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Facebook officially released its launch date for Project Libra, its Stablecoin project, to be in the first quarter of 2020. It will be used as a digital payment system in about dozen countries, with plans to expand after its release.
For those unfamiliar with what Facebook has been doing with its blockchain technology, Facebook is working towards creating a digital currency that makes payments affordable and secure for all, including those without bank accounts. This will be their second attempt at creating a virtual currency after Facebook credit failed to gain user traction.
They have also shared the new name for the token that will be used on its new digital payment platform, ‘GlobalCoin,’ to match its ambitions. Facebook registered its crypto payments project in Geneva already as “Libra Networks” this month and reported that it will focus on “investing, payments, financing, identity management, analytics, big data, blockchain and other technologies.”
Facebook’s new GlobalCoin will soon be in the market (source)
Facebook is moving fast to meet its promised date, requesting financial institutions to share confidential financial information about its users and already spoke with Bank of England governor Mark Carney last month to discuss the opportunities and risks in launching cryptocurrency. Facebook have also not shied away from regulators, seeking advice on operational and regulatory issues from officials at the US Treasury.
Seeing Facebook actively pursue a project that can have them be at the center of all payments and collect users’ financial data is generating concerns, with the US Senate and Banking committee sending an open letter to Zuckerberg to ensure that they understand what Facebook is trying to do.
After tumultuous years of dealing with user trust, it is natural to wander why Facebook is moving so fast on a project that could potentially erode user trust even more. There is no cryptocurrency that is not volatile yet, so why is Facebook making a huge bet that they are the ones that can do it?
It needs a new use case that compels its 2.7 billion users to stay
Facebook knows that days of continuous scrollable News Feed is coming to an end and that people are favoring discrete communication channels, like the way WeChat has done in China. With less ad space and ad-targeting information, along with millions leaving Facebook, Facebook needs a new reason for people to stay on Facebook.
The silver lining is that people are going to Instagram instead (source)
Facebook still means something for the 52% it has retained, but it also knows that it needs to quickly pivot to what the masses want. This is why Facebook is working to shift Facebook from feeling like talking in a ‘town hall,’ to conversing in a ‘living room.’
Hence, this means that the use cases must shift quickly as well. Instead of being used as a huge microphone, Facebook is working towards meeting the convenience and comfort of the individual that a living room offers. Hence, in addition to the privacy their end-to-end encryption offers, it’s working towards being a one stop shop where users no longer have to traverse to different sites or do complex banking work elsewhere.
By having all your financial capabilities available on Facebook, users no longer have to traverse to different apps when they need a new product or need to pay someone back. Everything can be done in an instance and with smart contracts, people no longer have to trust each other for financial promises to be met.
Why even leave the house when all financial activities can be done at home? (source)
This convenience will allow people to perform most of their daily tasks on Facebook without ever having to leave, which will increase user engagement of its 2.7 billion users. With payment also needing engagement from both the sender and the receiver, GlobalCoin could spur its next major growth.
As users decide against seeing ads, Facebook needs a new incentive for people to keep seeing their ads
Compared to the past, where Facebook claimed that the regulations will not help solve tech companies’ major problems, Zuckerberg is now calling for more governmental regulations. A major reason behind this is that Facebook knows that regulations are inevitable and would prefer to be in the talks when they are made, so that Facebook could suggest compromises that they can handle.
Facebook hired Top State Department Lawyer, Jennifer Newstead, to help them with new regulations (source)
One of the big tasks for Facebook will be figuring out how they will survive if they are to give up their firm control on user data and give users control over how their data is dealt. Facebook will have to shift to a different business model that can still extract data about each user. Hence, why not payment?
Payment is unique in that it tells you what you find as necessary, as you have committed to give up your hard earned money for something. This also incentivizes people to seek opportunities to pay less, even if they give up their data or loyalty to a certain company in return. And what could be more important for Facebook than data and loyalty from their users?
Loyalty market will be heavily disrupted by Facebook (source)
For example, the amount of discount an advertiser provides could factor in how frequently their ad is shown to the power users on Facebook or offer a vastly larger reach more quickly so that the businesses will be incentivized to offer steeper discounts. This costs Facebook nothing, while increasing the opportunities for GlobalCoins to be spent.
