Facebook’s New Cryptocurrency Project
For the past year, there has been very little news emanating from Facebook’s relatively quiet Blockchain Division, and whether or not Facebook might be planning to incorporate the digital currency exchange process into its platform capabilities. However, some news items are beginning to leak out, and when assembled altogether, they could just indicate an extremely significant shift in direction for the company. If the news reports which have trickled out of the Blockchain Division are accurate, it could also have a major impact on e-commerce in this country.
In March 2019, it was reported in the New York Times that Facebook might soon want to launch its own cryptocurrency, and that would allow Facebook users who have downloaded some of the network’s apps, to exchange money between friends very easily, without the application of any additional fees. At the time, it was assumed that the main emphasis for this option would be in the area of the Indian market, since India has by far the largest volume of funds exchanges between family members.
The Facebook cryptocurrency option would facilitate all these exchanges, and make them much easier for all those Indian families. A major part of the strategy involved here is that India is the world’s second most populous country, which by itself is a sound reason for Facebook wanting to expand its presence there. By initiating the cryptocurrency exchange in the Indian market, Facebook would then be in a position to expand its offering to other kinds of funds transfers, which could then very well enable a simplified kind of international currency exchange.
However, recent reports are now indicating that Facebook’s outlook on this whole situation may be much broader. The Wall Street Journal is now reporting that Facebook is working on its own payment network which is based on cryptocurrency, and would theoretically have the capability of engaging in direct competition with traditional credit cards.
It is known that Facebook has been involved in the recruitment of literally dozens of financial firms, as well as online vendors, who would presumably be involved with helping to launch a payment system based on cryptocurrency, and which would be situated on its enormous social platform. If this effort were to be successful, it has the potential to completely disrupt the traditional mechanism of e-commerce, and would probably constitute the most mainstream application of cryptocurrency to date.
The Wall Street Journal report has identified the offering as a ‘stablecoin’ offering, which is a cryptocurrency whose value is strongly associated with conventional currency markets. This is thought to be the main reason that Facebook requires backing from financial firms, which would serve as insurance against bitcoin market fluctuations. These fluctuations can have a significant effect on bitcoin values at any given time, so they must be accounted for.
The thinking is that Facebook would be looking far beyond facilitation of basic transfers of funds, and would be more interested in positioning its payment network as a brand new rival to both MasterCard and Visa. If this were to come about, it would allow Facebook to lower charges and fees which are currently associated with the transfer of funds. It would also facilitate direct international payments through its platform, which would require only the utilization of your existing Facebook credentials for those payments.
One of the factors that will come into play heavily if all this should come to pass, is that a huge number of websites already make use of Facebook API’s which enable users to login, using only their Facebook credentials. This being the case, it would be a simple matter to extend that infrastructure so as to enable users to buy items on third-party websites by making use of their existing Facebook credentials.
How it would all work
In essence, Facebook users would have the ability to earn bitcoins and have them accumulate on their profile, so they could be used in any kind of transactions which they execute while on the platform. It is likely that the use of these bitcoins would be extended to include Instagram, Messenger, and WhatsApp, and also that users would be allowed to transfer other kinds of funds into their account.
This would give them a kind of enclosed Facebook wallet which could be used for many different types of transactions. Carrying out online payments is a fairly complex process, especially when it involves international commerce. If Facebook is able to pull this off, while at the same time reducing costs involved with transactions, it will be a massive feather in their caps. Facebook users would probably also love to have a single-click shopping process right at their fingertips, for all those services and products which are carried within Facebook apps, and which also appear on partner websites.
Another aspect of the process
If all this isn’t startling enough, there’s another part of the process which is thought to be an important part of Facebook’s overall initiative with cryptocurrency. It is thought that Facebook is also mulling over the prospects of paying users a fraction of a coin in exchange for shopping on its platform, engaging with different kinds of content, and watching advertisements on the network.
While there is very little hard news on this subject, it does seem to be very much in line with company policy, and would be of course highly advantageous to Facebook itself. Other apps have already successfully used the same concept, for instance Pokémon Go, in which a small amount of tokens can be earned and can be used to make in-app purchases, simply by playing the game. Although the amount you can actually earn through playing has a ceiling, additional play is encouraged by providing you with enough tokens to make worthwhile purchases.
This strategy earned Pokémon Go nearly $800 million in revenue in 2018, which represented a 35% increase over 2017. This should make it clear that the strategy itself would be fairly well received, and that should Facebook choose to actually implement it, it would likely become extremely popular. If all this does come to pass, it’s easy to see why it would represent a major shift for Facebook, and how it could change the face of e-commerce in this country.
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