Facebook’s crypto: rumors and clouds
When it comes to Facebook and crypto, things get a little tricky. Now it is ‘almost official,’ media announced a loud statement of FB employees about plans to release their own cryptocurrency. While all speculate on this topic, we’d like to pause and think about the opportunity this decision will bring to Facebook businesses and the market in general.
Previously, Facebook was completely against crypto, putting spokes in the wheels of ICO projects, and acting like it’s an abandoned thing. Some expert would tell you that they’re keeping platform free for their own project. However, it is possible that restrictive measures against advertisement played a role in a decrease of its users, and in reduced capitalization (from $538bn to $464bn). These might be among the reasons for Facebook to reconsider its attitude to cryptocurrencies and create its own.
Let’s have a short look at what business opportunities Facebook has. It connects more than 2.3 billion people worldwide not only via Facebook but also via associated services, Instagram and Whatsapp. In addition to people, every second business has its own business/community page. Businesses advertise their products and services, social brands forming communities, people sending gifts etc. In fact, Facebook has always been a place where any demand meets a supply for a long time already.
Facebook Coin vs. GRAM
Its potential cryptocurrency — let’s call it Facebook Coin — will open a large set of opportunities for Facebook and its users. For example, it can be a substitute for expensive and long international transfers (total market volume $500bn). Actually, Facebook already lets you send money through Messenger for free, but only with a connected debit card or PayPal account. Aside from that, Facebook will be able to act as an intermediary or guarantor (escrow) in the interaction of contractors, which is really favorable for businesses monetizing their social network presence. The list can go on, but what is more important is that Facebook coin, according to some leaks, is going to be tied to a dollar in order to avoid volatility in the exchange rate.
Being a stablecoin Facebook Coin really shines before it’s antipode GRAM — coin provided by Telegram Open Network — in at least few aspects. First of all, it differs in turnover. It is clear that GRAM is going to have a deflationary model. TON’s interest is clear — the more efficient the ecosystem, the greater the demand for the token. This will be reflected in the price of the token and capitalization. We speak of this, because that is what investors liked the most in the ecosystem, the price of the coin is expected to grow which means volatility. In reality deflationary currency have certain issues being a means of payment. People are afraid to get rid of such currency and prefer to pay with the inflationary dollar. Volatility hinders interest in cash flow. In practice, this limits usage, due to the volatility of the token (the same problems as with Bitcoin and other coins that do not have an internal value). So GRAM is classic ‘hodl’ crypto, whose target audience is the crypto community. The stable price of the Facebook Coin makes it much more convenient for calculations, compared to GRAM.
Secondly, Facebook Coin has a bigger total audience (2.7bn users combined for Facebook, WhatsApp, and Instagram against 200m users for Telegram in 2018). And while Whatsapp does not have a clear monetization model, it is one of the most popular apps among users. One of the main obstacles for mass adoption is inconvenient, geek-oriented interfaces of wallets and services, while WhatsApp has an intuitive interface for an audience of more than 1,3 billion people. Messengers have already changed our lives, few people still pay for international calls. FB has all the possibilities for similar changes in the international payments market — the audience, intuitive user interfaces, and a ton of existing service providers. In addition, Instagram is increasingly being used as a marketing tool by small businesses and the ability to have an easy way to accept payments for goods for it is a huge advantage.
Imagine, being able to buy a product or pay for a service on Instagram instantly and safely — it’ll immediately create an additional monetization point of the service! Another positive aspect of creating a cryptocurrency will be the development of infrastructure that can be used not only for private blockchains but also for public ones. In addition, users of private blockchains will be easier to “drag” to decentralized solutions.
Despite all of this, it is still unclear who will be the winner in this unspoken confrontation. People who professionally deal in the market will not find Facebook’s crypto interesting. But such a large brand releasing a coin, can attract a lot of attention to the market.
What does it mean for the market?
If and when this comes true, if Facebook won’t make it, we’re sure there will be other companies that will provide such a coin to a broad audience) it will be a huge step towards mass adoption of crypto and a real benefit for end users. The distribution of Facebook Coin will push retail outlets and businesses into accepting crypto as a means of payment, because no one wants to lose customers and their money.
Be it a Facebook, Google,or Telegram, the first one to hop on the opportunity to capitalize on its audience with crypto, by providing feasible solutions to current problems, will win. Who needs to worry — banks and governmental systems taking 5–7–10 percent of transfers. States and state-owned corporations are non-competitive businesses that benefit from monopolies in their activities. At the same time, corporations are born and exist in a competitive environment, which makes them ruthless in looking for and finding ways to obtain a competitive advantage.
Highly likely, this explains why we hear rumors about Facebook’s stablecoin.
Open questions
With all the obvious advantages of the idea, FB, unlike Telegram, is a more regulated company, and any initiatives, will be closely studied by corporate lawyers, since any amount of litigation can bring a significant amount of damage to the business. It is not clear how the KYC/AML procedures will be solved and whether they even go through with it. The banking lobby will also fight against the loss of business
However, we believe in evolution and progress. If you can make international calls easily and for free, then companies that take the money for it sooner or later will die.
