Whitepaper - Factom With Cover

Using Factoids to Purchase Entry Credits
Factoids are the main internal scarcity token used to moderate and reward the system actors.
The right to put Entries into Factom is represented by Entry Credits. Factom separates the two
value-holding mechanisms, as they serve different purposes. Factoids can be converted into
Entry Credits, but not vice versa.
Factoids are implemented in much the same way Bitcoin is implemented, allowing for multisignature
security, multiple inputs, multiple outputs, etc. Factoid transactions are managed on a
special Factoid Chain. This Factoid Chain is handled more restrictively than other Chains.
Entries in the Factoid Chain must be valid Factoid transactions, or the Factom Servers will reject
the Entries.
Factoids are included into the protocol to completely decentralize Factom, and to reduce bloat
and spam in both Factom and Bitcoin. Factoids can be converted to Entry Credits in the
protocol, and payed out to Factom servers from the protocol. They also help to bind consensus.
If consensus is lost, then the Factoids will fall in value.
The conversion of a Factoid to Entry Credits will be done via a special purchase transaction on
the Factoid Chain. This purchase transaction will include:
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An Output directing a Factoid amount to be converted
The public key that is to receive the Entry Credits
The Entry Credits, once purchased, cannot be transferred to another public key. They can only
be used to pay for Entries or vote for Federated servers. This greatly reduces their value to
thieves, since they cannot be resold. Entry Credit private keys can be held in low security areas
with minimal risk.
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