It has been discovered this week that Facebook and other large social media platforms (Telegram and Signal) have been developing their own cryptocurrency coins. The news surfaced last week when five anonymous Facebook employees informed the New York Times. The Facebook coin project is so far underway that Facebook has been in discussion with various cryptocurrency exchanges regarding selling their coin to consumers.
In light of the recent news released about the JPM Coin, what does the Facebook Coin mean for Crypto? Is another cryptocurrency a good thing for the industry or a bad thing for the industry?
Some cryptocurrency enthusiasts claim that any news is good news. That might have been the case 2-3 years ago. But today, crypto is gaining traction and now I believe that we must differentiate our news from good and bad.
That being said, regardless of whether Facebook will be starting its own cryptocurrency or adopting existing cryptocurrency (or both), I believe that this is excellent news for the cryptocurrency community.
I should be clear, throughout this article I repeatedly say Facebook/Facebook Coin – keep in mind that the Facebook Coin will be first released on the WhatsApp messaging platform owned by Facebook. It is likely to be expanded to include the Facebook platform as well as the Facebook owned Instagram platform too, in the coming years.
The Facts Behind the Facebook Coin (so far)
- Facebook is developing a cryptocurrency coin that is reported to be released in the first half of 2019.
- It will initially be rolled out to WhatsApp users to instantly send the crypto-coin worldwide to family, friends and coworkers.
- Facebook is already in discussion with cryptocurrency exchanges (?regarding coin sales?)
- In 2018 Facebook had 2.7 billion monthly active users… and rising (that includes all of its platforms: Facebook, WhatsApp and Instagram)
Questions about the Facebook Coin
The news and few answers regarding the Facebook coin raise many more questions than it answers… For starters, what exactly is Facebook working on?
- Is it a truly decentralized cryptocurrency?
- Will all the coins be pre-mined? Or will there be a mathematically pre-determined inflationary or deflationary rate?
- What will be the consensus method? PoW? PoS? PoC?
- Will it be a stable coin?
- If so for USD?
- Some other fiat currency?
- Or a basket of international fiat?
- A basket of cryptocurrency?
- A mixed basket of international fiat and cryptocurrency?
- Will it enable smart contracts?
- Will it be its own original cryptocurrency or build on top of Ethereum/EOS/BTC/XRP?
- How does the Facebook coin fit into the regulatory landscape? Will it grant some equity in FB stock (like an STO)?
Facebook is looking at pegging the value of its coin to a basket of different foreign currencies, rather than just the (US) dollar… Facebook could guarantee the value of the coin by backing every coin with a set number of dollars, euros, and other national currencies held in Facebook bank accounts“Facebook and Telegram are Hoping to Succeed Where Bitcoin Failed” Nathaniel Popper & Mike Isaac, NYT, 28 Feb 2019
We do not have clear regulatory clarity for cryptocurrency yet in America and in most places in the world. Additionally, Facebook is a very large public company with shareholders to be responsible
Moreover, in recent years the social media giant has had some scuffles with the US government regarding ads and questionable propaganda during election campaigns, as well as the general public sentiment of distrust due to accused “spying” on people’s lives and selling their data to profit from advertisements.
Given this environment, I wonder how much controversy a Facebook Coin might stir up. A corporation issuing its own currency is not new (banks did it 200 years ago), although it has not been done in a very long time, and it was only done by banking corporations.
Facebook Coin’s Impact on Cryptocurrency Adoption
Earlier cryptocurrencies such as the original Bitcoin, followed by the likes of XRP, Ethereum, Litecoin, EOS, Tron, Cardano, Maker, Monero, XLM, IOTA, and hundreds (thousands) of other cryptocurrencies had to grow their user base organically from scratch.
Bitcoin started out literally between two cypherpunk users on a dark corner of the Internet, and it took 10 years to blossom into what it is today. Yet, a decade later, while immensely successful,
With Facebook’s 2.7 billion user base, if it were to release a cryptocurrency it would instantaneously be able to reach a third of the world population (based off an estimated world population of 7.5 billion). Comparatively, there are approximately 23.5 million Bitcoin wallets. Keep in mind that most people have more than one Bitcoin wallet, so we can safely assume that there are probably less than 20 million owners of Bitcoin.
Being able to theoretically, immediately engage 2.7 billion users in its cryptocurrency, and integrate a cryptocurrency hot wallet with its social media accounts, a Facebook coin would serve a huge benefit to advance cryptocurrency adoption. With an integrated mobile wallet on the Facebook mobile app, many users would immediately be able to pay for goods and services with Facebook Coin (and potentially other cryptocurrencies).
Moreover, being a well known entity, when/if Facebook follows through with releasing its own cryptocurrency, it will likely be trusted by most of its users. Additionally, merchants would be more likely to trust a Facebook coin over something more obscure such as Monero or Zcash, EOS, Tron, etc.
Once users get a taste for
Imagine if 10% of Facebook users explored other cryptocurrencies once the Facebook coin is released? That would be ~270,000,000 users. That is more than 10x the currency estimated Bitcoin/crypto user base.
Facebook’s entrance into cryptocurrency should be highly beneficial to the mainstream cryptocurrencies of Bitcoin, XRP, Ethereum, Litecoin, BNB etc.
Facebook: Big Data, Profit, Influence, Money… Power
I’m about to broach a complex topic here, but it is perhaps the most interesting piece in this whole post thus far.
Facebook is a wildly successful Internet company. Mark Zuckerberg took full advantage of the Network Effect/Metcalfe’s Law and engaged the globe on his social media platform. With over 2.7 billion active users, it is larger than India and China (each with about 1.4 billion citizens), and several times larger than the United States.
