Massive Potential: Facebook Could Take the Lead in Digital Currency Markets
Social media giants are launching platform-internal digital currencies. Their competitive advantages over existing projects could speed up digital adoption.
Facebook has kept its efforts to create a digital currency rather secret. According to insiders, the project team is locked away in an office with separate key-card access so others cannot get in. Nevertheless, some limited information has leaked to the public and sparked excitement among the blockchain community; for good reasons. With Facebook, another key tech player is entering the arena, bringing in additional technological know-how, and most importantly, a massive user-base.
Facebook and Telegram are gearing up for launch day
We don’t know what exactly Facebook is up to, as the company has not published an official statement. However, we do know Facebook has been preparing this for a long time.
“Libra,” that’s the project’s codename. According to Bloomberg, Facebook’s digital currency is going to be a stablecoin based on a pool of different assets. According to the Wall Street Journal, Facebook has been seeking up to $1bn investments from different companies to create the collateral to back up its currency. Keeping a stable value, the currency would not be attractive to speculators, allowing consumers to hold it and pay for products and services without worrying about the value of the coin rising and falling.
While Facebook’s Libra Project is undoubtedly the most anticipated, other social media networks are undertaking similar efforts. Telegram sent a letter to its investors stating that the preparations for its digital currency were 90 percent completed. The Telegram Open Network (TON) is expected to launch by October 31st 2019. In April, Telegram launched a private beta testing of its TON blockchain. According to two anonymous testers, the blockchain demonstrated “extremely high transaction speed.”
Likewise, the messaging services Signal and the two largest messengers from South Korea and Japan, Kakao, and Line have announced their own digital currency projects.
Social media platforms can make digital currencies available to hundreds of millions of users
Eric Meltzer, a co-founder of the cryptocurrency-focused venture capital firm Primitive Ventures, says, “It’s pretty much the most fascinating thing happening in crypto right now. They each have their own advantage in this battle, and it will be insane to watch it go down.”
Social media-internal payments systems have already proven successful. The most prominent example is Wechat in China, which operates a hugely popular payment system inside of its messaging service.
If successful, social media firms, in particular Facebook, could create a serious competitor to Bitcoin – or even bypass Bitcoin altogether and take over the market lead. As of March 2019, Facebook has 2.38 billion monthly active users, including connected services such as Whatsapp or Instagram. Telegram has 300 million worldwide users. In comparison, there were around 32 million Bitcoin wallets set up in 2018.
The reach of social media platforms far exceeds the backers of earlier digital currencies. Their messaging services are also popular throughout the developing world, where the value proposition of digital currencies is even greater than in developed economies, due to unstable domestic currencies.
More resources to tackle technological and regulatory challenges
Despite their massive user base, Facebook and others will face the same regulatory and technological roadblocks that have so far hindered the mainstream adoption of Bitcoin.
However, social media firms are better positioned to tackle these challenges. They have more lobbying power and superior finances – Telegram, for example, raised a whopping $1.7 billion to fund its digital currency project. They also have an enormous knowledge pool and can easily attract talent. Facebook’s blockchain efforts, for example, are led by David Marcus, the former president of PayPal.
No doubt, this won’t just be just an additional gimmick or a marketing stunt. Facebook is up to something big that could change the digital ecosystem. Insider sources say Facebook might roll out Libra in early 2020. Supposedly, the company has already held conversations with digital exchanges about listing the coin. Earlier this month, Facebook has registered a subsidiary called “Network Libra” in Geneva, Switzerland.
Facebook’s currency will not be completely decentralized and it won’t be based on the same principles as Bitcoin. But eventually, most consumers don’t care much about the degree to which a currency is decentralized. People want a practical solution for their everyday needs. And Facebook could deliver that.