The Truth about Facebook’s Cryptocurrency (GlobalCoin)
Is GlobalCoin the Last Stone in Facebooks Infinity Gauntlet?
Facebook’s cryptocurrency will be good for blockchain. It might take some market share from a few smaller coins and even cause a dip or two in Bitcoin if it really gets legs, however, more importantly, it will accelerate mass adoption — something that’s better for all cryptocurrencies.
Facebook has the world’s attention. Everything they do is highly scrutinized, and that scrutiny will lead to clearer regulation in the space, something that will help everyone involved — from retail investors to blockchain developers.
A few days ago, Laura Mccracken, Facebook’s head of financial services in Northern Europe, announced that they’re releasing the White Paper for their cryptocurrency GlobalCoin (nicknamed Project Libra) on June 18th. While the crypto community seems unsure of how to feel about this new coin, I’ve chosen to take a more positive stance, at least financially.
The attention this will bring to the greater crypto community far outweighs the potential threat to it. My concerns aren’t for Bitcoin, Ethereum, or any other blockchain project. As I said, I believe Project Libra will help cryptocurrency as a whole. What scares me is the power it will give Facebook over everyone who uses it.
I’ll save the ominous ramblings of a sleepless crypto-enthusiast for later on.
Facebook’s Cryptocurrency: good or bad for Bitcoin?
Facebook and Bitcoin are more complementary to each other than competition. Because Facebook is a mainstream medium, it’s the intro of a coin will normalize cryptocurrency use faster than any alternative, sparking curiosity across its gigantic user base and usher in the next big wave.
What is one of the largest hurdles to mass adoption? A lack of user-friendliness — Facebook has already proven user-friendly enough to garner 2.48 billion monthly active users. Hell, if your Grandma can send you bible verses on Facebook Messenger, it’s probably user-friendly enough for her to use for crypto-transactions. Bitcoin and other altcoins are intimidating. Our community, which I love, isn’t the most friendly. Sure we’re eager to help newbies, but as soon as someone mentions a thought or idea that conflicts with the majority, they’re treated like lepers. Facebook has already proven its ability to shepherd people down their user journey, I’m confident they’ll be able to make their coin as user-friendly as traditional currencies.
I think Facebook is a much larger threat to the dollar than bitcoin ever was, so many users who will be able to transfer value between each other. If Facebook succeeds at making their coin a stable coin, they could overcome one of the larger issues Bitcoin is plagued with when discussing mass adoption, the fact that it’s so volatile.
Facebook having an existing platform with users allows it to skip out on the hardest part of creating a coin (adoption). Taking a step further, it seems GlobalCoin isn’t even that much of a threat to the dollar, the only direct competitor I see is Ripple (which I don’t endorse, and hate myself for profiting off of it at one point in my trading career). As someone who has spoken out against Ripple (XRP) repeatedly, you might be wondering why I can get behind GlobalCoin if it shares so many characteristics with XRP?
The answer is, Facebook’s best interest is more closely aligned with the best interest of its users than Ripple’s interests are aligned with their users. If Facebook does something that’s bad for the average Joe, the average Joe might up and leave the platform. I’m 100% certain Facebook will inevitably also serve the needs of corporate clients and banks. However, their gigantic user base will force them to keep the people’s needs at heart as well. It’s a numbers game for Facebook; they have to focus on the volume of FB users over time.
This should cause Facebook to crack down on the quality of its profiles, quality relating to how many Facebook users are fake accounts. With the introduction of their own currency, new standards and regulations will have to be put in place on the platform. This could mean that anti-money-laundering and Know-Your-Customer practices will be implemented by them. This would cut down the number of fake accounts currently active on their platform (which already negatively affects their advertising programs) and make it a lot more difficult to create duplicate accounts in the first place. It makes monitoring for fake accounts in the best interest of Facebook for multiple revenue reasons, which in the end is the most important motivator for the company.
Facebook will Force Regulatory Scrutiny & Shed Light on Technological Grey Areas in the Law
Because of the power of influence that Facebook wields, that is recognized by the government, Project Libra it will focus attention on cryptocurrency regulation... Facebook is bound to come across financial regulatory grey areas as it launches Project Libra. While many small projects skimp on their compliance efforts, thinking that they’re too small to be called out for it, Facebook will be dealing directly with governments to discuss issues that will be covered in the mainstream media, publicized to heights that most crypto-related news pieces never dream of reaching. Facebook and its massive amount of working capital will have the best lawyers available fighting in its corner. They could force the creation of legislature around subjects that until now have been unaddressed.
Ross Ulbricht was sentenced to life in Prison for creating the Silk Road, a marketplace to buy and sell drugs. He committed a few other crimes along the way, but for the sake of this argument, let’s look solely at his crimes relating to the creation of his product.
The Silk Road (Product) wasn’t created to become a drug marketplace, it was created to be a market completely free from government regulation...
A little known fact about the Silk Road is that a large portion of its revenue came from selling consumer goods and commodities like wheat and condensed milk, in countries where these items easily accessible to Americans, were not available. Let’s say The Silk Road was a literal road; would you charge the owner of the road for the crime of drug trafficking, or the drug cartel using the road to move its product? Charging someone for crimes that are the responsibility of the people using his transaction/transportation platform is a slippery slope and one that would label a lot of business people who are considered legitimate today as “criminal”.
