BlockTime #4 – What’s The Use Cases For Blockchains Such As Factom?

Michael Tidwell: As we talk about blockchain when you don’t want to trust people, what’s an industry that can benefit from a blockchain like that?

Tai Zen: That’s very simple.

For example, when my son was born in Dallas County, Texas, for anyone that’s listening outside of US, in that city, we had to pay $25 to the county clerk’s office to get a copy of the birth certificate.

If they use a public blockchain to create a birth certificate when my son was born, then hash it and send 1 Satoshi from the hospital network into the Dallas county’s private blockchain, that will verify that my son was born on that date and time and everything.

In the future, for the rest of his life, whenever he needs a copy of a birth certificate or anything like that, he can just go to the blockchain and point to everyone that there’s the hash.

Michael Tidwell: Whether it is public blockchain or private blockchain?

Tai Zen: Well, it’s a private blockchain because the blockchain is run by Dallas County.

Mike Casey: It is publicly viewable, but privately run by the Dallas County

Michael Tidwell: So why do you need a blockchain for that if the county trust itself?

Tai Zen: because it reduces cost. Imagine anyone can come there and do it for free, but now I have to pay $25.

Michael Tidwell: Why not just make a view for a normal database?

Tai Zen: You can, but they’re not doing it. They might do it on a technology that has a lower cost.

Leon Fu: Another use case for that is for land titles. This is something that Factom is going after.

Michael Tidwell: Let’s talk about that.

Tai Zen: They expect us to disclosure about Factom.

Michael Tidwell: Are you the investor in Factom?

Leon Fu: We are first and foremost investors, So if we’re talking about something, just assume that we’re talking our book. That’s what we’re doing.

For example, even in America, when you go buy a house, you have to buy something called title insurance. That’s a major cost of the house.

Now, why do you have to buy title insurance? Because it’s possible that you’re buying a title that isn’t clean.

Supposedly they keep records of all the titles in their jurisdiction, they’re not entirely sure if somebody has a claim on that title.

Mike Casey: They may take out another mortgage

Leon Fu: Or no one is updating the title.

So there’s a thing called title insurance. It’s not even in third world countries. It’s even in our country, where you have this extra cost because no one has actually been sure about what is the status of a title.

If you think of a title as a ledger, no one has even really entirely sure about what is the state of the ledger.

Now think about a place where the government is more corrupt than ours.

Michael Tidwell: You are saying there’s a more corrupted government than the US

Tai Zen: Let’s just use my family as an example.

You asked earlier why someone would need private blockchain for if they trust each other already.

Let’s say the Dallas County which anybody can view, but here’s the problem.

I was born in Vietnam. I didn’t leave Vietnam until I was 7 or 8 years old. I grew up in a very small village. One day, I asked my uncle how long it took to drive to the village. He looked at me and he was confused. He said I could stay on one side of the village and just yelled at someone on the other side and talked to him. I didn’t need to drive.

What happened was when the communists took over, they took over 3 of my grandfather’s, houses. They just seized and confiscated it when they came in and took over the whole south.

Then, 20 years later, the only reason we were able to get the property back when they decided to give it back to its rightful owners was that lived in a such a small village that everybody knew each other. They agreed that that property belonged to my grandfather.

Mike Casey: Village blockchain,

Tai Zen: Exactly. When they agreed that that property belonged to my grandfather, which he was no longer there, it went to my grandmother, who was still alive at that time.

Then when she passed away, she passed the properties onto my little brother who was still in Vietnam.

Just think about this for a moment. What happens if the village blockchain wasn’t there. Imagine that instead of having a few hundred people live in that village where they can come to an agreement on who owns what, it was the capital of that time, which was Saigon or Ho Chi Minh City, where it’s bigger than the city of Atlanta that we’re in right now. How would you come to a consensus that that property was owned by my family?

Michael Tidwell: May I ask a question since we’re talking about Factom. Why can’t we just use a Bitcoin for this? I’m just curious

Leon Fu: As we know Bitcoin transactions are very expensive and getting more expensive by the month. What Factom allows us to do is basically they’re layering their own blockchain on top of Bitcoins.

Michael Tidwell: it’s actually using Bitcoin?

Leon Fu: it’s anchoring on the Bitcoin.

