Facebook’s New Crypto, Dubbed ‘Facecoin’, to be a Stablecoin
Corporate social media enterprise meets cryptocurrency? Following in the footsteps of Twitter’s recently announced plans for integration of Bitcoin’s Lightning Network into their platform as a tipping service, others seem to be slowly onboarding the blockchain train as well.
Facebook seems to be readying itself for an entry into the digital currency space, a story first reported on by Bloomberg in December 2018. Though not much is known about the project, it represents a sweeping about-face in the attitude that the social media giant has traditionally had about cryptocurrency. Facebook banned the advertisement of cryptocurrency and ICO-related products throughout much of 2018, before eventually reinstating them toward the end of the year.
In the last quarter of 2018, Facebook began recruiting blockchain-associated employees for a publicly undisclosed project. In the time that has passed since, much speculation has occurred as to why. In May of 2018, David Marcus (formerly President of PayPal) was hired as head of Facebook’s “blockchain initiatives department,” which also has not been discussed publicly in much detail.
Facebook is reportedly preparing to launch its own version of Bitcoin, for use in its messaging applications,WhatsApp,Messenger and Instagram.Could this Facecoin be the long-awaited breakthrough by a global technology giant into the lucrative market for retail financial services?
— Kripto haber (@Kriptohaber6) March 13, 2019
Facebook is preparing to launch its digital currency specifically for use in WhatsApp, Facebook Messenger, and Instagram. WhatsApp is the company’s encrypted mobile messaging app, which is extremely popular in India, where it has more than 200 million registered users. India also leads the world in remittances, with about $69 billion being sent home to India from workers abroad in 2017, according to figures published by the World Bank.
Individuals who were briefed on the Facebook team’s work stated that the company’s first product to be launched was likely to be a digital currency pegged to the value of traditional currencies. It has been suggested that “Facecoin,” as it has been nicknamed by the media, will be fixed against the combined value of the euro, U.S. dollar, and Japanese yen, rendering it a new type of stablecoin than those currently in existence. Users will likely be able to cash in and out of it in denominations of the fiat currency of their respective countries and sent cheaply (if not for free) between WhatsApp users.
In addition, and without much surprise, Facecoin will not be anonymous or pseudonymous like most other cryptocurrencies but rather directly associated with a user’s Facebook account. This means that while coin transactions will be stored in a blockchain, the blockchain will be maintained entirely by Facebook, with a permissioned mining structure (no mining outside of the company). Most major companies have shunned the integration of cryptocurrencies as a payment method, as by nature they cannot be controlled to a desired level, but Facebook’s stablecoin represents a sort of win/win compromise between those looking to use a cryptocurrency and those seeking to make a profit.
A much more interesting analysis would be about how FaceCoin will be a serious blow to Paypal, VISA, Chase and other banking industry players. Facecoin doesn't compete against crypto – it DOES compete and very strongly against the banking incumbents.
— Andreas M. Antonopoulos (@aantonop) March 7, 2019
On February 5th of this year, Facebook acquired its first blockchain startup company, Chainspace, suggesting that it is quite serious in bringing its plans to action. However, the veteran crypto community does not seem to be largely impressed with Facebook’s efforts, with media publications branding it as “just another exaggerated crypto project,” and everyday enthusiasts remaining highly skeptical over corporate influence in blockchain-related business ventures.
One member on the Bitcointalk forum went so far as to criticize multiple aspects of the latest breed of stablecoin, stating their belief that not only would it simply be a moneymaking venture but could actively be used against Facebook users:
“It’s a money making scheme for Facebook, nothing more.
It won’t be private or anonymous. All your conversions, trades, purchases and sales will be linked to your Facebook account. You will be letting them build up even more of a profile on you than they already do.
It won’t be decentralized. There is zero change Facebook and Zuckerberg will allow anyone but themselves to have control over it. I doubt it would even be based on blockchain technology at all, and even if it was, all the nodes will be controlled and ran by Facebook.
It won’t be immutable. You can better your bottom bitcoin that Facebook will retain the right to reverse or freeze transactions, freeze or close entire accounts and even seize coins. There is no way they will allow people to do anything shady or illegal on their platform, so the will hold on to the ability (because the coin won’t be centralized) to completely micro manage it.
This isn’t crypto. This is Facebook’s next money maker. Stay well away.” – Bitcointalk user ‘o_e_l_e_o’
Another forum member wasn’t sure why the idea needed to be brought to fruition in the first place, and chalked it up to being a ploy by Facebook to capitalize on the blockchain hype:
“Does it really make sense for Facebook to create a cryptocurrency for that? I think not.
If they create one with an own set of miners or validators (e.g. like Ripple) then they have to invest a lot in infrastructure, because blockchains are normally less efficient than centralized “non-blockchain” currencies.
If they create the coin on another platform – e.g. Ethereum, EOS or even a Bitcoin-based platform like Omni or Counterparty – then they don’t have this problem, but they would have to pay gas/transaction fees for every little “data dividend”. – Bitcointalk user ‘d5000’
In my opinion it would make more sense for them to create a centralized payment system like PayPal or PerfectMoney. The only reason to really use blockchain tech could be to profit from a “blockchain hype”, but imo the blockchain hype… is already gone.”
Entering the blockchain arena and launching its own coin will serve a dual purpose for Facebook. It will not only act as a revenue stream, potentially bringing in billions by adopting the lucrative remittance market, but will also help improve the company’s image among the cryptocurrency enthusiast demographic.
In the time since its Cambridge Analytica mishap in which data from more than 50 million users was leaked for unauthorized purposes, Facebook has seen a decline in users in the 18-34 year old range, which are among those most likely to consider cryptocurrency to be a valuable technology. In a recent note to clients, Barclays internet analyst Ross Sandler said:
“Any attempt to build out revenue streams outside of advertising, especially those that don’t abuse user privacy are likely to be well-received by Facebook’s shareholders… [It’s] sorely needed at this stage of the company’s narrative.”
Other popular social media platforms with plans to roll out their own cryptocurrencies in the near future include Telegram and Signal, which want to provide their users with a safe and secure way to exchange currency within their respective applications. Like Facebook, the two companies are looking to create their own stablecoin, which although may not be exciting to trade, will guarantee minimal price fluctuations and prove some assurance of value so they may be readily stored and transferred for everyday use.
Though Facebook has yet to make an official announcement about their project, enough information about it has been leaked to make it appear that its eventual deployment is all but certain. Regardless of the fact that the corporate underpinnings and closed-system nature of the project render it completely opposite of Satoshi’s libertarian ideals for bitcoin, it represents a step toward blockchain adoption and use by major companies, which have otherwise largely avoided the technology altogether for the last 10 years.