's a it's cemented in the past um which like I said turns out to be anybody working on I'm sorry go ahead um yeah I'm curious because a lot of people right when we talk about Bitcoin 2.0 uh protocols you talk about these possibilities in the abstract right we're building this sort of infrastructure thing and then people will build uh the expectations people will build things on top of it being one of them and it's certainly an

interesting use case that I hadn't heard of so much before so are there already people you know who are working on using factum like that because I think it you guys want people once doing that or are you planning on doing those kind of things no that's absolutely correct the the goal effective is to build a protocol layer and let people build interesting applications on top so uh for example uh the details of this are still a little bit private but um uh country reach out to us they've got a major problem with uh titles you know their title records proving who owns what piece of property and they basically are looking for a blockchain solution to their title problem because

if you put a title in the blockchain there's no way that somebody can go later on and fake that that title was transferred in a way that wasn't true so they reached out to us and what we'll probably do is work with a third-party application developer or whoever runs their current you know title applications and then build a fact and back end to it so every time that title gets recorded it also gets recorded in the blockchain so this is probably going to be the model moving forward or factum people will approach us with a problem a system of record problem and we will uh have a series of technological partners that we can help um you know sort of we we run the back

end for it and uh they run the sort of application layer so essentially factum provides an API where uh and any developer can plug into and use the protocol yeah and BLS on top of that so so this is one example of of how factum can be used in a corporate setting what are some of the ways that this can benefit just regular people um I mean you know so just for for context the the prior version of factum was called the notary coin or the the uh notary change sorry rather um so is is the idea to sort of replace uh notary services

um but you can you can certainly use factum as a notary service um for instance an artist who is working on a song or music or or anything like that can certainly take hashes of of recordings that they're making and recorded in a phantom chain um again it would reveal nothing to anyone looking at factum from the outside but at any point in time when there was a challenge did you write this song they they would certainly be able to bring uh you know provide the earliest proof recording of that of that artwork or that song so so there's some of that kind of copyright and rights

protection that you could use factum for um you could also use factum as a mechanism for um uh messaging uh in a in a way that uh is undeniable as well um and you can use a system of revealed secrets that allow essentially relatively Anonymous messaging yet yet fixed at a point in time anywhere where somebody wants proof that they had this concept or idea first and uh they want to have that record um there are a lot of very interesting use

cases that come into play when you're when you're talking about um immutable ledgers and revealed secrets that users can use to protect both their privacy as well as um just simply being more useful than other tools that we have I guess one other perhaps uh I mean sorry you go ahead no I'm saying maybe one other example and we're we're talking about this before the show with Brian and I is uh if you'd want to sort of store and a document uh

you could use in cloud storage decentralized cloud storage services like like storage or or made safe and integrate uh factum into that somehow so you would have like a a document that would live in the cloud forever and also be [Music] um cryptographically proven that it was created a certain date in factum that's right Phantom could actually act as a directory service and a in a time stamp service for um Technologies like uh just general uh torrents uh Storage storage and uh made safe made safe and store store J don't

uh intend to maintain time stamps and hashes so factum can do that you you would also be able to use factum to certify releases of software because you can have a phantom chain that's keeping the hashes of that software at that point in time going forward and then somebody taking that software could check it against these these known chains for their validity to ensure that no one's inserting uh malware into the source um and um a lot of those kinds of applications so um what what are the use cases that maybe for each of you what is the one

use case that you find the most fascinating uh well the one that really excites me is um recently there was a giant oil spill um that the British Petroleum was participated in uh in the Gulf of Mexico which is really close to a HomeTown because we're in Austin Texas and um what happened there was there was a whole series of contractors and subcontractors and sub subcontractors and um each one of them is sort of keeping track of what they said they did and uh not necessarily keeping track of what they didn't do so there was a major system a record um problem and when a subcontractor said

