Bloomberg reported yesterday that popular social media giant Facebook intends to dip its does deeper into the waters of cryptocurrency.
According to unnamed sources, Facebook is working on making a cryptocurrency that will let users transfer money via the WhatsApp messaging app. The newly implemented cryptocurrency will apparently be a stablecoin pegged to USD and will initially focus on the remittances market in India.
“Facebook is far from releasing the coin, because it’s still working on the strategy, including a plan for custody assets, or regular currencies that would be held to protect the value of the stablecoin,” Bloomberg further adds.
Facebook has been flirting with crypto ever since they hired David Marcus, former PayPal president and a member of Coinbase’s board of directors, to lead the company’s blockchain research sector. This sector currently employs over 40 people and is clearly making moves to leverage the blockchain technology.
India being considered as the launch ground for this project makes plenty of sense, even if merely 480 million out of 1.3 billion people living in the country currently have access to the internet. Researchers predict that this number will increase to above 700 million by 2022, presenting a massive market for Facebook and WhatsApp to tap into. Indian internet market is dubbed as the world’s fastest growing one and the two companies plan to grab a share of that by releasing cheap handsets (dubbed “WhatsApp phones”) that’ll provide internet access even in rural areas. The creation of a remittance-focused cryptocurrency makes sense as well, since Indians working abroad sent $69 billion back home during 2017.
What could this mean for bitcoin?
Vijay Boyapati, renown crypto personality and Senior Software Engineer at Peach Inc. took to Twitter, back in October when first rumor about Facebook coin surfaced to give his opinion on the matter.
After acknowledging that Facebook hired an outstanding expert and executive David Marcus to head their blockchain efforts, Boyapati proceeds to explain three roads Facebook can possibly take in their crypto venture.
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I see three main possibilities and I want to consider whether each of them (A, B, C) pose a direct threat to #
Bitcoin and what resources and comparative advantages Facebook might bring to bear in the cryptocurrency market.
A: FB launches a payment rail that allows their users to transfer digital currencies between each other, or perhaps allows merchants to accept them for payment. Such a service would directly compete with Square or Coinbase’s merchant services.
The comparative advantage Facebook has if it pursued path A is its dominance in the messenger market (FB messenger & Whatsapp). There is a tremendous synergy between messaging and payments as can be witnessed by the success of WeChat Pay in China.
Path A would be no threat to Bitcoin, however, because Bitcoin is nascent store of value, not a payment system. It is akin to how Visa and Amex do not compete with gold (gold, btw, has a much larger market cap than Visa and it only represents a fraction of the SoV market)
B. Facebook launches their own digital currency over which they maintain substantial control. An example might be something similar to XRP (which Ripple controls) or EOS.
Facebook could increase demand for such a currency by using the revenue stream they generate per user which they could issue as a dividend to holders of these tokens (or perhaps by buying up supply of the tokens and destroying them, as Binance does with BNB).
Path B, again, does not compete directly with Bitcoin because Bitcoin is a *non sovereign* currency that has no centralized control. A Facebook controlled currency would still require trust of Facebook itself.
FB has shown a worrying tendency to censor users and if it were to build its own currency it would need to comply with monetary regulations in all the jurisdictions in which the coin was used (i.e., everywhere). This would substantially increase their proclivity to censor.
C Facebook launches a currency over which they do NOT have control, but provides the source code to birth the currency and a means for distributing it. The major advantage FB has is their massive identity database (over 2 billion people).
Following path C, Facebook could undertake an airdrop far larger than anything anyone has ever done before. It could achieve a distribution of its token (FBCoin) across billions of people (BTC ownership in comparison is in the order of tens of millions of people).
Path C is by far the biggest threat to Bitcoin, if Facebook were to pursue it. However, distribution is not an overwhelming advantage. People who receive something for nothing are highly unlikely to value it; if FBCoin has any value at all most people are likely to dump it.
Furthermore, the main attributes that would drive demand for FBCoin vs Bitcoin would be censorship resistance and monetary policy. Bitcoin already has the best monetary policy possible for a SoV (a strictly limited supply) and it has shown itself resistant to attack.
FBCoin, as the arriviste, would have to prove that it was superior to BTC along the important attributes that give BTC its value. Without a strong ethos of censorship resistance and sound money (definitely not present in Facebook’s corporate culture) this threat is unlikely. “
