Interview with Factom’s Chairman of the Board: David Johnston

In this interview, Clay talks with David Johnston about the Factom project, how Factoids interact with records on their blockchain, and David’s thoughts on a bitcoin hard fork.

Enjoy! Also, get ready for Back to Earth’s ultra-unique crowdfund coming up on April 26th!

In addition to providing strategic counsel to Factom, David is the Managing Director of the DApps Venture Fund, the first fund to invest entirely in open-source, blockchain and token-based projects. He also co-founded and served as Executive Director of BitAngels in 2013, one of the world’s largest angel investment groups. An avid entrepreneur and early adopter of emerging technologies, David has founded several enterprises in industries ranging from software to biotech.

Thanks for coming in David. I thought it would be nice to start with your background and how you got involved with crypto.

David: Well I’ve been a student of free market economics since 2007, and when a friend told me about Bitcoin in 2012 it aligned with my view of the world. So I converted my green pieces of paper into BTC and then started getting more and more into the space.

So you got some of that cheap bitcoin?

It was a good time in 2012.

How did you get involved with Factom?

Paul Snow and I were at the Miami Bitcoin Conference in January 2014 and talking about how to use the decentralized applications model, and he articulated to me the thing we really needed first was a general data layer for the blockchain. That was the birth of Factom.

I started funding Paul to work on the Factom white paper and the alpha and introduced him to Peter Kirby. Brian Deery joined shortly after, and Tiana Laurence shortly after that.

So you’ve been very important in helping expand Factom’s reach both from the beginning and now?

I’ve mostly helped with investor relations. I organized the seed round in 2015 and the Series A in 2016 for the company. Paul and Brian built the tech. Peter and Tiana did all sales and marketing. Now the team is 35 people from all around the world.

Let’s talk about the tech. Because when I last talked with you I thought I knew what Factom was, but I was wrong. I thought it was a means of verifying information on the blockchain, but it is a lot more than that.

Factom, at its heart, is a way of extending and scaling the blockchain to users who need millions or billions of records secured. And it does it in a way that extends Bitcoin’s core innovation “proof of the negative.” This is protection against double spends if you will.

The data structures of Factom prove you not only have correct data, they show you have the only valid version.

And so your customers are generally large firms that need to secure massive amounts of documents and data, right?

Correct. If you check the factom.com website you will see we recently passed 100,000,000 records secured to the blockchain.

100 million records is pretty amazing. What records are generally secured?

Mostly it’s high value financial records. But what’s worth securing to a blockchain is a good first question. [Some of the most useful records to secure are] assets, titles,  and mortgages.

It’s if expensive to audit, and has a lot of records involved, that is a pretty good indicator.

How do you convince a company not using blockchain tech to use Factom? I can’t imagine that is an easy task, as even now not a lot of people have heard about bitcoin or the blockchain.

Well it’s like convincing a company to get a website during the early days of the internet, even though they didn’t understand the internet protocols. It’s ok they don’t get the tech. They just need the benefits.

The ability to prove things to other companies who don’t trust your company without hiring expensive auditors is pretty compelling.

A factoid is the token that runs on the Factom blockchain. Can you explain how a factoid (FCT) interacts with the network?

It’s the anti spam token. You need to use some entry credit tokens, converted from Factoid software licenses to publish data to Factom. If there were no cost people would attack the network by publishing unlimited amounts of junk data.

You told me about  a guy who gave away free space to anyone, and people took advantage of it and uploaded a whole bunch of worthless documents just because they didn’t have to pay for the transaction.

Exactly. The entry credits run about one tenth of a penny and it turns out that is enough of a cost to deter bad actors.

So how do you verify the initial document or record?

We don’t. That’s a choice of the protocol. It’s data agnostic. It’s the application layer that decides what to publish.

Rather than try to solve that at the base layer, Factom secures whatever data is published in whatever format.

So it is at the publishing company’s discretion to publish accurate records.

Exactly. And they better [publish accurate records] because once it’s written it can’t be unwritten.

You can’t change history, but you can add new records. Think of it like an append only database. You can always add the new correct data, but you can’t pretend it didn’t happen.

So once the factoids are used to publish these records, what happens to them? Are they destroyed?

Yes, once used the factoids are gone.

Tell me about Harmony.

We just launched our Harmony software for the mortgage industry. You may have heard they had a little problem with record keeping a few years ago during the financial crisis.

Some of it was a fraud issue. But a lot of it was just poor record keeping. As in who owns what, how the loan was created, and how it was turned into a security.

So Factom could come in and stop the next financial crisis!

We are doing our best. If you saw the big short that’s pretty much what we are trying to solve for.

I wanted to ask you about your views on the Bitcoin hard fork, because you’ve been saying a hard fork is imminent for a while now. You summarize it rather nicely by saying that the bitcoin community is divided into two camps: Ones who believe bitcoin should be a global payment network, and ones who think it should be a secure store of value.

Right. That’s a good summary. It’s also a question of on chain scaling vs. off chain scaling. On chain scaling being the Bitcoin Unlimited view, and the off chain lightening approach being that of Bitcoin Core.

One of my main points is that if we look at what happened with Ethereum’s hard fork it was largely positive. The fork resolved a deep split, and folks got on to building things instead of arguing.

Right, the contentious issue was resolved by allowing the community to go separate ways.

Yes. That is a core belief of mine as well. Systems that are voluntary.

But ultimately, is there room for both chains? Ethereum Classic and Ethereum still appear to be direct competitors

I believe there is plenty of room. Systems that you can opt into and out of are much healthier than those which are based on a monopoly.

Technology specializes over time and that is ok. There is room for Java and Javascript. They do different things and have different strengths.

Today the Ethereum market cap is much higher than it was before the split.

Do you have a chain that you would prefer? Unlimited vs Core?

I’ll put it this way. I kept both my Ethereum and Ethereum Classic. I believe both have different values and will both do well over time.

I think the same would be true of Bitcoin Unlimited and Bitcoin Classic. It all depends on the use cases you want to focus on. If it’s massive off chain lightning transactions, then Bitcoin Core is great. If you want more on chain transactions, then Bitcoin Unlimited is preferred.

There are different trade offs to each. Security vs economic.

But ultimately a bitcoin hard fork isn’t the end of the world. If anything, it will only add more value to the bitcoin blockchain(s)?

I think it would be positive in the long run. It would show us a means of resolving difficult debates.

Thanks for popping in David, we really appreciate it!

You’re welcome.

 

This interview took place on March 28th, 2017 in the Back to Earth Community Telegram. It has been lightly edited to fit this medium.

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