they did something and didn't um and then the person above them said that they did it and or you know that the the that subcontractor finished that work um you know eventually somewhere along the line all those records were not really 100 true and what ended up happening was um you know a giant explosion a tremendous you know billions of gallons of oil released into the Gulf of Mexico huge environmental disaster because basically like people weren't doing what they said they did and then when the court cases all came out BP is stuck paying I think it was like 43 billion dollars in reparations and and various fines because at the end of the day they're the people holding the liability

for this problem so in a phantom world where every subcontractor was documenting exactly what they did in recording it and there was an audit system on top of that proving that they did what they said they did you could go back and figure out not just who's at fault but like like what process is broke down so next time we don't have problems like this so in addition to you know leaving BP have a tremendous amount of liability and um you know sort of putting the finger on who's really to blame you could also build better systems that evolve right you know based on this system of record we can see exactly what happened wrong and then like fix it in the future so we don't

have the Deep Horizon problems that's what gets me really excited cool good well I I think that uh my uh my goal with factum is to Simply create a system where we can uh inject honesty into systems that just aren't terribly honest um if I look at uh settlement um for stocks and stock trading or if you look at uh the Banking and Financial system if you look at Insurance um any of the any one of these or all of

these areas uh the uh is putting an end to the ability to backdate a record and putting it into the ability to construct a history that that that an institution can prefer over what really happened um we'll inject honesty into these systems and and I believe the more business processes that you make cryptographically auditable the more honesty you inject into uh the whole ecosystem and I think more honesty makes a better world it's very interesting so we'll we'll get

to uh talk about uh the protocol uh also the factory token and just the overall organization of the team in just a few minutes but first we'd like to talk about our sponsor fairly fairly is a Bitcoin prediction Market where you can place predictions on the likelihood of sporting events the Bitcoin price or current affairs and you earn money if your predictions are correct so to place a bet on fairly you can go to fairleigh.com epicenter that's f-a-i-r-l-a-y.com and place your first bet today so um we as we mentioned earlier uh factum is a protocol it's a bitcoin2 protocol and so can you explain at what

uh level it sits so perhaps we we could start by saying that it's a Bitcoin 2.0 protocol that sits right on top of Bitcoin it's not built on on top of some other platform like counterparty or mastercoin or something like that it does have its own uh its own chain um can you go into detail about how that works yeah what the way uh the way factum works is it uses a um set of uh a consensus model and a set of Federated servers in order to order and secure um the information submitted to it by the users and every 10 minutes it

creates a Merkel proof of the data that's in factum and places a entry pegging that data to the Bitcoin blockchain so basically you can go through the Bitcoin blockchain through history and look at the pegs and validate the factum data that was collected all the way up to the last Peg and then in that time period following fathom is securing those entries using a consensus model so consensus for 10 minutes and then you trust consensus for 10 minutes and then you trust Bitcoin

forever that's the the basic design goal of the protocol um a little more detail on the protocol every every user can create their own uh chains what we call a chain in factum and it's a it's a custom chain uh that they name and they create and then they're able to put their entries in their chain um when you create a chain you have the um absolute right to put the first entry into that chain and that gives you an opportunity to define the rules for that chain in Define the process of auditing

that chain um and that's important because factum does not uh do any kind of vetting of entries so once once that chain is created and once that entry has been added now any anyone can put an entry in that chain however when you run your audit against your chain any invalid entries will be discarded and you can um essentially create a client-side uh validated series of events so um if I take Bitcoin as kind of an example or any kind of coin transaction

is as an example without the proper inputs and without the proper outputs and the proper signatures the entry would be invalid so you can place into a chain a series of valid entries and a series of invalid entries but as you audit the chain in process is it any invalid entries you'll just discard and leaving only the valid ones and be able to create a perfectly trustable chain of ownership and the factum servers themselves wouldn't be in the position to create invalid transfers of value because your chain requires certain signatures and and nobody outside of the people holding those private Keys would be able to

