News of the largest social media platform developing its own cryptocurrency first surfaced in December of last year. As we would, later on, find out Facebook was developing a crypto coin that would allow users to transfer money using the WhatsApp messaging app with an initial focus on the remittance market in India. Fast forward a few months later, and we have more details about what the cryptocurrency will be all about and when it’s set to launch. Below we are going to discuss more on what we already know about Facebook’s cryptocurrency plan.
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A Short History of Facebook And Virtual Currencies
This isn’t the first time that Facebook will be trying its hand with virtual currencies. Surprisingly, the social media giant has already had two previous experiments that didn’t fare so well. The first venture was through Facebook Credits a coin that enabled people to buy items in games and non-gaming applications on the platform. At the time $1 was equal to 10 Facebook Credits and the coin was available in 15 currencies including USD, euros, and pound sterling.
However, the virtual currency caused headaches for international payments because of fluctuating exchange rates and was shut down only two years later after launch. Then there was also Facebook Gifts which was launched in 2012 only to be shut down two years later. The problem according to Josh Constine was that the social media giant never found a way to solve localization and distance issues to make Facebook Gifts work internationally.
However, not all the platform’s efforts that have failed as it has managed to achieve some success with Facebook Messenger Payments which was launched in the US in 2015 and expanded to Europe two years later. The platform allows for a secure and convenient way for users to send and receive money right in the messenger threads.
However, in FaceCoin, Facebook will be trying to emulate messenger payments and not Credits and Gifts. The new cryptocurrency will be based on the blockchain and will be a stablecoin that will be backed by a basket of fiat currencies to ensure its price is stable. Interestingly, the virtual currency will be a private stablecoin which is unique since there is no other that exists so far. So if we are to believe Facebook, this coin is going to be a big deal.
One of the main concerns of FaceCoin according to Alex Stamos is that “a completely private and encrypted messaging service tied to an open, Zerocoin-like, zk-SNARK backed cryptocurrency and backed by a tech giant would instantly become the go-to mechanism for global money laundering, tax evasion, and just general criming.”
However, Stamos believes on the other hand not having a mathematically backed privacy feature and having all this data in a single place will be a massive source of privacy and security risk. And if this is the case, he believes that many countries that have leverage over Facebook will use this opportunity to get access to private information.
For this reason, he believes that no existing tech project has a critical privacy/safety balancing act better than this one.
Problems FaceCoin Has To Overcome To Ensure It Succeeds
If FaceCoin is to succeed, then the team behind the project will have to figure out how they can make the stablecoin easily convertible back to fiat around the world. It’s no secret that the current problem with stablecoins is that no business is accepting them.
This means users have to convert them back to fiat currencies before they can use them to do purchases and other things. So even if Facebook proceeded to offer goods and services that can be purchased using the stablecoin, this would lead them back to Facebook Credits all over again- a situation we believe they will try to avoid.
As for remittances, which is a massive market and the apparent target market there is the issue of FaceCoin not being recognized as legal tender in various locations. Also, given the process will involve having to convert the currency to fiat before it’s used there is a chance the process will be much slower, clumsier, not very user-friendly and it could be even more expensive.
For now, there is little known about Facebook’s plans; however, there are two ways in which the platform can overcome the many hurdles it will likely face with the cryptocurrency. One is establishing partnerships with other businesses in a way that they will accept FaceCoin which will make it valuable – which will be nearly impossible.
The other alternative will be to establish a relationship with cryptocurrency exchanges around the world and have the currency easily converted to different modes of payment like Mpesa or other mobile money platforms. This would make the crypto-coin seamless, fast and user-friendly when it comes to international remittances – a market that is currently worth around $500 billion a year. It would also allow anyone with a mobile phone and a Facebook app to maintain a personal account that has stable coins and is backed by hard currencies.
The FaceCoin cryptocurrency team is led by David Marcus who is the former president of Paypal and was previously in charge of Facebook’s Messenger app. He was appointed as the head of the blockchain unit in May of last year. So far, the team is believed to consist of over 50 employees, and the company is on a hiring spree. A quick check on LinkedIn reveals names like Kevin Weil who is the vice president of product, Evan Cheng who is the director of engineering, Dave Hrycyszyn who is the technical program manager and Nate Gonzalez who is a product manager.
The team is also expanding, and on Facebook’s careers site there are 18 blockchain related jobs. Some of the advertised positions include Business operations manager, product manager, global security strategic partner, growth product manager, software engineer and a data engineer.
The cryptocurrency is set to launch sometime in the first quarter of 2019, and we will have to wait and see if it doesn’t end up as Facebook Credits or Gifts.