Facebook’s Crypto Payments Solution is Raising $1 Billion from Investors
This is a part of an ongoing blog series touching on important news in on blockchain technologies and their impact. The first piece focused on Fidelity’s how cryptocurrency trading desk will cause institutional capital to flow into the space and the second article captured how Microsoft’s Azure Blockchain platform will spur many developers to build on top of Ethereum. This piece will focus on Facebook’s plans to develop and release its own cryptocurrency-based payment system.
Facebook’s wants to capitalize on its dominant position as a market maker for all sorts of online marketplaces and digital services. Their cryptocurrency project, code-named Project Libra, is looking to raise $1 billion from investors, and Facebook is actively looking to partner with firms such as J.P. Morgan or Mastercard. Project Libra is something that Facebook has been working on for over a year, with the intent of creating a digital coin that users can send to each other and make payments with. In a sense, Facebook is looking to replace FIAT currency on its platform.
As of right now, there is not much information on Facebook’s massive initiative. The company does plan on releasing a whitepaper of their token on June 18th. However, Facebook’s online coin will have almost immediate access to over 2 billion global users, will force competitors to take action, and can potentially become the first truly worldwide, spendable cryptocurrency.
Facebook’s Tremendous Reach
The potential implications of Facebook’s coin are massive due to Facebook’s reach. It’s important to realize that Facebook touches almost a quarter of the world population in some way, not to mention the significant number of websites that leverage Facebook’s services to connect to users. Facebook has a stranglehold on a large majority of digital marketing, analytics, and services that are available today. Since there is so much cash flowing through all of Facebook’s services, replacing just a portion of that capital with Facebook’s cryptocurrency can potentially solve one of the largest facing cryptocurrency today: widespread adoption.
Historically, cryptocurrencies have never really been used as a form of alternative payment. There are dozens of reasons why, but the most common ones boil down to ease of use and extreme volatility. Facebook has long had a record of creating applications and services that are easy to use for users – to the point that the company spawned diagnosable social media addiction across its Facebook, WhatsApp, and Instagram services. Given Facebook’s expertise in understanding what users want, it is reasonable to assume that Facebook’s cryptocurrency will be similarly easy to adopt, spend, and use. Add in the fact that Facebook is considering “rewarding” users who view ads, interact with content, or shop on the platform makes it even easier for consumers to get their hands onto the coin.
Spurring Response from Competition
Another aspect to consider about Facebook is how the competition will react. Facebook is looking to raise almost $1 billion to focus on the project, and they are actively looking to partner with industry leaders such as Mastercard or Visa to build out a viable solution. Facebook occupies such a vast space that there is no single competitor that can hope to match its reach, but a large number of smaller competitors can.
One of the most significant services threatened by Facebook’s services is Apple Pay, which could see many users flood to Facebook’s option. Around the world, other multi-purpose social media applications with payment solutions such as Kakao Talk or WeChat are threatened. To compete with Facebook’s incredible reach and expenditure, many of these smaller companies could band together to develop a cryptocurrency of their own.
A Global Wave of Cryptocurrency Adoption
Regardless of whether Facebook’s cryptocurrency takes off successfully, it will force competitors to develop their own solution in response. By focusing so much effort on building out cryptocurrency payment solutions, it will only further bolster the industry. Facebook is a company with global reach, which means the response will be seen around the world as well.
For blockchain technology, this is happy news. A technology giant throwing almost a billion dollars into developing a solution will mean that the efforts will spread across the entire industry. Whether or not Facebook’s attempt succeeds, other companies and projects will rise to follow suit. Remember that blockchain technology did not appear overnight, but was built through iterative improvements. The increased attention and flow of capital into the space means that the growth is accelerating, and the idea of cryptocurrencies is ever so slowly becoming more mainstream.