Facebook has a few key elements that make it such a formidable force:
- Massive user base (>2.7 billion people)
- Massive amounts of data on each user
- Profits ($10 billion 2016, $15 billion 2017, $22 billion 2018)
- A platform
- Algorithms combined with artificial intelligence
- Social hacking – Selective information/ advertisements/ endorsements
- Power – “Central Bank” like Power
Governments have populations to govern, so they develop sets of laws that function as societal rules for a civilized country to function. It enforces those laws with law enforcement. Governments require money to function, and earn their money via taxes and printing certain amounts of money each year, as well as having influence over central banks. Governments gather information from their citizens via tax information, public poles, elections, and census surveys.
In the past, certain news outlets would often lean towards one political agenda or the other based on the company. CNN tends to be more liberal/democratic, while Fox News tends to be more conservative/Republican. Now this site is NOT about politics, it is only about cryptocurrency. In this particular case they intersect.
News outlets were just that. News outlets. They had a one-way information channel, sending us the news to our televisions or newspapers. They guessed what we wanted to hear based on current events and news items that tend to be popular. News outlets also do not have an intimate connection to their viewership.
Facebook (and other social media platforms) and two way systems and are intimately familiar with their user base.
In a way, Facebook is much like a country with a much tighter grip of control over its citizens (users). Facebook has a virtual livestream of data about each and every user. It has a massive user base and gargantuan amounts of information on each person, groups of people, and can gauge the general sentiment of its users.
Facebook has massive profits, bringing in $22 billion USD in profit in 2018, and growing each year. Having huge stockpiles of cash grants a corporation huge flexibility in its ability to engage in projects and make advancements.
Moreover, Facebook’s largest asset is its influence capabilities. With all of the data it collects, its highly used platform and artificial intelligence technology today, it can socially engineer posts, and advertisements to guide/influence the general public, ESPECIALLY the uneducated general public, which unfortunately is the vast majority of the public (but not you, you well-informed reader 😉 ).
Furthermore, it would seem that Facebook is constructing what could be its second most important asset: a cryptocurrency and the ability to be its own central bank. There is no central bank in the world who’s issuing fiat currency directly impacts 2.7 billion people. Yes, the USD is the world reserve currency, so it would be Facebook’s largest competitor in that space.
Facebook Coin could potentially be the world’s largest currency.
Money in itself is a complicated technology/social construct. It conveys value, power, freedom, influence and more. To be able to control and issue a widely adopted sound money currency has huge implications for the issuer’s authority, influence and power in the world. What happens when this power is making its way into the hands of corporations? It might be good. It might be bad. I honestly do not know.
Despite the supposed insider statement that Facebook is looking at a basket of fiat currencies, we are still woefully unaware of the details around Facebook’s coin there is obviously speculation out there. I think the two strongest options for a Facebook Coin (FBC) would be:
- Its own native original cryptocurrency, decentralized.
- A combined basket of international fiat and cryptocurrency
- Fiat: USD, EUR, Yuan, Yen, British Pound
- Crypto: BTC, ETH, XRP, LTC
I believe that the first option of its own native, decentralized cryptocurrency would be optimal since I believe that fiat will greatly decrease in value over the coming decades. Therefore, holding a basket of fiat seems like a poor choice as a stable basket currency. Moreover, its own native, decentralized coin would grant it a new beginning and entrance into the cryptocurrency space. However, holding sound money options such as BTC, ETH, XRP, LTC and Gold makes good sense as well.
Markshire Crypto Conclusion on the Facebook Coin
Given that Facebook anticipates Facebook coin to be released by mid-2019 we can expect a lot more news and answers on this topic shortly. It is early March as I write this post, so in 3-4 more months, we’ll hit the halfway point of 2019 and I’ll be sure to write updated posts as the weeks progress!
I should reiterate, that the Facebook Coin will be released first on WhatsApp, and then likely eventually expanded to its social media platforms “Facebook” and Instagram.
I personally think that Facebook should adopt existing cryptocurrency coins such as Bitcoin, Ethereum, XRP, Litecoin, Monero, Dash, BNB, Tether, DAI, etc. The adoption of existing cryptocurrencies will have a hugely beneficial impact on adoption and price movement. And it would not dilute the cryptocurrency space.
Although, the benefit of creating its own Facebook Coin cryptocurrency is that it is a fresh start and can build the trust of the Facebook user base, which would then by way of association build trust in the broader cryptocurrency community, likely leading to greater adoption and interest in the main cryptos (Bitcoin, Ethereum, XRP, Litecoin, BNB, etc).
It is entirely possible that Facebook will release its coin (be it a basket of fiat or original crypto) as well as onboard native cryptocurrencies such as Bitcoin, Ethereum and XRP so that all can be used on its platform. Realistically, that would not be deployed until there is clearer regulation and highly secure and trustworthy custody solutions.
As my final statement, I am highly optimistic about the Facebook Coin, regardless of how it is constructed. I think that it will bring the Average Joe into more awareness of the cryptocurrency industry and allow them to get their feet wet with a trusted corporation.
There is another great article on Facebook Coin ideas and speculation, written on Medium, ‘Facebook Plans to Become World’s Biggest Central Bank?‘
We do not know the details around the Facebook coin, but the timeline is short (by mid-2019) and so I plan on posting again with more information on Facebook Coin. Stay tuned!!!
Please feel free to drop a comment, question, or note for me. I love hearing from my readers