Making Money User-Friendly: Facebook
A series of primers on why Facebook doesn’t want to become your bank, what Apple Cash is all about, and how tech giants are changing the UX of money. This is Chapter 1.
Chapter 1: Facebook
Facebook doesn’t want to be your bank, anymore than it wants to be a media company. Yet they’re doing it again: here’s a primer on how Facebook Coin could change the face of digital banking and finance as we know it, and not in the way most people think.
As someone who has worked in blockchain industry with different cryptocurrency startups, I spent some time thinking about Facebook Coin and what it could do to be truly disruptive, just like Bitcoin has been.
9 Ways Facebook Coin Could Change the UX of Money
Here are 9 ideas on what Facebook Coin could do to deliver on the promise of native digital, programmable money.
- Launch a stable coin. Check! In 2018, Bloomberg reported that Facebook was developing a stablecoin for its WhatsApp users in India. In 2019, the New York Times stated that “Facebook is looking at pegging the value of its coin to a basket of different foreign currencies, rather than just the dollar.” The trend toward stablecoins — a cryptocurrency with a fixed price — has been on for sometime, with MakerDAO as one of the better known projects. A stablecoin can become a true global medium of exchange, and will make user adoption infinitely easier.
- Set Facebook Coin free. Facebook Coin must be an accepted method of payment across all its platforms and for all its services, but to truly succeed, Facebook Coin needs to be adopted as means of payment outside of its ecosystem. To truly be considered a cryptocurrency, Facebook coin must also mean the company can’t just take the money back, arbitrarily change balances and control its currency fully. In contrast, Amazon can block any gift card at any time, and if Amazon stops accepting gift cards as payment, all value that has resided with it will be lost.
- Exchange from fiat to Facebook Coin and back. This can be accomplished through listing its coin on popular exchanges. The New York Times has reported these negotiations are already underway: “The Facebook project is far enough along that the social networking giant has held conversations with cryptocurrency exchanges about selling the Facebook coin to consumers.” While this shifts the onboarding and some of the tricky regulatory compliance to exchanges, and while this may be how the coin gets launched, ultimately people should be able to access and purchase Facebook coin directly from Facebook, as well, and seamlessly. There could also be an open standard for exchanges to “list” the coin, in addition to the partnership conversations that are already underway. What complicates this part of the onboarding today is the mesh of global regulations. If there’s too much KYC, it’ll simply turn into just another bank account. What is wrong with bank accounts today? Hint: it’s not just because the system is inherently slow. Centralized processing of transactions, mutual debits and credits can be super fast, but every transaction must be checked for suspicious payments. But Facebook doesn’t want to be a bank. It doesn’t need to — similar to Uber, which famously doesn’t own any cars, the company just needs to do its integrations really really well. Assuming Facebook doesn’t want to be a bank any more than a media company, it is in its interest to avoid being considered a bank and succumbing to massive and diverse sets of global regulatory compliance rules. What it could do instead is extend its partnerships with banks and financial institutions, just like it did with PayPal, and align on strategy now that PayPal has also moved into the blockchain space —and network the world through a decentralized, interoperable payment system.
- Make an open standard wallet and let other people build wallets for Facebook — it has to be wallet based and not account based. Cryptocurrency is something people can use on their own through a software typically called a wallet. If the money requires the company that issues the money to match owners name with a balance, then it’s not a coin. This means the company must let go and allow for the currency to exist outside of its control. With coins, people keep track of their own holdings, and nobody mandates a central database of holdings. In case of Bitcoin, people keep track of their holdings by using wallets that keep the list of private keys a person controls and match them up to keep account through UTXO — unspent transactions output model. They won’t be the first to “coin” something like this. There’s a market for Amazon gift cards, for example, and they could exist outside of Amazon. But then Facebook Coin would be no different than an Amazon gift card: you’d match your name to a balance in your account. A true Facebook Coin must operate without support from a third party, and needs to have a wallet, or it is straight up a bank account, and Facebook then acts as a central bank. If Facebook is serious about cryptocurrencies, and doesn’t want its coin to be a hack, they’d go for the real thing, and not for the balance/account option.
- Let people send it to each other and pay each other for services on Facebook — people must be able to send payments without Facebook’s permission, or going through Facebook directly, like cash operates today. And if they feel like exchanging Facebook coin for Amazon gift cards, well they should be able to do that as well. Facebook could then become a revenue stream for content creators, so actions like sharing and liking of posts can mean micro-payments to content creators can happen, instantaneously and automatically. Facebook could also charge a small fee to process transactions.
- Decentralize controls. Mining can be either centralized or decentralized, as long as no central party — no government or any one company — is able to take cryptocurrency away from the users or freeze accounts. Mining today is not terribly user-friendly; building the right incentives into the development of that ecosystem, tools, and processes could ensure the health and stability of the network infrastructure.
- Protect confidentiality and privacy. People should be able to transact with each other and with businesses without fully disclosing every detail of every transaction, giving up the last shred of their privacy in exchange for convenience. Thankfully, breakthroughs in cryptography can address that problem. It would be amazing to see a company like Facebook taking cryptography mainstream.
- Make Facebook Coin opt-in. If people want to use it, that option should be there. But the company needs to continue supporting other methods of transacting and payment and in fact, expand that role globally and partner with more banking institutions.
- Make Facebook Coin user-friendly. This is the biggest opportunity for Facebook to influence the way we transact today, in the same way the company has influenced the way we stay up to date with friends and news. In crypto, UX/UI and yes, even good design are still nascent and rare; Facebook can truly shine here. People must be able to use Facebook coin easily, and to understand how to handle their own financial affairs and choices. It must also be accessible and programmable. Cryptocurrency is borderless, programmable money — if it’s liberated, it can be programmed. This means settlements can be automated, and apps and services can be built on top of it, meaning games, subscription services (look out, Netflix and AppleTV… Facebook is coming), remittances and even lending services would become possible.
While the idea of Facebook Coin comes as a surprise to many, those paying attention know that the race to usher in the new era of native, digital transactions has been on for quite some time, ever since cryptography breakthroughs like Diffie-Hellman key exchange dating back to 1970s made Bitcoin and more recent Ethereum possible. Where WeChat works with state-approved financial services providers in China, other messaging services and networks — Telegram in Russia, Kakao in Korea, Open Whisper Systems’ Signal, and Canadian-born Kik to name a few — have all went through similar motions to launch some sort of currency. But Facebook has a chance to do it well and at scale — and to be the first giant out of the gate with a true cryptocurrency to its name.
With Facebook Coin, the company will be connecting world once again, this time as a medium for sending and receiving a new kind of messages — financial transactions.
Elena Yunusov is marketer and founder of Communicable Inc. and has specialized in adoption of emerging technologies. Elena also ran marketing at Shyft Network, a general purpose proof-of-sender credentials verification platform. Named “Top 80 Women in Canadian Tech” worth following in 2019.