Whitepaper - Factom With Cover

Appendix 4: Comparing Factom with Other Blockchain
Technologies
How Factom Differs from Bitcoin and Sidechains
Factom is very different from Bitcoin, and in fact very different from any current cryptocurrency
project.
Cryptocurrencies like Bitcoin implement a strict, distributed method for the validation of
transactions, where anyone can validate each transaction, and the validity of every input into a
transaction can be verified. Because each transaction is authorized via cryptographic proof, no
transaction can be forged. Each transaction can be checked for validity by verifying signatures
of each transaction, and the miners hold each other accountable for only including valid
transactions.
The Bitcoin protocol is transactionally complete. In other words, the creation and distribution of
Bitcoins through transactions is completely defined within the Bitcoin protocol. Transactions
(which specify movement of bitcoin) and block discovery (which move bitcoin via mining fees
and provide block rewards) are the only inputs into the Bitcoin Protocol, and nothing leaves the
Bitcoin Protocol. In other words, the 21 million bitcoins that will ultimately exist will always and
forever exist within the protocol. Pegged sidechains, when implemented, will provide additional
movement of bitcoin value outside the blockchain, while the pegged value is in stasis in the
blockchain.
The sidechains proposal describes a solution to increase the scalability of Bitcoin by allowing
value control to move off the blockchain and onto a sidechain. In the sidechain, many trades
can occur. Later, a cryptographic proof (not all the transactions in between) can be recorded in
the blockchain which moves the BTC out of stasis in Bitcoin. This proof would have to be
available to the Bitcoin miners, but the bulk of the transaction data would be left behind in the
sidechain.
Factom is in some sense attempting to increase scalability, but not by enabling more value
transactions, but by moving non-BTC transactions off blockchain. This would be transactions
that are not primarily intended to transfer Bitcoin value. For example transactions could manage
domain name registrations, log security camera footage, track the provenance for art work, and
even establish the value of show horses by documenting their history. Some of these do not
move a value at all, like transactions establishing a proof of publication.
Sidechains and Factom are both trying to move transactions off the blockchain, but to achieve
similar ends via completely different mechanisms. At some point, Factom will integrate with a
Bitcoin sidechain in order to take advantage of the atomic swaps from BTC to Factoids.
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