Lastly, as all transactions occur on GlobalCoin, Facebook could even reward users and create a unique ecosystem, which I touched on before. If Facebook manages to dominate payment while others struggle to target their ads due to new regulations, guess where the advertisers will go?
Moreover, considering that blockchain is an immutable ledger and Facebook needs access to each transaction to ensure that no money-laundering occurs, guess who will have permanent access to all purchases?
Facebook wants to disrupt global banking and make banking capabilities accessible to all
Bitcoin has already begun to disrupt the $600 billion global remittance market by bypassing banks, but it’s avoided by many because “of their lack of knowledge of how they work.” Many users don’t want to risk possibly losing their money due to technical complexities or having the volatility of bitcoin suddenly decrease their remittance.
However, if Facebook makes this experience intuitive, then there is no reason why people should resort to traditional money-tranferring banks anymore. This feature may be the reason why Facebook chose the name, ‘GlobalCoin,’ as they want people to forget about all other currency.
Traditional money transfer giant, Western Union, is aware that this shift to the blockchain will be inevitable and have teamed up with Coins.ph, a blockchain startup in Philippines specializing in cash remittances, just last month. This deal will see both international and domestic payments made via Western Union’s network sent to the digital wallets held by Coins.ph’s “over 5 million” users.
Traditional money tranfer giants are shifting to the blockchain too (source)
As such, other money transfer giants will likely have to follow suit and follow Facebook’s orders, as losing out on partnering with Facebook means losing your existence in the remittance world. It’s similar to how those who lost all of their users after entering Google’s “PageRank” of zero. Even though some like Bank of England have been working to build their own cryptocurrency, no bank has the reach of Facebook, which explains why all banks want to talk with Facebook.
Moreover, it’s important to note that GlobalCoin will give banking capabilities to those who never had it before — children and those from developing countries. As economic activity shifts to the digital space and Facebook develops its own economy, some may receive their first income via GlobalCoin.
If children and new comers to the banking world send gifts with the GlobalCoin they make, the receivers then need to engage with GlobalCoins as well. They can liquidate it right away, but it gives them a reason to download and engage with Facebook. Hence, Facebook gets a second chance for the churned users to try Facebook again.
Facebook is disrupting the banking industry by channeling in more users into banking (source)
Facebook wants to prove that it can be a trusted product again by tackling the product with the most trust issues, banks.
As Zuckerberg put it during this year’s F8 conference,“[Facebook] don’t exactly have the strongest reputation on privacy right now, to put it lightly.” A lot of people are still disappointed with what happened and as Warren Buffett put it, “it takes 20 years to build a reputation and five minutes to ruin it.”
Zuckerberg knows that regaining user trust is Facebook’s top priority (source)
Unfortunately, being in the digital world where things move exponentially faster than other industries, Facebook doesn’t have 20 years. It’s not even 20 years old and it has to meet the Wall Street’s expectations each quarter, which will only get harder as their core monetization strategy is at risk with the data protection regulations that even Zuckerberg is calling for.
Facebook needs a drastic pivot to convince its 2.7 billion users that they are the platform to trust and the future hub of all economic transactions. Considering that not much details has been released about this project, Zuckerberg pushing for an early date is a clear sign that he is betting on GlobalCoin to make Facebook a trusted platform again.
How this will affect the future of privacy will be another question to mull on, as blockchain was originally meant to restore user privacy and give authority back to the people.
As Garrick Hileman, a researcher at London School of Economics, puts it, “GlobalCoin project could be one of the most significant events in the short history of cryptocurrencies.” GlobalCoins will be the most ambitious project Zuckerberg will undertake and will determine the future direction of Facebook.
Why is Facebook developing “GlobalCoin”? was originally published in Hacker Noon on Medium, where people are continuing the conversation by highlighting and responding to this story.
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The views and opinions expressed in this article are solely those of the authors and do not reflect the views of Bitcoin Insider. Every investment and trading move involves risk - this is especially true for cryptocurrencies given their volatility. We strongly advise our readers to conduct their own research when making a decision.