Facebook seems serious about launching its own cryptocurrency with a focus on cross-border payments, but while talk of this adds more meat to the global blockchain drive, it’s not going to happen any time soon, and the social media giant is arguably behind the times in this game.
Right now, it’s part of the rumor mill and hasn’t even been confirmed by the social media giant, but was prompted by the announcement last week that David Marcus, VP in charge of Messenger, would be exploring how Facebook could leverage blockchain.
Then the rumors started flowing, led by Cheddar, citing anonymous sources. According to Cheddar, Facebook is exploring the creation of its own cryptocurrency that would allow its users around the world to make electronic payments, but it’s light on the details.
Does it make sense? Yes. After all, Marcus was an early bitcoin investor who joined the board of Coinbase in December, so putting him at the head of a dedicated blockchain research team necessarily tells us Facebook is getting serious about the tech. Whether that means issuing its own cryptocurrency or not, no one can say for sure until we hear something official from the social media’s executives and while Marcus has hinted at such, it’s been rather noncommittal.
Having earlier played around with digital tokens and then giving up the ghost, Facebook is behind. Google is reportedly already developing blockchain-based tech that would make it possible to conduct transactions.
So why now for Facebook? That’s simple: After the Cambridge Analytica scandal that saw the personal data of 80 million users abused for presidential campaign benefits, Facebook is under significant pressure to boost security, and blockchain is one way to do that.
But still, we’re potentially years away from anything really happening here.
Cheddar cited anonymous sources saying It would likely be years before Facebook's work on blockchain and cryptocurrency became anything material. During an interview at a conference earlier this year, Marcus also confirmed that the idea is in early stage.
“Payments using crypto right now is just very expensive, super slow, so the various communities running the different blockchains and the different assets need to fix all the issues, and then when we get there someday, maybe we’ll do something,” Marcus said.
The company started studying blockchain almost a year ago, but at that time there was no consensus on exploiting.
And it’s not Facebook’s first crack at a digital token. Between 2009 and 2012, the company experimented with virtual currency when it released Facebook Credits, which could be used to purchase virtual goods in games. But it never gained enough traction and Facebook shut it down.
But if they do, they’ll give Google a run for its money. By introducing crypto, Facebook could help bring the cryptocurrency world to the mainstream given the vast population it influences. We’re talking about over 2 billion users.
At the same time, it underscores the crypto contradictions that rule the day. Just in January, Facebook banned cryptocurrency-related advertising across its network, and then Google and Twitter followed suit.
But blockchain—the anonymous, secure, decentralized digital ledger that underpins cryptocurrency—could resolve some of Facebook’s most pressing problems, including identity verification and advertising sales.
Facebook founder Mark Zuckerberg has hinted before that he’s intrigued by blockchain, and he’s also admitted that his social media giant has failed when it comes to protecting the private data of its users.
The Cambridge Analytica scandal, more than anything else, highlighted Facebook’s need to start taking its user data seriously. Since that scandal broke, the social media darling has lost many users, even if it’s not enough to make advertisers think twice about the lucrative revenue they earn here. (A study from mid-April claims that one out of 10 American Facebook users has deleted their account).
Blockchain could provide the security Facebook needs, and the timing is all about rebuilding a beleaguered reputation.
By Michael Kern for Safehaven.com