create uh transactions that were valid so um in that in that sense go ahead so who writes uh uh takes maybe the rules that were put in this first transaction in the chain and writes for example the software that later goes and validates that is that the person that creates the chain and you can provide that to others or does everyone well if you if you have the if you have the right to create the first entry you have the right you you have the ability to put a hash of an audit program a link to a website

um um a URL to some text that describes the rules for that chain um or it could even be a reference to another chain that's managing the um versioning of the audit program for um for your value chain so you could have a chain that's your audit chain and a chain that's your valid chain uh a value chain and your value value chain in the first entry would say go to this audit chain to to determine how to audit this value chain and basically you can create these structures that basically reflect you know the real world the that you know because the real world's messy

and requires updates and and and all that sort of thing so you could also have a chain that allows the roof uh to be the rules of validation to be changed at a later time for example well yes you could and and but but all of that should be clear from that first entry if the rules for the change should be fixed and not non-changeable then that's what the first entry should tell you if the rules are changeable then that's what the first entry should tell you um or if the chain has to recognize certain authorities

um like for instance if the chain is supposed to uh manage the ownership of a car it has to recognize the fact that cars can be repossessed by a court uh no matter how much we would like the real world to require digital signatures for all chain exchanges of ownership they're in the real world some things exchange ownership simply because uh of a of a losing a Court battle or um you know some other uh mechanism so factum is supposed to be built so that you can draw the picture that you want to draw um there is no limits if you can imagine a set of rules you can Define them

that's fascinating so in this case could this be I guess in the future at some point that the courts would be given some sort of private key that gives them a special ability to sign uh signature or that some Authority would be defined initially that then would would verify four documents or how would that work well I think that this is what's going to happen there's been a lot of news about how Bitcoin needs to um conform to the regulatory environment that exists for the Banking and Financial world and what factum comes back and say says you know cryptography

cryptography provides a lot of tools to audit business processes in the real world so instead of saying Bitcoin needs to be regulated the way banks are factum says hey guess what we can regulate we can give government the tools to actually enforce the regulations they already have on the books by requiring businesses like Banks and financial services to maintain cryptographic audits so that they can be responsible for what they do at the time they do it and not be able to hide behind their messy accounting practices I see what you I I think I believe we call that a switcheroo oh absolutely

absolutely I think honest is a very subversive thing honesty is a very subversive thing that's interesting it's fascinating um now there is one thing that that I'd like to sort of understand a bit better is can you describe the the server infrastructure um and because factum doesn't have minors correct right so can you describe how that works okay the the users will will all have um uh public keys that they're using to put entries into factum and when a when

a user has uh essentially these entry rights tied to a public key they can't be transferred in any way and so other than to use them to put an entry into fact them well those public keys can be used to vote towards servers that um that uh the user believes uh behave well and are good players all right and the the top servers in uh in the network will be considered the uh Federated servers and those Federated servers are responsible for running the consensus algorithm and the consensus algorithm simply records every entry that's

submitted into factum into the proper chain and that is all they do um we seek to um maintain a pretty high level of ignorance when it comes to the factum servers in other words they should simply scribe the entries they get without knowing what those entries mean or or what the value of those entries are and and that of course makes the servers a little more honest even though I can't stop servers from knowing uh information that's publicly available in order to keep them honest about What entries they place in the system we separate the payment for the transaction

from the actual submission of the data so you submit or you commit the system with a hash of the entry um when with your public address which says I'm I'm paying for this entry but since it's a hash no no one in the factum universe can tell what that entry means they record it and that now obligates them to record the entry then you do a reveal presenting the entry and because the hash matches what they've already promised Place into factum and because they now learn what chain that entry should be placed into they are not

