Facebook is launching its new cryptocurrency, dubbed GlobalCoin, later this month, The Information trumpeted yesterday. The more cynical among us may ponder the timing: it was only 48 hours prior that Facebook faced new federal probes and privacy concerns.
Picking apart the social media mammoth’s newly revealed crypto plans has proved fashionable. Allow us to summarize.
Facebook is handing over responsibility of the network to a Foundation, in response to claims that it's a centralized coin dressed in decentralized clothing. Yet, the Foundation, which Facebook appears to be choosing itself—and asking willing participants to pay $10 million for the privilege—is a bit like a feudal king picking a government from his own lords: looks good on paper, but in reality it’s more of the same.
“It's no Bitcoin,” decrees the Economist pointing directly at Facebook’s ham-fisted attempt at decentralization.
"Sounds a lot like EOS’ DPoS (delegated Proof-of-Stake)” mulls TNW’s Hard Fork, referring to the blockchain that everyone derides for its lack of decentralization.
Most tellingly, the price of Bitcoin feigned complete indifference to the news.
But hey, what did you expect? Essentially, it's a permissioned chain, folks, with Facebook choosing all the nodes and their degree of influence. Quelle surprise! Mark Zuckerberg is no Jack Dorsey—the Web 2 poster boy of Web 3 decentralization. You only have to look at how much power he still holds in Facebook’s share structure (53.8% of voting rights) to know he ain’t about that. But painting FaceCoin, GlobalCoin or Project Libra—as it’s variously known—as a total downer is not playing the long game.
For those that are, the betrayal of true libertarian cryptocurrency dreams and ideals isn’t so keenly felt.
Certainly, there will be plenty of people in the developing world, where Facebook plans to trial its tech, who don’t care whether their ability to convert cryptocurrency into cash comes from Mark Zuckerberg or anyone else.
In India, regulators have clamped down on cryptocurrencies to the point where banking services can’t be used for trading. So Indian crypto-enthusiasts, are expected to flock to Facebook and use it as a peer-to-peer channel, where they can deal with each other directly. Startups, such as New York-based Rupeecoin, which offers cash-equivalent digital currency, are praying that such a huge player getting on board will lend legitimacy to the technology, and persuade banks to open up to the industry.
Even for Facebook, that’s not an easy task. Facebook’s recent trials with digital payment trials in India, with 200 million WhatsApp users, reportedly ran into regulatory and user problems. While many of its users live in countries where people would be better off being paid in a stablecoin rather than an inflation-prone national currency, governments may not be so enamored by the possibilities. In Venezuela, the unwilling laboratory for cryptocurrency as a viable alternative to fiat money, the government is working hard to stamp out its independence.
But, with a Facebook owned cryptocurrency, things in India could change very fast. While regulators are keen on the blockchain technology that underpins them, cryptocurrencies are another thing altogether.
“The government feels that until the general public has a better understanding of cryptocurrencies, such operations should not be allowed,” said Rajesh Dahddu, global practice leader for blockchain at Tech Mahindra, an IT services provider.
Facebook’s coin could well serve to educate the Indian (and other) masses. Still, Facebook coin fans are decidedly lacking among decentralization proponents. However, Spencer Bogart, a partner at venture capital firm Blockchain Capital is one of them. He has suggested that Facebook will be a catalyst for mainstream cryptocurrency adoption around the world and that it would set a rocket under the industry.
Sure, Facebook’s motivation for getting into cryptocurrencies is questionable; its reliance on advertising revenues is giving it belly ache. And its implementation will follow selfish lines and pander to regulators concerns. But, ultimately, whether it’s a good thing or not depends on whether you think blockchain has to keep its libertarian ideals or evolve with who and how it’s used.
And Zuckerberg has not only billions of users at hand, but access to some of the most important policymakers in the world, such as Bank of England governor Mark Carney–the two sat down for lunch earlier this week. Facebook wants to partner with worldwide banks who will change international currencies into its digital coins, a bit like Ripple.
Ultimately, Facebook doesn’t care what you think. And neither do the majority of Internet users, many of whom are glad of anything that can give them a bit of extra value. There are people out there uploading their entire medical records to the Internet in return for Amazon vouchers.
It boils down to this: is it better to get on the bandwagon and hop off at the appropriate stop or just let the bandwagon leave all together?