They do have the federated server where they’re kind of centralized because right now just Factom servers are updating the Factom blockchain.

However, to prove that they didn’t just go and change their database, they actually take a bunch of their blocks and anchor them into the Bitcoin blockchain, so we can reference it back to the Bitcoin.

Tai Zen: The other thing on top of that is the way Factom technology works. It’s not dependent on just Bitcoin.

Michael Tidwell: you can make anchor on any blockchain?

Leon Fu: They can anchor that into Ethereum or anything.

Now you’re asking me why you can’t do that. If you need to anchor millions of hashes into the Bitcoin blockchain, that is not going to happen on Bitcoin.

Michael Tidwell: Tierion? I will tell you what I know and maybe you could answer that.

There is the idea of making a Merkle root and then combining a bunch of hashes up into a parent. Then, you have one route that represents all the underlying data. After that, you just put it into the Bitcoin blockchain.

Another system is like a federated server… I don’t really know who holds the data with Factom. Maybe you can educate me on that.

However, as far as those are the actual raw data, maybe that’s still the customer that has to hold onto the data and improve that it’s been hashed in a certain time.

Leon Fu: Well, I don’t know too much about Tierion.

Michael Tidwell: I would call it a central service that you have to trust for like 10 minutes until it writes to the next block.

Leon Fu: Basically you do have to trust it for a certain amount of time?

Michael Tidwell: Yeah. You have to trust it until it gets to the next block

Leon Fu: own Let’s say I have these hundred hashes I need to store. I do understand that it can hash all of that and put 1 hash.

Michael Tidwell: So how do you keep track with Factom?

Leon Fu: because they lay a Factom blockchain on top of Bitcoin.

Michael Tidwell: How do you know what your address on the Factom chain is.

Leon Fu: Well, because you know which block it was in.

Michael Tidwell: Who keeps track of it?

Leon Fu: Okay. The Factom server does that. Right now, it’s a central server, but this next release, the milestone 2, they’ve been working on is to go to a federated server model where that database is not going to be distributed among a group of servers.

Michael Tidwell: Then you still have holds your own data, but they will hold onto the hash information.

Leon Fu: Yeah. There’s even an app where you can upload these hashes into the Factom blockchain. That’s where it’s being stored. It’s still being stored as a layer and application layer on top of Bitcoin.

Michael Tidwell: Tierion is doing something similar, but it’s just bypassing the blockchain and making an API call to Tierion, then it ‘ll just do that for you and. Then, it sends you back your receipt that you can prove it belongs in that Merkle root.

Leon Fu: You hold that on your own? So they’re actually storing it on their own servers here, which they’ll serve that information to me and I don’t know have to hold on to it.

Michael Tidwell: You should hold on to your proofs.

Leon Fu: Yeah. However, you could also publish these. I mean Factom published these proofs. They’ve done this with some books and…

Michael Tidwell: To me, it seems like a lot of overhead to have a whole Factom blockchain to be able to peg stuff against the real secure blockchain.

Obviously, it seems like Factom’s use case is pegging stuff against other blockchains. They’re like a helper service that gets you there. Do they use Factoids or something?

Leon Fu: Yes, Factoids.

Michael Tidwell: Is it really worth all that overhead if you can just make an API call to the service that we’ll just do it for you?

Leon Fu: Ultimately, I think their vision is to become a fully decentralized blockchain. Right now, it’s not there yet. They’re taking 1 step there with this federated server model.

Michael Tidwell: He’s been dying to ask a question.

Tai Zen: I want to add this so that your listeners can understand. You’re asking a valid question: why do we have to use the Factom service or technology when you just write it yourself directly there or use Tierion?

Michael Tidwell: Yeah.

Tai Zen: Here’s a thing. For an individual or a small business, that’s doable. However, if you look at a place, let’s say they have contracts with the Homeland Security, Homeland Security is not going to go and do that. They would rather outsource that to someone else that knows how to do that to do it for them.

Leon Fu: I don’t know much about Terion. I can tell you a lot about Factom, but I can’t really compare it with the others.

Mike Casey: Okay. Let’s just move on. What are the other big use cases?

Michael Tidwell: We will talk about proof of existence.