in a position to censor the entry they've already promised to put it in if they don't put it in all of the nodes looking see the proper submission and see that it wasn't recorded go ahead so but yeah what keeps them from breaking their promise well they can break it but it'll be obvious the other thing is that the the responsibility for the chains um every minute shifts from one factum server to another so even if one factum server tried to censor and not refuse to record the entry the next fact of server will unless you have collusion of of all

the factum servers or then eventually the entry will be recorded because the the responsibility for recording the entries uh shifts each minute from one factum server to the next and all it would take is one honest factum server for your entry to get into the system so what's still unclear to me is who chooses these servers and the economics like who how do they get paid for are we talking about like GPS servers like what what type of service are we talking about here well these are these are the people that set up factum servers with the software that we provide and and the factum servers are chosen by election

from the users who who vote with the public keys that both hold entries to be spent into factum as well as a history of having spent entries into factum both of these numbers are available in the system for um tallying the the weight of that vote so it's kind of like a proof of stake but it's but it is um rated towards the people actually using factum for the good guys yeah the users are the good guys they're the ones recording entries they're the ones that have most most um uh a greatest interest in making sure

that the servers are religiously recording every entry that they get and then if I statistically look at the behavior of the servers I can detect censorship and one one of the things we've learned from Bitcoin is when we realize that a an Infinity a pool a a mining pool is acting badly the the those contributing to that pool will move because the value of Bitcoin requires the my the mining pools to behave well and so we're leveraging that same social aspect to allow the the users to remove a server that isn't behaving well remove support for that

server um and um and the fact is that your the system agrees to buy it before they degrees to record the entry before the system knows what the entry is and that's actually a rather critical aspect to our design so in the future as I I suppose that there is some human intervention in choosing the servers that will get uh that that users will vote on right okay in the future could we imagine sort of a I mean if we can tie this in with uh with ethereum for instance uh imagine a scenario where

the factum protocol is choosing servers Based on data feeds and making decisions like price speed stability and things like that and that gets done automatically and there's no human intervention required um I I think that the users always need to be have a say in the factum servers because I I ca there are aspects of censorship that don't show up within the factum universe basically I can automate in the protocol any decision where all the data is available in factum but I can't I can't automate what is occurring outside of fectom and censorship is one

of those things that occurs outside of phantom the only the only entities that can see a an entry not being um recorded will be the users of the system so I I think there will always be the users involved did I answer the question just having the option right yes and I think um we will want to implement as much automated um controls as possible um that's absolutely true and and actually there are certain missteps that servers can occur that can be guilty of and they will be immediately dropped out

of the uh the server pool um if those missteps occur for instance if they submit entries that aren't that are not paid for um entries that are not paid for cannot be submitted into fathom and so um all the other servers that are um double checking the work of a server um responsible for a particular chain if they see an entry that isn't paid for that's that that a server is trying to place into a chain then that server immediately gets bounced out um because that that's some sign of an attack can we uh go a bit into talking about

the factum token yes what is the role of the fact and token how is it issued um what are the economics of that well we're calling our factum token effectoid and so the factoids will be issued with the yes with the with the crowd sale and and so the the large body of them will be issued at that time um and then there will be re um um there will be uh um rewards paid out rewards not the right to win

um um for yeah it is block rewards to the servers for processing you know processing the data and um and there are fees involved in placing entries into factum but this is how that works and it's rather an interesting design as well factum is targeted but to towards many in um organizations that may never want to have a wallet or cryptocurrency and so the solution there is to allow entities to sell entries into factum by simply tying entry rights to a public key now all all a

um industry or company that that wants to put entries into factum um but doesn't want a currency or cryptocurrency all they need are entry rights tied to a public key so they if they can go to a website and buy those entry rights using Bitcoin or using a a credit card or whatever um then they don't have to have a factum wallet or know anything about a phantom coin well the factum token allows that to be trivially executed because the factum token ends up in the hands of factum servers the factum servers probably need to pay bills so they're

