Is Facebook looking to launch a cryptocurrency?

Written by Shannon Beets || January 25 2018

Bitcoin has grown rapidly in 2017 and its grabbed the attention of industry leaders and CEO’s, including Facebook founder Mark Zuckerberg. In January, Zuckerberg released a comment that indicated that Facebook will be looking to research and potentially adapt Blockchain technology.

The reason for Facebook considering Blockchain technology, stems from the fact that users of Facebook are growing unsatisfied with the social media giant’s policies and operations. Facebook is becoming increasingly centralised, as Big Tech companies and Governments are using it collect data from individuals and Zuckerberg wants to “take power from centralized systems and put it back into people’s hands” thereby increasing users trust.

Blockchain provides a better control over content, allowing the individuals improved security so that their data remains private. This prevents targeted advertising and customized engagement with users. By decentralizing the network it removes any single entity that monitors or controls user generated content.   

It’s assumed that if Facebook was prepared to incorporate Blockchain technology, that a Facebook Token would be created. Given that Facebook has 2.07 billion monthly users, the potential reach for this cryptocurrency is phenomenal, possibly becoming a Bitcoin rival. It’s stated that Facebook’s largest demographic is aged 25-34 making up 29.7% of the users, which is beneficial as it’s predicted that 33% of millennials will be holders of a cryptocurrency.

Peer-to-peer commerce is an area that is becoming increasingly popular, a cryptocurrency would allow payments within the social network without the interaction of banks. This is a good foundation for other kinds of businesses that integrate transactions with the social network.

A Facebook token creates a potential for crowdfunding, with start-ups raising capital through cryptocurrencies and ICOs, having a social network that has a blockchain foundation can also allow users to easily raise money. The tokens would operate as Facebook's currency allowing users to buy and sell products in the marketplace, donate or purchase ad space.

Currently, the Facebook payment feature isn’t popular. Facebook payments allows a debit card to be connected to Messenger enabling e-commerce purchases to be made via Messenger and Marketplace on Facebook. Facebook also added the ability to send British pounds over the platform last year in November. However, this decision limits the market to individuals using pounds. Adapting a Facebook token would see this barrier removed as it could be globally accepted with cross-border transactions within the platform.

Generally the creation of a cryptocurrency stems from the intention of raising capital through ICO’s. Although, with Facebook's current market capital at $550.21 billion (USD) this won’t be necessary. Cryptocurrency is a very recent trend and it comes with its disadvantages. If Facebook was to create its own crypto-currency it may struggle to be accepted, the coin wouldn’t have any value outside of the social platform and it’s been seen that businesses can be skeptical when dealing with cryptocurrencies, so creating a ‘marketplace’ could prove difficult.

Cryptocurrencies have a reputation of being volatile and this brings a lot of uncertainty around it, a ‘Facebook coin’ would be no different. In addition, with countries becoming increasingly hesitant with cryptocurrencies and looking to regulate it Facebook may be faced with obstacles. Although Facebook is looking at this blockchain technology and cryptocurrency to appeal to the modern, younger generations, crypto currency would exclude a substantial amount of the market. While 59% of the Facebook usage is from 18-34 year olds, there is an additional 32% of the market that is 35 and older which is less likely to get involved with cryptocurrencies.

The social media market has seen China lead the way with Alibaba and WeChat while Facebook lagged. Combined Alibaba and WeChat hold 92% of mobile wallets in China, with 500 million mobile payment users, whilst there are 556 million mobile money accounts outside of China. China’s banning of ICO’s and cryptocurrency transactions on local exchanges could give Facebook the edge it needs on overseas competitors by adapting technology that isn’t available in China.

Zuckerberg has published comments stating that he is interested in researching the positive and negative aspects of the technology in 2018, however there’s no date as to any release of new updates. Is this an opportunity that Facebook will take advantage of, or will the usage of blockchain technology be nothing more than a mere idea?