Facecoin: The Future of Payments or Just Another Exaggerated Crypto Project?
Over the past week, barely an hour has gone by without a new story popping up about Facebook’s pending cryptocurrency, dubbed “Facecoin”. Towards the end of last year, the social media giant began hiring blockchain-related staff for a “secret project” and ever since rumors and speculation have abounded.
Most recently, investigative journalists from the New York Times report that Facebook is developing a stablecoin – a cryptocurrency with a value fixed against an existing fiat currency. In this case, it has been suggested that Facecoin will be fixed against the combined value of the Euro, U.S. dollar, and Japanese yen. Furthermore, and somewhat unsurprisingly, Facecoin will not be private like most cryptocurrencies but rather directly linked to your Facebook account.
However, at this point everything remains rather speculative, leading some media outlets to question whether it’s all just a bit of hype. In an article entitled “Facecoin: Why You Should Be Sceptical”, Indian English-language publisher the Business Standard recently posed the question – “will it be yet another exaggerated crypto project?”
Declining User Base
Last week it was revealed that in just the U.S. alone, Facebook’s user base has declined by 15 million, with the majority of those leaving in the 12-34-year-old bracket. This group coincidentally represents those most likely to adopt and use digital currencies, so could “Facecoin” be a desperate attempt at drawing back users?
Another question is – what will “Facecoin” be used for? As a stablecoin, it won’t serve as an investment device or store of value like Bitcoin (BTC), so will it simply be a way of Facebook cashing in by selling hyped up digital tokens that users can send to each other via its various messaging platforms? Other than the marketplace, Facebook doesn’t have any other ways by which to buy anything on its platform. Initially, at least, the majority of marketplace users will undoubtedly prefer to keep using traditional payment methods.
Considering Facebook’s recent failures in securing user data and privacy, and the resulting high profile Cambridge Analytica case, it seems likely that many users will be wary about giving the company their financial information. Most people don’t even trust their banks these days let alone a social media platform with a prior history of data leaks.
However, despite the lack of rhyme or reason behind why a social media platform would develop its own cryptocurrency, some believe it will inject billions into the cryptocurrency industry. Speaking to financial news network CNBC, Barclays analyst Ross Sandler proposed the company could make as much as $19 billion from the project in a best-case scenario. In cryptocurrency circles, Changpeng Zhao, CEO of crypto exchange giant Binance, has also spoken of how a Facebook Coin could be excellent for wider cryptocurrency adoption. His feelings have been echoed by BlockTower Capital founder Ari Paul in a string of Twitter posts regarding “corporate coins”.
Whatever the outcome, Facebook feels like an antiquated platform within the blockchain space and its attempt at getting into cryptocurrency is a bit like a middle-aged uncle suddenly buying a Ferrari. Would it not be better off if it helped develop a truly private, decentralized blockchain-based social media platform that actually addressed user concerns?