Over the past day or so, there have been several reports in the cryptosphere, mentioning a supposed cryptocurrency from Facebook, called, ‘FBCoin’.
The most recent reports about this alleged impending product release were brokered by New York Times writer, Nathaniel Popper in a series of tweets on April 8th, 2019:
Update on Facebook’s cryptocurrency: Sources tell me that Facebook is now looking to get VC firms to invest in the Facebook cryptocurrency project we reported on earlier this year. I hear they are targeting big sums — as much as $1b.
Given that one of the big allures of blockchain projects is the decentralization, getting outside investors could help Facebook present the project as more decentralized and less controlled by Facebook.
One person I spoke with said that Facebook is talking about using the money as collateral for its cryptocurrency. Facebook has been designing the coin to keep a stable value, pegged to a basket of foreign currencies held in bank accounts.
It’s interesting to think of one of the richest companies on earth raising money. When was the last time they did outside fundraising?
Notable highlights (blips of information) from Nathaniel Popper’s tweets are that:
- Facebook is looking to raise approximately $1 billion in investment from VC firms for their new cryptocurrency.
- Facebook feels that they will attract more investors by presenting the project as ‘decentralized’ and ‘separate from Facebook’ (confusing concept, but we’ll get to this later).
- “Facebook is using the money as collateral for its cryptocurrency”
- “Facebook has been designing the coin to have a stable value, pegged to a basket of foreign currencies held in bank accounts.”
We’re going to cover all aspects of what Nathaniel Popper tweeted about below.
Dissecting Nathaniel Popper’s Tweets
Is Facebook Actually Entering the Remittance/Stablecoin Race?
Obviously, the most notable takeaway from Nathaniel’s series of tweets is the idea that Facebook is seriously going forward with a cryptocurrency. Obviously, this would be the biggest name that has entered into this space in a direct and substantive manner (yes, that includes IBM).
But the question remains — ‘Why would Facebook enter into the remittance markets when they have absolutely zero experience with remittance payments?’
This is an issue that the publication, ‘TechCrunch’, addressed in a thorough and critical manner a little under a month ago:
If Bloomberg and the New York Times are to be believed, later this year Facebook will introduce a cryptocurrency which will allow WhatsApp users to send money instantly. Yes, that’s right: Facebook . Cryptocurrency. Earthquake! Revolution! The world is tilting on its axis! The end times are c…
Specifically, the following excerpt from the ‘TechCrunch’ piece call the idea of a Facebook-backed cryptocurrency that would be used specifically for remittance payments, into question:
In the above screenshot, TechCrunch makes the apt observation that Facebook has already issued a ‘digital currency’ in the past, called ‘FacebookCredits’.
According to Wikipedia (reliable in this instance; times have changed!):
“Facebook Credits was a virtual currency that enabled people to purchase items in games and non-gaming applications on the Facebook Platform. One U.S. dollar was the equivalent of 10 Facebook Credits. Facebook Credits were available in 15 currencies including U.S. dollars, pound sterling, euros, and Danish kroner. It was expected that Facebook would eventually expand Credits into a micropayment system open to any Facebook application, whether a game or a media company application. While the Facebook Credits website is still active, Facebook has announced that it is doing away with Facebook Credits in favor of local currency.”
What’s notable are the similarities between what is written in the passage above and the fate that Nathaniel Popper described for Facebook in his tweet thread.
Specifically, when Nathaniel Popper stated this:
Essentially, this is no different than what Facebook did with ‘FacebookCredits’ by pegging the value of a Facebook Credit to one U.S. dollar and allowing it to be interchangeable with a number of different foreign currencies. Thus, ‘FacebookCredits’ essentially served the exact same purpose as the alleged impending Facebook cryptocurrency that is slated to launch at some point in the near future.
Why We Should Be Skeptical of Reports Facebook is Launching a ‘Stablecoin’ for ‘Remittance Payments’
‘FacebookCredits’ existence on Facebook’s site did not last for long, however, with Facebook announcing that it would be discontinuing ‘FacebookCredits’ in 2012/2013, a little over a year after its initial launch.
Thus, we must ask ourselves, ‘Why would Facebook launch a digital currency of their own?’.
