For the last couple of years, internet users have been gradually waking up to concerns about their privacy. Many are skeptical of social media in general, with Facebook under particular scrutiny for use and misuse of users’ data.
Facebook hasn’t only been talked about in terms of its privacy issues. People have long been speculating that Facebook might launch its own cryptocurrency. The cryptocurrency would potentially reward miners for working on the algorithms that keep Facebook running.
These two lines of thought come together in a recent post by Facebook CEO and co-founder Mark Zuckerberg. The post discusses a more private future for Facebook and includes references to incorporating more payment options.
What Did the Post Say?
Today we already see that private messaging, ephemeral stories, and small groups are by far the fastest growing areas of online communication. There are a number of reasons for this, Zuckerberg wrote in the post, published earlier this month.
Many people prefer the intimacy of communicating one-on-one or with just a few friends. People are more cautious of having a permanent record of what they’ve shared. And we all expect to be able to do things like payments privately and securely.
It’s not unusual for Facebook to talk about things like messaging in their communications. However, very few elements on Facebook require payment, and that allusion isn’t the last time it’s mentioned.
We plan to build [the future of Facebook] the way we’ve developed WhatsApp: focus on the most fundamental and private use case — messaging — make it as secure as possible, and then build more ways for people to interact on top of that, including calls, video chats, groups, stories, businesses, payments, commerce, and ultimately a platform for many other kinds of private services, wrote Zuckerberg.
…Significant thought needs to go into all of the services we build on top of that foundation — from how people do payments and financial transactions, to the role of businesses and advertising, to how we can offer a platform for other private services.
The messaging service WhatsApp, mentioned in the post, is also owned by Facebook. It’s focused around messaging and, like Facebook, it’s free and doesn’t really deal with business, payments, and commerce. To be clear, there is a WhatsApp Business app but it is still just for messaging and doesn’t involve payments.
So, where does all of the talk about a Facebook cryptocurrency come in, considering Zuckerberg never outright mentions it?
How a Cryptocurrency Could Solve Facebook’s Problems
For one thing, Zuckerberg is interested in the things that everyone else is interested in. Facebook has a long history of expanding into tech areas that don’t fit with their original focus. From buying VR tech company Oculus, to launching their own internal games, to the new Portal. The fact that we’re talking about cryptocurrency means that Zuckerberg is at least interested in it.
Further, as pointed out above, this post talks about payments a lot. That’s despite the fact that Facebook doesn’t really deal with payments from most users. Zuckerberg is (probably) human, so he talks about things that he’s excited about, even before they really come to fruition. Zuckerberg talks about new tech before developing it like you or I talk about a car before getting the loan. We saw the same kind of thinly veiled optimism before Facebook bought Oculus or launched Portal.
Finally, it makes sense to talk about a Facebook coin because a cryptocurrency would do everything that Zuckerberg talks about. Having its own cryptocurrency would allow users to purchase over and through Facebook. Having miners generate that currency by running the algorithms would create more privacy for users. Right now, Facebook has multiple data handling centers and they’re careful about where they are, to protect data from governments. How much safer would it be if individual miners crunched the numbers rather than these centers?
So what might a Facebook cryptocurrency look like?
A Precedent for Social Media-Based Crypto
Zuckerberg can pretend to not be talking about cryptocurrency all he wants. Ted Livingston, CEO of Kik, described a possible Facebook coin future in a recent Medium post.
Livingston begins with the idea of how Facebook might make money in a future based on private communications. Facebook, and most social media sites, have adds in the banners and margins. Most private messaging services, however, are reluctant to place adds in private messaging. If Facebook follows that trend, it could mean a big loss of revenue.
The only good way [Kik] found is with a cryptocurrency. By creating a cryptocurrency that is used as a medium of exchange in our app we can create something valuable like Bitcoin or Ether, said Livingston.
This allows both us and our users to make money by selling pieces of the currency as the economy grows and the currency becomes more valuable.
The company sold an initial volume to generate revenue and reserved a much larger volume for use within the service. However, Linvingston believes that Facebook will make a currency for everyday needs, like Chinese messaging service WeChat did.
In 2014 WeChat used the cultural phenomenon of red envelopes to get people to bring their money into WeChat. Instead of waiting to hand out envelopes of cash at special occasions, people could send virtual envelopes right inside their chats. Soon millions of people were bringing their money into WeChat, putting them into virtual red envelopes, and sending them all over the country, wrote Livingston.
WeChat allowed people to take their money out at any time, but they also added more and more reasons for people to keep their money inside: paying hydro bills, buying food, booking vacations, and more. Soon no one was taking their money out.
Could Facebook Coin Replace the Dollar?
Livingston argues that this model will be even easier for Facebook because of blockchain technology. The transparent and decentralized technology behind cryptocurrency wasn’t around when WeChat reinvented money in China, basically by becoming a cyber-bank. By using a blockchain-based stablecoin, Facebook, Livingston says, could effectively replace money for most transactions.
People who understand crypto might argue that this doesn’t matter. That because the value of a Facecoin is pegged to the value of a dollar, they are essentially just dollars that run on a blockchain. To me this is the most important part, said Livingston.
Not that long ago the world’s reserve currency was gold, where the value of a dollar was pegged to the value of gold. But then one day the US decided to unpeg the dollar from gold, paving the way for the dollar to replace gold as the world’s reserve currency. So here is my question: what will stop Facebook from doing the same?