Facebook’s New Cryptocurrency Gets Big Backers

https://www.wsj.com/articles/facebooks-new-cryptocurrency-gets-big-backers-11560463312?mod=rsswn

by kyrra • 7 years ago

59 56 7 years ago

gist• 7 years ago

This really says it all:

It is still not entirely clear, even to some members of the consortium, how the coin will work or what their roles will be, people familiar with the project said. Regulatory hurdles in the U.S. and elsewhere are high.

You have to love when corporations and people are so FOMO they will put money into something when they don't even know how it will work.

elorant• 7 years ago

Same happened with Theranos. Big backers for a product that no one ever got their hands on.

ethbro• 7 years ago

I mean, Thenaros showed something to their investors and regulators (lab test results) but straight up lied about how they were generating them.

So this would be more like... the Palm Foleo?

Mc_Big_G• 7 years ago

I sincerely hope this fails in the worst way possible, but it will be wildly successful of course.

WheelsAtLarge2• 7 years ago

Facebook will make this work simply because of the number of users and its world reach. It will be successful even if it only becomes a medium of sending money between countries but there are so many ways to expand it and earn a small commission for Facebook so it won't stop at just money transfers.

I predict that Amazon will have to release its own currency to guard against Facebook becoming a middle man for e-commerce and becoming a threat to its business. It's only a matter of time.

skinnymuch• 7 years ago

HN and other online places are guilty for calling all sorts of investments ludicrous. But Instagram along with Priceline buying Booking.com, Naspers buyjg 1/3 of Tencent, and to a smaller degree Yahoo (though they stupidly sold a lot of the stake far too early) and SoftBank investments into Alibaba are the best tech investments possibly of all time. And some of the best investments overall too.

ErikAugust• 7 years ago

What is “crypto” about it? Anything? Seems like a digital currency minted by Facebook pegged to USD.

dmihal• 7 years ago

Probably crypto as in you sign transactions with a private key, and submit them to Facebook's semi-centralized blockchain

zamadatix• 7 years ago

What is “crypto” about it? Anything?

What in the article seems non crypto? That you can't make more out of thin air? It seems like your run of the mill stablecoin, the advantage being transactions would have the ability to be decentralized. How much will need to be seen at official announcement.

pegged to USD

"which will be pegged to a basket of government-issued currencies"

jryan49• 7 years ago

Time to privatize our currency! Owned by Facebook! What could be better?

silversconfused• 7 years ago

So this is like the IBM PC then? Horrible, obsolete, flawed, but adopted by everyone because it was released by a reliable business partner...

I hope they call it FaceBuck.

Urgo• 7 years ago

Their internal name was "GlobalCoin" but looks like it will be called "Libra". That said I like "FaceBuck" or "ZuckBuck" way better!

RandomBacon• 7 years ago

I hope we call it ZuckBucks.

It also is good for shorthand: 10 ZB.

cbisnett• 7 years ago

Given the privacy issues and general data hoarding by Facebook, giving them additional access to purchase history and account balances seems like it’s going to make the problem worse without much upside.

qrbLPHiKpiux• 7 years ago

WeChat v2.0

stcredzero• 7 years ago

WeChat reduces the iPhone to "The thing we run WeChat on." It acts to commodify the iPhone. If Facebook is going to become another WeChat, this is just about the last thing that Apple wants!

tjpnz• 7 years ago

Precisely why they're doing this.

awrence2• 7 years ago

All stablecoins are Venmo calling themselves decentralized cryptocurrencies. Venmo is honest and tells you it's managing a USD deposit balance for you and amending its private centralized ledger accordingly (and sometimes providing a short term credit service on top). FB et al are lying to you and putting a disingenuous patina of techno hype and grossly misleading decentralized implication on their project by calling them cryptocurrencies. Not surprising but completely uninteresting.

rahimnathwani• 7 years ago

Your first sentence doesn't have to be true. It's possible to create a stablecoin that's decentralized.

And such a stablecoin exists: https://makerdao.com/en/dai/

It uses collateral, lending and a careful incentive setup to maintain close to 1:1 parity with USD. I haven't looked into the detail, but it seems to have a decent record (of stability).

awrence2• 7 years ago

I contend it's not. There are two main features which proper (decentralized) cryptocurrencies are supposed to offer.

The first is censorship resistance. And I can assure you that however in the world you set up something backed by a fiat, its controlling government can step in and seize your collateral if and when it pleases and then you're screwed. But you can certainly come up with all sorts of fancy legal speak and marketing pitches to argue otherwise which makerdao is basically doing.

The second is protection from currency manipulation and stable coins solve nothing on that front, but let's assume for the sake of argumentation that people interested in stable coins are aware of that.

javert5• 7 years ago

It uses collateral, lending and a careful incentive setup to maintain close to 1:1 parity with USD.

I'm highly skeptical that this actually works.

javert5• 7 years ago

All stablecoins are Venmo calling themselves decentralized cryptocurrencies.

Not really.

Consider an archetypal stablecoin, like Tether or Gemini Dollars. Only liquidity providers at the edge of the payment network need to actually have a relationship with the backing company, like Tether or Gemini.

That's because payment flow is actually tracked by a public, decentralized, pseudonymous blockchain.

So an archetypal stablecoin is basically equivalent to an imaginary "benevolent PayPal" that never suspends or freezes anyone's account and doesn't charge high fees or allow clawbacks; it just works.

