Is Facebook Building a New Bitcoin? A Look at Facebook’s Recent Moves

June 27th, 2018

There has been a ton of speculation recently about Facebook jumping into cryptocurrency – launching their own token or currency, buying a marketplace, implementing a digital asset into their product, etc. There are few clues so far as to what they are doing, so let’s dive into what we know about Facebook, and what that could tell us about where they’re going.

Management Re-Shuffle and a Blockchain Group:
Announced on May 8th, the (former) head of Facebook Messenger has shifted roles. After leading Messenger for four years, David Marcus is transitioning to something new, “setting up a small group to explore how to best leverage Blockchain across Facebook.” There has long been speculation that Facebook CEO Mark Zuckerberg is interested in launching his own cryptocurrency. To believers of that theory, this new position only adds fuel to rumours that Facebook will soon be involved in blockchain technology in a major way.

Cryptocurrency Advertising on Facebook – Banned and Unbanned:
As the valuations of most digital assets (cryptocurrencies,) fell throughout December 2017 and January 2018, the number of initial coin offerings (ICOs) only continued to climb. Amid concerns that Facebook could be liable for investor’s losses, Facebook put a ban in place, restricting companies from advertising their ICOs on the Facebook platform. (With the increasingly fraudulent and misleading clams being used to promote initial coin offerings, Facebook probably made the right choice to limit the ability of promoters to sell to Facebook users.)

This week, (June 26th, 2018), Facebook announced a lifting of this ban. While Facebook is still more restrictive than they were before the initial ban, the easing of regulations will allow blockchain exchanges, companies, and products can be advertised on the platform again. It may be required to show Facebook “licenses they have obtained, whether they are traded on a public stock exchange, other relevant public background on their business.”

Zuckerberg’s Personal Interest:
While it’s not worth putting too much stock into Mark Zuckerberg’s “personal” Facebook posts/ PR releases, a post published at the beginning of the year seems to indicate that the Facebook CEO has an interest in decentralized apps and the blockchain. In his post, Zuckerberg writes:

With the rise of a small number of big tech companies — and governments using technology to watch their citizens — many people now believe technology only centralizes power rather than decentralizes it.

There are important counter-trends to this –like encryption and cryptocurrency — that take power from centralized systems and put it back into people’s hands. But they come with the risk of being harder to control. I’m interested to go deeper and study the positive and negative aspects of these technologies….

-Mark Zuckerberg, Facebook CEO, January 4th, 2018

Putting It All Together:
Facebook has 1.45 BILLION users log on every day, and over 2 billion every month.  If Zuckerberg is truly interested in blockchain technology, he has the world’s biggest platform at his disposal, and could massively influence the industry.

For comparison’s sake, the largest trading platform in North America, Coinbase, is only serving about ten million customers. Facebook’s insane reach, spanning Facebook, Messenger, Whatsapp, and Instagram, means that any foray into cryptocurrency by the giant tech company would have massive implications for the digital currency industry. It would take only 1 in 200 (0.5%) of Facebook’s current customers to become involved in a Facebook-blockchain project for Facebook to have as many customers as Coinbase.

Following this train of thought, and Facebook’s history of acquiring other companies with large user bases, there has been speculation from many, including the Economist,  that Facebook may just try to acquire Coinbase. Coinbase reportedly tried to value their company at $8 billion when acquiring Earn.com, another blockchain company. That’s a huge sum, but Facebook has enough cash on hand to pick them up without blinking.

Regardless of whether or not Facebook makes a play to acquire Coinbase, the role change for David Marcus, and Facebook’s MASSIVE user base, means that even a half-hearted attempt at entering the blockchain industry could have a huge effect. There’s no guarantee it would work – remember Facebook Paper or the Facebook phone? – but for a nascent industry like digital currencies and blockchain tech,  reaching new users is the hardest part. Facebook already has this solved.

What we don’t know what exactly a Facbook-backed coin or exchange would do…. would it be to bolster privacy? To create a fact-checking ecosystem to steer Facebook away from the “fake news” issues that have dogged it? Would it play into a marketplace or classifieds product? Or would they simply become a mega-exchange?

As a thought experiment, what would happen if Facebook began selling Bitcoin and Ethereum? It’s hard not to see that scenario as a massive boost, in terms of users, developers, and price movements.

We’ll be sure to cover future news on Facebook’s foray into blockchain. In the meantime, you can beat them to the punch by picking up some bitcoin or other digital currencies.

Or, even better…

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