What would happen if GlobalCoin somehow ended up facilitating the buying and selling of narcotics at scale? If people are able to manipulate a government-run election, it seems feasible that said people would also be able to figure out how to use GlobalCoin to traffic drugs. Would Facebook be held responsible for this? Would Zuckerburg spend time in jail for the sins of his users?
Helping the “Unbanked”
Beyond the positives brought to the crypto-community, I think GlobalCoin can also help citizens of third world countries who don’t have the luxury of a stable currency (or at least as stable as the Dollar is..) to store their value within. GlobalCoin will be pegged to a “basket of fiat currencies”, and is slated to be a stable coin. Many have tried to create a stable coin in the past with little success. However, Facebook definitely has the time, money, and resources to address the issue effectively. Facebook is offering people of impoverished nations a chance to take part in the global economy. Crypto advocates often spout scripture-esque rants about how Bitcoin will help bank the unbanked, providing banking services to the part of the world without access to them. In reality, this seems to be a far more feasible future for GlobalCoin.If accomplished, it would create a tremendous amount of goodwill and global citizenship that Facebook could use in light of the ongoing negative media attention following the 2016 election.
Is GlobalCoin the Last Stone in Facebook’s Infinity Gauntlet?
GlobalCoin will be good for Bitcoin, Ethereum, and the cryptocurrency market as a whole. This I’m confident of. What causes me some concern is the sheer amount of data Facebook will then own if they successfully launch this product. I’m excited about the launch of their coin because financially I believe it will benefit me, but I’m nervous for other reasons.
Netflix’s Black Mirror, a show that covers dark futuristic depictions of society, often shaped by technology can really scare the shit out of me One episode showed a world where every individual was assigned a social score. Every time you interacted with someone, they could give or take points from you(like the damn Uber drivers rating you while you’re rating them — it’s already begun!) These points went towards your social credit score — that are used to give you access to luxuries, determine if you could attend certain events, and even how other people treated you. A couple of years after the episode aired, China launched an eerily similar program that gave its citizens a social score. The program tied into WeChat and AliPay, quickly gaining over 200 million users. I haven’t spoken to any Chinese locals about their feelings towards the social score system, but as someone who jaywalks a little too often, I personally want to avoid a social credit score if I can.
“Alipay and WeChat are less like individual apps than entire ecosystems. Whenever Liu opened Alipay on his phone, he saw a neat grid of icons that vaguely resembled the home screen on his Samsung. Some of the icons were themselves full-blown third-party apps. If he wanted to, he could access Airbnb, Uber, or Uber’s Chinese rival Didi, entirely from inside Alipay. It was as if Amazon had swallowed eBay, Apple News, Groupon, American Express, Citibank, and YouTube — and could siphon up data from all of them.”
“The aim is for every Chinese citizen to be trailed by a file compiling data from public and private sources by 2020, and for those files to be searchable by fingerprints and other biometric characteristics. The State Council calls it a “credit system that covers the whole society.” — WIRED
Facebook is already one of the most recognizable companies in the world, but I’ve never heard someone say that “life would be extremely difficult without Facebook”. A journalist for BBC made this exact comment about the Tencent owned messaging app, WeChat. How has WeChat made itself so necessary that life is difficult without it?
Facebook is something many people have a hard time deleting because it’s their only connection to people who may not be geographically near them, whether its close friends, family or the odd ‘virtual’ friends. They buy and integrate other services and features to make their platform more all-encompassing on a regular basis. Messaging. Marketplace. Money transfers. If it were to also add in the ability to take part in your local economy, and even the global economy, then Facebook is starting to border on a staple of human life. How would a company go about making themselves indispensable when they already control the data of a large portion of the population? It already added in a marketplace where you can buy items from one-another. If it became an umbrella that covered all the typical expenses we encounter in day-to-day life and allowed us to pay for them seamlessly, it wouldn’t just have a lot of data, it would have ALL the data. What is more important, your data privacy or personal convenience?
Perhaps Facebook is trying to emulate what WeChat and AliPay have done in China for the rest of the world. Perhaps they believe that by tying in a payments functionality with their own currency, they too can become indispensable. If Facebook were to achieve what WeChat and AliPay have achieved, but on a larger scale, it would be the most powerful entity on the planet. It would have the data and power to give us access to anything we could possibly want, right at our fingertips. The only concern I have is that if someone has the power to facilitate your access to something, they also have the power to take that access away.
I believe that GlobalCoin will be good for blockchain. I believe GlobalCoin will be good for cryptocurrency adoption. I am just not sure GlobalCoin will be good for humanity. I don’t think Facebook has bad intentions. I doubt any of its’ executives are sitting in a dimly lit conference room raising whiskey glasses to the future financial/social enslavement of society.
Yet, it feels like we’re coming to a tipping point. Where great forces too big for their own good start to butt heads in which the moral and ethical questions are not even asked. It seems like a shift in power is about to happen on a global scale, a shift to a world where large tech corporations write governing legislation in their Terms of Service (with slightly more detailed descriptions in their FAQ). I feel like I’m at risk of sounding over-ominous, but I worry that a dystopian future where corporations and governments have switched roles would not be good for the individual, small businesses, or even the crypto-enthusiast. If GlobalCoin becomes a global success, that future might not just be feasible, but inevitable.
The Truth about Facebook’s Cryptocurrency (GlobalCoin). was originally published in Hacker Noon on Medium, where people are continuing the conversation by highlighting and responding to this story.