“Always two there are, no more, no less. A master and an apprentice.”
It’s no secret both Facebook’s Mark Zuckerberg and JP Morgan’s Jamie Dixon have been flawlessly playing villainous roles for most cryptocurrency enthusiasts. From Facebook prominent privacy related scandals, to the innumerable times Dixon sent direct attacks on Bitcoin during his career, it’s no wonder the news about the development of their own proprietary solutions has been met with plenty of skepticism. The reality is that so far little is known about these highly coveted projects, so let’s weigh in on the implications and repercussions both could have on our entire digital financial landscape.
A Promising Apprentice
Facebook — the social media giant founded just 15 years ago — is not a complete stranger to virtual currency if we take into account its own experiment, back in 2012 with Facebook Credits. That experiment failed to make an impact, so what does Zuckerberg’s company have up its sleeve a decade later?
Apparently, the answer is a mix of blockchain features, good old Facebook network effect, reliability and ease of use. A strong rumor is that FB Coin will be listed in cryptocurrency exchanges but will be stable in value, not that different from currently traded stablecoins. It’s no secret volatility still remains a major adoption barrier for Bitcoin and digital currencies, at least at this early stage. The new coin is rumored to include different fiat currencies, perhaps not even limited to those. A basket composed of the world’s top currencies and smaller allocations to precious metals — and even cryptocurrencies — has the potential to become the top choice for most people, especially taking into consideration inflation and unstable economies around the world.
Interaction with the old -fiat based world won’t really need to be mandatory either; Facebook is more than capable of launching its own digital economy and take over digital payments, just as WeChat has done in China. It’s easy to envision how hairdressers could get paid via WhatsApp or Messenger and able to pay for their groceries and bills with that same income seamlessly, at first with a third party service perhaps, but eventually directly. This leads to the question, why would most individuals need a traditional bank account or even a credit card? A bank account comes with plenty of bureaucracy and clunky user experience attached, while much more appealing products like the upcoming Apple Card are moving into the fintech scene.
We already trust our most personal information to these companies, why not our money and financial affairs?
The Old Master
At first it seems easy to dismiss the development of the JP Morgan’s Quorum blockchain project as a mere centralized database. After all, a similar scenario occurred in the early 90s, where Intranets started to pop up and every major company had their own private version of the Internet. And while we all know how the Internet came to evolve, “winning” that debate over time, the fact is those same Intranet projects helped build most of the online banking infrastructure we still use today. In the same vein, JP Morgan may be aiming at establishing the financial groundwork of the future.
At this point, it seems that kickstarting a transition from the old world to the new will need the experience and leverage only traditional finance companies and banking giants can provide. And while Quorum appears geared to develop a robust settlement network à la SWIFT (or Ripple) at first, but the tokenization of traditional investment vehicles such as securities, bonds and others may soon follow. Privacy is another element that will be in need of a quick revision — an indispensable feature moving forward — which JP Morgan didn’t overlook when it integrated Zcash technology to Quorum. And while Facebook and others will be focused on a more superficial level, directed mostly at retail users, a deeper disruption of traditional and private banking seems to be in the works here.
In conclusion, it also remains to be seen if Quorum and similar projects will in fact connect and communicate with public ledgers and blockchains, which could be the real key to unlock unlimited power and liquidity.
Paradoxically, the two conform an unlikely duo of insurgents, catering to both retail users and large institutions. However, a big question still remains unanswered, how big will their commitment to open source, decentralization and censorship resistance — all core features of the technology — be? Many believe the future will be decentralized or not at all. Any other attempts would be more of the same, and will end coming up short.
In the middle of it all, traditional cryptocurrencies will have to come to terms with the arrival of these new actors. This is a move that will undoubtedly legitimize the technology, while bringing many benefits to some of its current primitive solutions. At the same time, and depending on execution, these new alternatives could directly compete for market-share and network effect, threatening to send Bitcoin and other popular cryptocurrencies into a smaller, niche market.
How all these events will unfold while the concept of digital money gets redefined will be a treat to watch. Coming soon; in a galaxy not that far, far away.