The fact that there now are sources that claim that Facebook is planning to launch their own cryptocurrency is not news, but so far the statements from the social media giant have been scant, to say the least.
It is also no secret that Facebook looks with envious eyes on the Chinese payment solutions Wechat and Alipay – to succeed in establishing an ecosystem for payments in the already existing ecosystem Facebook would, of course, be a wet dream for the company.
And I think this is exactly where cryptocurrencies come into the picture. The cryptocurrency boom that we saw in 2017 may have given Facebook the opportunity to expand their system with their own cryptocurrency, and hopefully become the hub for payments that both Alipay and Wechat have become.
Can be difficult to leave the core business
With that said, I think there has to be a huge effort from Facebook in order to succeed with what they have taken on. Looking historically, giant companies like Facebook, Google, Microsoft and the like have generally found it difficult to go beyond what is perceived as their core business.
Google is a very good example of this: they are the best in the world in search engine services and video streaming services (Youtube), but their attempt to launch Google+ as a Facebook challenger fell flat, to say the least, and recently the whole project was dropped.
I think there is an imminent risk that Facebook’s own cryptocurrency carries a sense of being shoe-horned into the existing Facebook system that users appreciate and continue to use. That it does not work so well, becomes complicated to use and that there are far too few services connected to it. It may very well be like when Facebook launched its Instant Articles service a few years ago: existing solutions are both better and more reasonable from an economic perspective.
“Will their coin even be decentralized? Probably not”
Furthermore, there is also a great risk that “Facebook coin” does not even meet the requirements for what we normally choose to include in the term “cryptocurrency”. Will their coin even be decentralized? Probably not. Will you be able to store your “Facebook coins” without Facebook being able to access them? Probably not. Will Facebook be able to remove people’s coins if, for example, there is a suspicion of a crime? Most likely.
Remaining after that is a coin that in many ways is just like any coin in any smartphone game. The users will have as much use of Facebook’s cryptocurrency as they have of all the coins they collected when they played any of the Super Mario Bros games.
But if Facebook succeeds with the art of avoiding the traps I mention above, it can definitely come something exciting out of this project. However, I will not dare to invest a single penny of my money that this is actually the case.
Totte Löfström,
Cryptocurrency expert and CEO at the Swedish crypto exchange Trijo
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