Facebook’s small blockchain group has ambitious plans to potentially disrupt the entire payments industry, but the company is also running into recruiting challenges amid its many public scandals.
In recent months, the world’s largest social network has been quietly trying to recruit product managers, engineers, academics, and legal experts with experience in cryptocurrencies and payments, according to people familiar with the effort. Nearly 40 employees — including several former PayPal execs — work in Facebook’s secretive blockchain group, and the company recently appointed a head of business development to oversee acquisitions and deals in the space.
Since officially forming its blockchain group just eight months ago, Facebook has sent staffers to crypto conferences around the world to recruit researchers, cryptographers, and top academics in the field. At a private dinner Facebook hosted during a recent crypto conference, one attendee told Cheddar that Facebook employees pitched the idea of creating a decentralized digital currency for the social network’s 2 billion users.
Facebook job listings state that its blockchain group’s “ultimate goal is to help billions of people with access to things they don’t have now,” which “could be things like equitable financial services, new ways to save, or new ways to share information.” Back in May, Cheddar first reported that Facebook was exploring the creation of its own cryptocurrency — a virtual token that would allow its billions of users around the world to make electronic payments without the need of a traditional bank.
To kick-start its plans, Facebook has shown interest in hiring teams behind nascent cryptocurrency and blockchain-related projects, according to people familiar with the matter. Some of the projects in which Facebook has shown interest are far from the production or deployment level — an indication that Facebook is keen to quickly scoop up talent in the industry.
But that hunt for talent hasn’t been easy.
Despite its interest in several crypto start-ups, Facebook has encountered problems with recruiting due to the negative perception of its brand and many public scandals, according to people who have had discussions with the blockchain group in recent months. Many in the crypto and blockchain industry see heavily centralized, data-hungry companies like Facebook as the very entities they are trying to disrupt.
When asked for comment, a Facebook spokesperson told Cheddar that the company’s efforts in blockchain were still early and referred to a previous statement:
“Like many other companies Facebook is exploring ways to leverage the power of blockchain technology. This new small team is exploring many different applications. We don’t have anything further to share.”
A team of ex-PayPal execs
While Facebook’s efforts in blockchain and cryptocurrency are less than a year old, the group has already assembled an all-star roster of executives led by David Marcus, the former president of PayPal ($PYPL) and vice president of Messenger at Facebook.
Leaders from other divisions of Facebook, like former Instagram product chief Kevin Weil and head of engineering James Everingham, have joined the blockchain fold in similar roles. Geoff Teehan, a longtime Facebook employee who was previously the director of product design for the News Feed, recently changed his LinkedIn profile to read, “Head of Product Design, Blockchain.”
A further indication that the group is focused on disrupting the financial industry, roughly a half dozen of the executives Marcus has hired for his blockchain group share his connection to PayPal.
Tomer Barel, Facebook’s vice president of risk and operations for blockchain, previously ran all fraud and risk management as PayPal’s executive vice president. Facebook’s director of product for blockchain, Meron Colbeci, led product management for PayPal’s person-to-person payments. And the group’s head of brand and marketing, Christina Smedley, ran global communications and brand marketing at PayPal.
In addition to the payments talent that moved from PayPal to Facebook this year, the cofounder of BitGo, Ben Davenport, is advising Facebook’s blockchain team, according to a person familiar with the matter. BitGo is a crypto asset wallet and blockchain security company that Davenport left earlier this year.
Other employees in Facebook’s blockchain group have past experience working on payments products at other big tech companies, like Google Pay and Samsung Pay. And Facebook has found a public policy liaison for Washington, D.C. in Lee Brenner, who was previously an executive for a trade association called the Global Blockchain Business Council.
According to LinkedIn, Facebook has six recruiters working to expand the group with more engineers, product leaders, and PhDs.
Secrecy ruffling feathers
The more than a dozen people Cheddar spoke to for this story all said that Facebook has remained tight-lipped about the full scope and timeline of its blockchain plans.
Non-employees are asked to sign nondisclosure agreements before they can learn about the details of the project, and even those who have been actively recruited by Facebook haven’t been fully informed on details of the group’s strategy.
The stealthy approach Facebook has adopted for exploring blockchain — an industry that’s predicated on the concepts of decentralization and transparency of information — has already caused irritation.
At a recent academic conference called Scaling Bitcoin in Tokyo, Facebook hosted a private, invite-only dinner to recruit attendees on the same night as a official event organized by the conference.
The conference’s organizer, Anton Yemelyanov, told Cheddar by email that Facebook wasn’t an official sponsor of the event and was thereby barred from any “commercial activities such as marketing and recruitment.”
“We will be issuing a strict warning to any Facebook employees attending the next event,” he said.
A digital economy for 2 billion people
With more than 2 billion users, experts say it’s not surprising that Facebook would attempt some kind of native payments solution — especially in developing markets with less advanced banking and payments systems.
“They have a massive installed user base,” said Drew Hinkes, an adjunct professor at the New York University School of Law who specializes in blockchain and cryptocurrency. “They probably are looking at China and seeing how popular mobile commerce has been there and wondering why we can’t do that.”
And much like WeChat, the do-everything messaging app at the cornerstone of Chinese digital life, Facebook has an opportunity to offer financial services beyond payments, namely loans and bank accounts, from which it could eventually profit.
The fact that Facebook is actively recruiting academics and looking at early-stage crypto projects suggests “they want to develop their own new network as opposed to leveraging someone else’s” according to Hinke.
In a post at the beginning of 2018 announcing his plans to fix Facebook’s problems around misinformation, CEO Mark Zuckerberg hinted that the concept of decentralization could counteract the ill-will that big tech companies are facing.
“With the rise of a small number of big tech companies — and governments using technology to watch their citizens — many people now believe technology only centralizes power rather than decentralizes it,” Zuckerberg wrote. “There are important counter-trends to this — like encryption and cryptocurrency — that take power from centralized systems and put it back into people’s hands.”
To build its own decentralized payments network, experts say that Facebook would need a robust identity management system and a significant number of users, which it has.
But blockchain technology has historically suffered from a scalability problem. While the original vision of Bitcoin was a peer-to-peer system for electronic cash, it has failed to scale to the level of Visa or Mastercard, and now the race is on to build a viable blockchain network for cross-border payments.
Facebook tried to have its own virtual currency years ago. In 2009, the company released Facebook Credits, which could be used to purchase virtual goods in popular games like “Farmville.” But the feature never gained enough traction, and Facebook shut it down two years later. Since then, Facebook has integrated PayPal into the Messenger app and started supporting payments through local banks on WhatsApp in India.
For a company like Facebook, blockchain technology could also have other applications outside of cryptocurrency. And the company’s blockchain group will likely explore other applications outside of payments.
Facebook tried to buy the digital identity startup Distributed Systems, according to two people familiar with the matter, before Coinbase bought it earlier this year. The move suggests that Facebook could want to decentralize and essentially give back the data it collects from users. Currently, Facebook collects data based on user activity and charges advertisers to be able to target users based on that data.
“I think Facebook is concerned their business model can be upended by decentralized technology platforms in the future,” said Ari Lewis of Grasshopper Capital, a firm that invests in blockchain-based digital assets.
Additional reporting by Tanaya Macheel.