incentivized to have interfaces that allow people to buy entry rights and they when an individual when a company goes to that website to buy an entry right they they pay the server and then the server converts those factum tokens into entries that's the only way you can get entries and the fact them is to convert your factum token into entries so essentially the protocol pays factum token uh the factoids out to the servers for how having run the servers then the servers can buy you the can sell entry rights by returning the factoids back to the protocol note that the factoid never

went out into the wild it was never sold for another cryptocurrency for a dollar so you avoid the whole issue of regulatory money service business or money transfer business because the server is never selling a transferable right to somebody else they're only selling non-transferable rights which essentially give access to the protocol to somebody else so they can have a nice clean business that doesn't doesn't uh fall foul to any regulatory problems I mean we want to make the blockchain technology accessible to business with no barriers and the way to do that is to make sure that they can access it on their terms

what it however they want to access it whether they want to pay with dollars or where they want to pay with Bitcoin or they want to actually secure factoids out in the the Wild and directly whatever path they want should be supported so what is the business model for you guys then but um go ahead Peter this is yours yeah yeah absolutely um so the the value of the um the total pool of phantom tokens is based on how is based on the utility of it right the more people are using factum the more valuable those tokens become so this is a really interesting way to monetize open source software where basically um The factum Entity uh is just a

non-profit um the initial crowd sale that we do which is about 10 of those tokens um builds like an endowment for that uh non-profit we also the nonprofit also reserves 10 of future factum tokens to pay out future developers so we have a way to pay with uh you know some combination of cash and factum tokens people who continue to work on this open source project and then for all the people who were initially involved in all the people who participated in the crowd sale the more useful fact and becomes the more valuable their Holdings in fact them so um it turns out to be a wonderful ecosystem where you can align all of the incentives for all the people

who make pack them successful the users the developers the future developers and the initial crowd sale participants so um what happens first of all what happens with these other 80 or 90 percent um and winners of crowd sale uh when is that gonna happen let me answer that in Reverse um so the crowd sale is planned for mid February of 2015 so in a few months um we want to have the beta version of the factum system working prior to that crowd sale so that's the uh the most important thing for us we want people to be able to both buy fact them at a crowd

sale and start developing right away um the remaining two-thirds of those tokens are the ones that Paul was talking about that will continue to pay for the hardware backbone the factum servers and the audit process will continue to get paid sort of like an analog to mining um but that they will run the hardware that runs the factum system and earn factum as a result of that um I have another question so if um you know if there is a certain number of factoids uh whatever it is and uh are they divisible or what happens if the the demand for that just uh explodes

gigantically um could could you run out of factoids um so a phantom token will buy a certain number of entries into the system um and then when those entries get bought that factum token you know essentially pays that factum server so it gets recycled back in the system in a way that you could never run out of phantom tokens now over time as Hardware gets faster and uh you know sort of competition builds for entries um the price of how many entries of factum token buys can increase so it could start at a hundred and then go to a thousand and then go to ten thousand as it becomes more and more um you know as the hardware becomes more efficient

um So eventually the price of an entry goes down but um the number of phantom tokens that are introduced into the system can stay you know fixed over the entire time or at least have a standard release of them to the audit servers can be divided um up uh by eight decimal places or so okay got it in a way that uh that we don't ever run because otherwise you might run into this situation you might run into a situation where you can only buy at least like a thousand at a time or something but of course if it's visible like Bitcoin then you don't have that issue right yeah right

um we want to create a limited you know a scarcity of tokens so the value goes up but we also don't want to hamstring the system at all because you can't buy what you need to yeah I think this makes a lot of sense and it's it's such a fascinating model now we're seeing it like again and again and again yeah with like this way of having decentralized open source systems that can still be like really interesting businesses in this way so I mean it's a of course extremely similar in this way to ethereum or storage or a lot of other projects in this area well and um our chairman David Johnston

