Factom – Bitcoin Blockchain Savior?

Bitcoin may be a victim of its own success. The blockchain is now around 28 gigabytes, and as more people jump on the Bitcoin bandwagon, it will only grow faster. With new Bitcoin technologies like Omni and Counterparty on the horizon, letting us put all kinds of things on the blockchain, scalability has become a concern.

Bitcoin’s blockchain is not just for bitcoins anymore, and many fear it’s running out of room. It increases in size with each transaction, and with the current maximum block size, the network can only support seven transactions per second. This has caused a serious debate about what’s called “blockchain bloat,” where some people want to put domain names, trademarks, and even physical “smart” property on the blockchain, while others want to keep it pure.

Since the Bitcoin network is the largest–and therefore inherently the most secure–neither side wants to leave and start their own blockchain. Thankfully, this is a false dilemma. The team over at Factom has developed a new software protocol layered on top of Bitcoin’s, which provides the best of both worlds.

Factom uses hashing–the mathematical process that supports Bitcoin–to take any data of any size and convert it to a numerical value of fixed length. Every minute, everyone’s data is hashed together to a single value, which is inserted 10 at a time into the Bitcoin blockchain in a single transaction. This takes upwards of all data on the planet and crunches it to a tiny size.

You can’t do this in reverse, but it’s trivial to prove if some given data was used to make the hash. Bitcoin miners will preserve its record for eternity, so if anybody tries to send you a false document or coins they don’t have, Factom will tell you immediately.