Recently Facebook announced their entry to the crypto-currency space with the announcement of Facebook Coin. While many experts in the space are calling it a fake-crypto move by facebook as it just mimics the stable coins but does not have its decentralized properties, it still has the potential to change the crypto currency game.
What is it?
Facebook specialized team is making cryptocurrency for Whats app that will let users transfer money on its Whats App messaging app, focusing first on the remittances market in India.
Remittances are said to be the first space which will see a mass adoption of blockchain as both the time taken to send money and the middlemen being cut will increase the efficiencies in the market.
Why Remittances and Why India?
This service is being launched in India first, as this is the biggest market in terms of remittances. According to data from the World Bank, the country received nearly $69 billion dollars in foreign remittances in 2017, or 2.8 percent of the country’s GDP.
Facebook sees this as a perfect opportunity as both parties involved in the transactions would usually have whatsapp, and can converse while the money is being sent to them hence removing the middlemen from the equation completely.
The first mover advantage of Facebook is going to help them have the biggest share in a market which will inevitably have this service in the future.
Also, in other markets Alipay and Wechat Pay have already been exploring the market, and it is just a matter of time when they turn towards India.
What is Facebook Coin?
Facebook Coin is a Token which works in the Facebook Ecosystem as a way to transact money. The value of 1 Facebook Coin is pegged to 1$. This is what makes it a StableCoin.
Stablecoins are blockchain-based, digital assets, which derive their value from another stable asset. Most traders affiliate the term with a digital asset backed by USD — meaning the digital token will rise and fall alongside the FIAT currency. Realistically, these stablecoins do not need to be backed by USD — they can be backed by any asset of value deemed to be ‘stable’ in the eyes of investors.
Interestingly, it is being said that this coin would not be backed solely by USD. Rather, Facebook is believed to be ‘pegging’ the coin to a variety of FIAT currencies. Doing so will shield the coin from fluctuations in value, even greater than one backed just by USD.
Interestingly, this is not the first time Facebook has tried virtual currency on its platform:
- Facebook Credits, previously launched as a virtual currency in 2011 and what happened after just two years.
- Facebook Gifts, launched in 2012 and closed two years later. Quoted by Josh Constine, “Facebook never found a way solve distance and localization problems to make Gifts work internationally.
- Facebook Messenger Payments launched in the US in 2015 and later expanded to Europe within two year’s time. What is happening now? We all know very well. No mass-adoptions.
I believe most of these were instances of right used cases at the wrong time. The market is right for a token based economy and Facebook coins might just work.
Why is it a game changer?
There are two reasons why Facebook Coins can be a game changer:
- Cross Platform Usage
Blockchain and Cryptocurrencies value depends on its user adoptions. the more number of users use the tokens, the more valuable it is in the market.
When Facebook launches its coin, it would probably have the highest circulation of any virtual currency, with a potential market of over two billion users. By comparison, there are only around 23 million distinct bitcoin wallets, and around 33 million Ether wallets — and many users have multiple wallets.
Facebook Coins has the potential to become the biggest name in the crypto-currency market overnight.
Cross Platform Usage:
The second, and one of the most important reasons, would be its cross platform and cross-utility usage.
A currency is technically a standardized measuring tool for products/services which otherwise cannot be measured in terms of each other. So, if there is a different currency for buying groceries vs. a different currency for paying for electricity, it would not make much sense.
Facebook has Instagram, Whatsapp, Messenger and Facebook ( the platform) in which people not only interact, but create content, buy/sell stuff, have virtual workspaces, and most importantly, brands put their ads.
If Facebook starts incentivizing different parties using Facebook coins to partake in different activities, it has got itself a goldmine in its hands in which they are creating the gold themselves.
Consider the following scenarios:
- Creators on Facebook and Instagram are paid using Facebook coins for creating content. Further, they are paid monthly to create a certain numbe of content pieces. this same facebook coin can either be spent on Facebook to buy ad credits and promote themselves, or be converted into FIAT currencies and make their salary.
- Brands can buy Facebook Coins at subsidized rates and buy ad credits from them. These coins can be converted into FIAT currency at any time, but why would they?
- Users can be paid in terms of Facebook Coins for the amount of Data they share.
- A user can buy/sell their products in Facebook Coins. these same Facebook coins can then be used to promote their business in the platform. Most of the money would be spent on their promotion and a certain % converted into FIAT
- Facebook can incentivize its workspaces concept using the FIAT Currencies where the emplyees of the workspaces can actually be paid salaries in terms of Facebook Coins, and then incentivized to use more of Facebook and earn more coins.
All in All, Facebook Coins becomes the incentive mechanism for Facebook to make its users do whatever they want them to do.
It is too early in the day to predict the outcome of this, but one thing is for sure. For a market like India, where the regulations are against cryptocurrencies, only Facebook has the scale to make the dent and pave the road forward for blockchain and cryptocurrencies.
The possibilities are endless, and if Facebook is able to execute this properly, it might announce a paradigm shift in the way things are done in the internet on a mass scale.