Below, we can see a speculative argument made by Techcrunch in the piece we cited from above:
The author is inclined to disagree with this narrative. Instead, it might be more beneficial for users in the community to consider broader possibilities as it relates to potential use cases for a cryptocurrency from Facebook.
Facebook’s Data is Worth a Lot
When you hear the phrase ‘blockchain use cases’, what are some of the more classic examples that come to mind?
Many will probably state something related to ‘remittance payments’ (this is the obvious potential use case). However, another major use case for blockchain is data preservation, sharing, and access.
Specifically, many have listed healthcare as an entity that would benefit greatly from the data sharing/storage capabilities of blockchain:
How blockchain could reshape the healthcare industry in 2019: Brian Kalis, managing director of digital health and innovation at strategy and consulting company Accenture in Dublin, Ireland, shares why he considers blockchain to be healthcare’s next hot technology and how it can help secure patient records.
Brian Kalis, managing director of digital health and innovation at strategy and consulting company Accenture, headquartered in Dublin, Ireland, shares why he considers blockchain to be healthcare’s next hot technology and how it can help secure patient records. Responses have been lightly edited for clarity and length.
Here’s an excerpt from the article:
Note how the excerpt above mentions three important facets of data integrity that blockchain can assist with in the healthcare field:
- “Creating secured and trusted care records”
- “Linking identities”
- “Recording patient consent”
These are three facets of blockchain technology that would greatly benefit Facebook.
Data Management/Preservation Has Been the Bane of Facebook’s Existence
Below are some recent headlines that have come out about Facebook:
Federal prosecutors are conducting a criminal investigation into data deals Facebook struck with some of the world’s largest technology companies, intensifying scrutiny of the social media giant’s business practices as it seeks to rebound from a year of scandal and setbacks.
More than 540 million records about Facebook users were publicly exposed on Amazon’s cloud computing service, according to a cybersecurity research firm. A report out Wednesday by UpGuard said two third-party Facebook app developers posted the records in plain sight, causing yet another major data breach for the world’s biggest social network.
4/10/2018 9:32PM Facebook CEO Mark Zuckerberg testified before lawmakers on Capitol Hill for roughly five hours Tuesday. Here are the highlights in around five minutes. Photo: EPA
Facebook has changed the fine print in its terms of service to clearly explain to users that it makes money by using their data, the European Commission said Tuesday. The social media giant modified its terms and conditions to better inform users what they are signing up for, the commission said.
For years, Facebook gave many large technology companies special access to users’ information. Here’s how it worked. Facebook for years gave major tech companies, including Yahoo and Netflix, greater access to people’s data than it disclosed, a New York Times investigation found.
The above headlines are just a microcosm of the general native on Facebook over the past few months.
Essentially, data management has been the bane of Facebook’s existence. Which begs the question of why the greater cryptocurrency space has not even pondered the possibility that Facebook may be exploring using blockchain as a solution to their data problems.
Facebook Revenue From User Data
One possibility that the crypto community must consider is the possibility that Facebook is tokenizing the sale of user data.
Its worth mentioning that, in 2017, 89% of Facebook’s revenue came via advertisement (they raised $40B in 2017):
Facebook, Inc. (NASDAQ: FB) today reported financial results for the quarter and full year ended December 31, 2017. “2017 was a strong year for Facebook, but it was also a hard one,” said Mark Zuckerberg, Facebook founder and CEO. “In 2018, we’re focused on making sure Facebook isn’t just fun to use, but also good for people’s well-being and for society.
This is relevant specifically because a substantial reason for why Facebook is able to amass so much revenue through their advertising is due to the fact that they have an enormous pool of (probably accurate) data on their users.
In order to understand why this is, we must consider what Facebook is and how it is used by individuals.
- Facebook is a social media platform that is designed to facilitate direct interactions between individuals and their relatives, friends, colleagues etc. Essentially, Facebook is the social, non-formal version of LinkedIn. Therefore, most individuals have registered on Facebook with their real names rather than aliases like we see are common on Twitter, Instagram, or other major social media platforms.
- Facebook is structured around networks, so users are encouraged to add information to their profiles such as their interests, opinions, likes/dislikes, etc.