Leon Fu: What I can tell you about Factom is they’re going to focus on mortgages this year. I think that’s going to be major.

Mike Casey: I used to work in the mortgage industry.

Leon Fu: Sure.

Mike Casey: So good luck.

Leon Fu: I didn’t say they will succeed. I’m saying that this is one area of focus for them. They explained that right now mortgage-backed securities is one of the reasons we had the whole housing.

However, there’s entire paperwork that goes with mortgage-backed securities. It’s very difficult to trade them because every time they’re traded, the buyer doesn’t know whether this person has the right credit score and all of the supporting documents.

If you could just know that all of this work that was done before and the integrity of that work, it can move with that security and you have this hash if you hash all of that.

Of course, you can’t store all those documents on the blockchain, but you can store hashes of them.

That’s a big use case for Factom

Michael Tidwell: I have a question about Factom before we leave this topic.

Mike Casey: 14:41 – 14:44 she, as we know, invented that whole instrument.

I think that is probably an ideal use case for that. I don’t know exactly how it’s going to be implemented, but I know it one day.

Michael Tidwell: Yes. Factom uses 15: 02?

Leon Fu: well, it’s a federated server.

Michael Tidwell: so Factom itself isn’t a blockchain? I’m confused.

Leon Fu: It depends on your definition.

Mike Casey: It depends on your definition.

Michael Tidwell: Earlier we said blockchains are immutable and we’re using proof of work.

Leon Fu: What makes it immutable is that they’re anchoring. It’s this whole idea. They’re proving that they have a hash and it’s being anchored to Bitcoin so that you can always reference their bots.

Mike Casey: It’s anchored to a blockchain, but itself isn’t a blockchain, right?

Michael Tidwell: It’s almost like a Factoid asset, like proof of federation.

Mike Casey: proof of federation?

Leon Fu: Anyway, that’s the whole idea. I think they’re trying to reduce the cost of making entries into the Bitcoin blockchain.

If you ask me like what is factom I’m trying to accomplish, I think it’s an order of magnitude cost reduction to at least the anchor data into the Bitcoin blockchain.

Mike Casey: Yeah. I would put it like the same thing as like a Tierion 16:29. It’s an outside service. It just anchors itself to the blockchain. That’s probably going to mutate over time because you said they’re going to try to move to the federation. Is that what you said?

Leon Fu: Yeah. They’re moving to a federated server instead of just a central server.

I know that the milestone 2 is moving to a federation of servers.

Mike Casey: Do you think that ever make it to a decentralized blockchain.

Leon Fu: I know they’re trying. I know they’re moving in that direction.

Mike Casey: Will it be a blockchain?

Leon Fu: We will get very philosophical.

Tai Zen: Here is the thing that you have to remember. When we look at a cryptocurrency project, we don’t look at it as to whether or not Factom is better than Tierion or vice versa, but we look at what the profit potential is.

You are not going to make a change in this world until you the money to do it.

Michael Tidwell: Let’s talk about investments. What are you willing to share as far as your strategy.

Tai Zen: Why don’t you want to share with them the biggest miss we had last year?

Leon Fu: We have 2 different styles. I’m more of a fundamental analysis kind of guy. Tai is a technical one. He’s looking at the lines, supply, resistance and doing all the charts looking for, I would say, a tactical entry and exit points based on the market action. I think that’s where Tai focuses more on,

I’m more of a valuation guy. I look at these projects and I tried to put a value on it.

Mike Casey: Would you say you’re more long-term and he’s more short-term?

Leon Fu: Absolutely not. I am also short term too.

I’ll give you an example of a short term call.

When Ethereum Classic first magically appeared on Poloniex, I thought it was a scam, but I kept watching it. After that, because there was so much volume, I made a valuation call. I said it’s trading at 50 cents now. That gives it this valuation. However, if any exchange picks it up, it’s going to double or triple.

Michael Tidwell: At what point do you know this is not a scam? That’s really interesting.

Leon Fu: That’s an example of a valuation call.

This is what the market is valuing it right now, but in the near term, these are the things that might happen that could change that fundamental value. Now all of a sudden, there’s more liquidity. Therefore, you could instantly get a double or triple right in a very short period of time. That’s using fundamental analysis in a short time period.


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