uh is one of the pioneers of of this sort of model for monetizing open source software uh you'll know David because he was obviously involved in the made safe crowd sale and uh and a couple of the other major ones and he wrote a white paper all about how um this new model allows you to build really wonderful open source software that solves a lot of major problems in the world and not have to rely on the Venture Capital model or an equity model or a separate company that um you know basically builds a Consulting on top of it you know you can actually build value for the open source project yeah we spent quite a bit of time

describing that model with him uh last week actually and in a lot of ways I think perhaps that you you fall within the the the the framework of the of that daps white paper uh on the crowd sales side but also you know being a non-profit Foundation um now touching on that can you sort of describe your organization yeah absolutely um so as I mentioned David Johnson is the chairman and uh Paul who's on the other line is the CEO um Paul is also the sort of lead architect developer you know heading the code side um I'm the president of the company I do mostly the business development and uh you know fundraising and all that store that sort of uh everything that falls

under business processes is sort of my jurisdiction um we have a team of five developers um uh a gentleman named Bo Wang and a gentleman named Jack Liu um who are Chinese coders they live in Austin uh lots and lots and lots of background I think they have about 20 plus years of experience each uh Brian Deary is our lead architect uh he's all both write the white paper and rough out the overall architecture design uh there's a new gentleman named Matthew Bing who's just joined our team on Monday and uh he'll be doing a lot of the server related coding um and then we have a whole team of advisors

um people like Steven Sprague who have a tremendous amount of depth in security and blockchain Technologies and other tools that we can sort of rely on to help us uh and help guide us on specific technical matters so you mentioned that there was a crowd sale taking place in February what's the timeline on development looking like right now um so Paul do you want me to answer that real quick yeah feel free okay um so there's basically four steps in the development cycle uh in our roadmap the first one was getting that proof of existence piece right uh that was in place um this summer um The Next Step was basically building the factory chains and making sure that

every factum entry can basically talk to the other fact and blocks so you can chain those records together we have that in place um they're building the apis right now for that and that's going to be released in mid-november along with that version 1.0 of the white paper that we're finalizing right now so pretty soon within the next few weeks developers will actually get to play with factum using the API calls on a test server so they can sort of experiment with it and start seeing like start building the kinds of applications that they want to develop for um in early 2015 it's probably looking like about January we'll have in place the more beta version of it which isn't

going to include the Federated server model that Paul described and also the tokenization mechanism like who gets what tokens and and at what rate um so we'll release that in early 2015 prior to the crowd sale cool well all right this is super fascinating I'm really excited we've had you guys on because I think this is a this is one of the most exciting projects I think that I've come across now there's one question I want to ask about also partially uh for selfish reasons because it was nice to become meet up in Berlin and I'm giving a talk I'm giving a talk on Tuesday about side chains so I'm thinking a lot about that

and I'm really curious what do you guys think um assuming side chains work out and they sort of live up to their promise with that in any way uh effect factum uh no what's really cool about the way side chains is building their project um is that uh factum can lay right on top of those side chains just as easily uh you know factum just writes hashes into a blockchain so if it turns out that side chains evolves to be you know blockchains first or you know side chains for specific functions um and they want to run factum tools on top of those piece of cake factum is blockchain agnostic and in a similar

sense like if it turns out that ethereum builds a really robust blockchain and people want to do interesting projects on top of that blockchain you can use factum for that too so um the tools that we're building fit really beautifully into the ecosystem as it evolves foreign fact them and have like you know effective ethereum effective side change back in Bitcoin or could it be one factum that sort of simultaneously runs on all those systems you could write into the fact and protocol to write to multiple blockchains right Paul yes uh well the the observation is that factum doesn't actually move value natively I mean mostly it's a it it's an immutable