- Facebook also collects location information. So, if an individual has visited a specific place, they can note that on their Facebook.
- It goes without saying that Facebook obviously has access to everyone’s public (and private) status updates as well as their comments and they can also track which pages that individuals visit and how frequently.
- With a high success rate, Facebook has enticed users to add personal information such as the schools that they have attended, their age, birthday, pictures, address, specific relatives, various locations that they have visited and lived in (etc.)
Facebook is perhaps the only and largest aggregate of such accurate and personally identifying information. Even Google’s store of data on its users pales in comparison to the level of specificity and individualism in the data that Facebook is able to provide to its advertisers.
This, in combination with Facebook’s ‘targeted advertising’ options for entities (and companies) has allowed to become a giant in the advertising space.
DigitasLBi vice president and group director of paid social Jeanne Bright gives an example. Say a person was looking at jackets on Nordstrom from their mobile phone while they were logged into the Facebook app. Then they open their computer to Facebook and see ads from Nordstrom.
Facebook Faces More Woes Over its Advertising Practices
Unfortunately for Facebook, its legal issues and PR crises has not been limited to their data preservation and usage methods — their platform’s advertising practices have come under immense scrutiny as well.
Recently, ‘The Washington Post’ posted a piece that dissected the issues with Facebook’s “targeted advertising”, namely singling them out for discriminatory practices in the display of advertisements by the company:
Facebook agrees to overhaul targeted advertising system for job, housing and loan ads after discrimination complaints
March 19 Facebook on Tuesday agreed to overhaul its lucrative targeted advertising system to settle accusations that landlords, lenders and employers use the platform to discriminate, a significant shift for a company that built a business empire on selling personal data.
(Un-paywalled article can be found here): https://outline.com/d4cfum
Unfortunately (again) for Facebook, the bad news wasn’t limited to negative press. They are also facing a hefty lawsuit by users that claim they have been adversely impacted by Facebook’s discriminatory advertising practices:
Facebook Entering into the Remittance Space Doesn’t Seem Smart
Any casual observer of Facebook and events related to the company over the last few months can tell that Facebook is currently in the midst of repairing its public image, revamping their websites’ algorithms, and pursuing greater strategies to ensure data security/preservation whilst dodging lawsuits, indictments and Congressional subpoenas launched straight at the owner himself, Mark Zuckerberg.
Even if one has been blind to the events surrounding Facebook over the past few months, Facebook’s recent public campaigns have conveyed the same sense of public penance that we often see from companies that have been ‘caught’ in a PR scandal.
Below is an example:
Obviously, it only takes one look at recent headlines to come to the conclusion that Facebook has been vastly unsuccessful thus far in their PR campaign as they are still under immense scrutiny from the public.
To make matters worse, a recent report (published in 2019) by Digital Marketing firm, ‘Smart Insights’, shows that Facebook usage among the younger demographic has decreased substantially:
“ A new 2019 Children and parents: media use and attitudes report also published by OfCom (UK) is interesting if your business is involved in marketing to children or youth markets or you want to understand future adult use of social media. It highlights the continuing decline of Facebook use by younger demographics with 12–15 year olds with a Facebook profile decreasing from 40% in in 2017 to 31% in 2018. Instagram increased from 14% to 23% in the same period with Snapchat fixed at 31%.”
The 9% drop off in usage by 12–15 year olds from 2017 to 2018 is a substantial decrease and could precipitate a greater exodus from the platform from the younger demographic.
This is important to note because, as many know, Facebook gained popularity through its widespread usage and adoption by younger demographics (ages 11–25). Thus, a major exodus of this core demographic could signal impending death for the platform in the next few years (or perhaps even sooner).
Given all of this inner turmoil and external scrutiny on top of the ongoing PR scandal Facebook (and Zuckerberg) have been dealing with for the past year, its hard to imagine that Facebook is now planning to redirect and divert their resources toward entering into an entirely different market that they have a proven history of failure in.
However, it is plausible to suggest that perhaps Facebook is looking to blockchain to conquer its data integrity issues.
Only time will tell what direction that Facebook goes toward in the long-term.