Ledger and so it's the client that decides what to pass into factum and so if I'm if my proofs are running down into Bitcoin that's that's fine if their proofs are running down into ethereum that's fine but but factum itself doesn't interact with either um if the side chain protocol yeah well when that's in place we can actually create sidechain uh side chains that are running in factum it may require us to add um a little more code into our system to handle those chains differently because uh we have to we would have to have that

chain conform to the uh specifications of side chains but that would allow someone to actually move Bitcoin value into a factum chain where it could um have expanded um uh protocols built on bitcoin and then have the Bitcoin value come back into uh uh Bitcoin you know so if Bitcoin moves into factum it bounces around in fact and then it moves back into the Bitcoin uh protocol so uh so basically I think the side chains um is a incredible opportunity for factum

um that's the way I look at it could be a type of side chain almost yes absolutely I think I think David made a pretty strong point last week about you know the need for inoperability between uh between all these different protocols and uh perhaps when that inoperability begins really to be a sort of a default feature in all uh all these protocols um then we'll really start seeing a lot of interaction between them yeah absolutely and uh yeah to build on David's point the the more interactive all these Protocols are the more likely

they are to be adopted right you know we want to play with uh protocols that play nice in the same ecosystem yeah I mean one thing that that he had mentioned that I hadn't really thought about earlier is uh you know the the idea that we sort of see these protocols as being in competition with each other when in fact they're not they should be learning from each other and yeah and if you think about it and we we could imagine a future where you build an app or you build some piece of software you build a service that uses multiple components you could be using fact and for one thing you could be using ethereum for something else you could be using uh counterparty or you could be using colored coins and I'll have and have that all built into one piece of

software uh and the inoperability allows for Value to move from one to another yeah absolutely and I think that's a really good way for this the ecosystem to evolve um Everybody Plays nicely together so we're almost at the end of our show so we uh yeah before we wrap up um is there something else you guys want to briefly mention or talk about oh um we've really covered a lot and on the other hand we could go for another hour if you wanted to there's uh there are a lot of

ramifications to the protocol and a lot of interactions and um yeah we we would encourage people to go to thefactum.org and learn more about factum and there you go we're uh definitely read the white paper yeah absolutely uh as I mentioned uh on the 17th we'll be releasing that version 1.0 the white paper um look at it read it we're open to feedback it's not just open source but it's also open development so we're getting all the technical thought leaders and all the really smart people that we know to read it give us feedback push back on some things we want to make this a project that uh people are

excited about developing on and uh the first step is that they uh they read that paper and then they give us the feedback that we need to move it forward and where can people find the paper um that'll be on factum.org as of the 17th um and it's going to be in the GitHub repository also okay so that's uh github.com factum project now just to be clear there is another I mean there's a previous white paper called notary chains uh not to be confused with that paper it is fact and projects and you find it there in the Phantom docs yeah correct and uh when we go to release it we'll make sure that all the notary change stuff is totally cleaned up yeah we'll also add it to the uh to the show notes episode.com fantastic

all right gentlemen inside and we'll definitely tweet about it um well thanks so much guys for joining us today and that was super fascinating really interesting and I'm extremely excited to see how this turns out and also look forward to reading the white paper again when it's kind of in a wrapped up nice uh and clean form um so thanks so much fantastic thank you we really appreciate the time thank you very much well and uh thanks so much also to our listeners for listening uh it was a pleasure as always if you want to follow us on Twitter we're at Epson BTC you can also uh subscribe to our newsletter

which goes out every Friday and you can do that at Epson bitcoin.com newsletter you can also donate to us at bitcoin.com tips and uh leave us like to interview so people can find the show and let us know what we're doing well and what we can still improve so thanks so much and we'll be back next week with actually we'll be doing we can announce that as well now we'll be doing an episode on gems is that right Sebastian we will do yeah go ahead no it's uh we will do the episode with uh uh Ariana Simpson of Pico I think

right so we've got Ariana Simpson and gems coming up in the next few weeks so uh soon on the Twitter uh feed and also on our Google Plus page we'll be announcing that there okay well thanks so much and we will thank a wonderful day thanks again thank you