That's a marginal improvement over the current state of the art. Maybe just barely enough to gain traction and mass adoption.

After all, it allows reasonably fast international payments to anyone, anywhere.

If Facebook Dollars are implemented in this way, it's promising.

On the other hand, if Facebook Dollars require you to use a Facebook account to send and receive, it's just a re-implementation of venmo or PayPal.

lalaland1125• 7 years ago

Tether and Gemini can freeze/suspend anybody's account at any time for any reason with practically no effort if they wanted to. All they have to do is refuse to honor/reimburse anybody for the particular tokens assigned to a particular account. The public blockchain ledger makes this super easy. You can even track your blacklisted token amounts through middlemen and mixers.

The main thing to keep in mind with stablecoins is that your coins are only worth something as long as the producer (Tether/Gemini/Facebook/etc) is willing to give you actual hard currency for those coins. This gives the stablecoin "bank" total control over the system regardless of how the cryptocurrency is set up. (Similar issues do apply for private stablecoins, but the freezing/suspending will occur per an individual user trying to redeem their currency).

anongraddebt• 7 years ago

Given the wild wild west culture of 'crypto' up to this point, I'm not sure it is possible to have a non-disingenuous and non-hyped usage of the word.

This Facebook experiment may indeed just be a Venmo that's connected into their tech+business ecosystem. However, the sheer size of their user base should at least give you pause when claiming this experiment is completely uninteresting.

ihm3• 7 years ago

They plan to “market it aggressively in developing nations”. Western companies extracting rent from the global south: this is colonialism by another name.

ekianjo3• 7 years ago

Many small countries have issues having stable currencies, in case you have not noticed.

bduerst2• 7 years ago

True, but that's a symptom of other problems that cryptocurrencies can't solve.

ihm3• 7 years ago

Did the people who live in those countries ask Mark Zuckerberg et al to come replace their national currencies with one which allows Mark et al to control how they’re allowed to use their money?

If so then maybe this would be an ok argument, but this is a massive change to people’s lives that’s being forced upon them without the slightest consultation, and which will almost certainly be used to control and surveil them for Facebook’s benefit.

CryptoPunk2• 7 years ago

It would only be exploitive if it didn't come about as a result of consumers freely choosing in the market. Since that's not the case, the criticism is unfounded.

chubbyrabbit• 7 years ago

Not related to the article but recently it's hard to get an objective view on any Facebook's news in HN comments due to the overall attitude towards the company.

CondensedBrain• 7 years ago

What would an objective view look like?

gervase• 7 years ago

I think people are missing the big picture here. This isn't a replacement for Apple Pay, Alipay, or PayPal - it's something new, driven by the sheer scale of Facebook's userbase. The cryptocurrency aspect is a smokescreen for the actual impact.

In fact, I predict that national governments are going to have to get on board with electronic currencies if they don't want to unwittingly transfer control over their own economies from their national treasuries to a private company.

Indications are that this won't be pegged to USD, but rather to a basket of international currencies. Since there are so many ways to combine a basket of currencies into a single value, this gives Facebook plenty of leeway as to how to price this currency.

Essentially, this is the equivalent of the virtual Facebook nation-state establishing their own federal reserve. More importantly, they've already got buy-in from the major non-governmental players. This will essentially create, all at once, a settlement layer that not only bypasses any individual national government, but also the established banking channels like SWIFT.

The US dollar is the predominant international reserve currency at the moment, and the US government leverages that as a pretty big club via SWIFT injunctions.

If there is an alternative that is ostensibly neutral from a governance perspective, and publicly auditable to prevent arbitrary adjustments/freezes, I could see that being very attractive to countries with a less-than-friendly relationship with the US. We already see rumblings to this effect in US-unfriendly countries: http://fortune.com/2018/07/26/iran-sanctions-cryptocurrency/

Of course, since Facebook is based in the US, it also provides the US government with a nice, local target for legal leverage. But it would also be very easy for Facebook to spin off this as a subsidiary and place it somewhere out of reach, like Switzerland. Perhaps they could call it something like Libra Networks? Wait, that sounds familiar... https://www.reuters.com/article/us-facebook-switzerland-paym...

It would be very difficult to outlaw transactions in a currency when those transactions can be initiated and validated on a blockchain directly by the participants. You'd have to play the whack-a-mole game with access to the chain itself, because with direct validation, you're essentially trying to outlaw barter. Look at the efficacy of the cryptocurrency ban in Venezuela as an example.

Facebook is currently doing an end-run to create the first supranational currency, and it's billion+ users combined with the technological agility (specifically, the lack thereof) of national governments means that they actually have some chance to succeed.

JMTQp8lwXL• 7 years ago

Essentially, this is the equivalent of the virtual Facebook nation-state establishing their own federal reserve.

That leaves me really at unease. The Federal Reserve has plenty of its own problems, but it has a history of providing US currency stability.

I doubt an individual foregoing usage of this coin will make much difference in its adoption. Maybe the stability of the US Dollar will still reign superior to this? Paper dollars have their own transaction costs, but come with a lot of nice "enterprise" features I'd like to see in a currency.

ruytlm• 7 years ago

Facebook is currently doing an end-run to create the first supranational currency, and it's billion+ users combined with the technological agility (specifically, the lack thereof) of national governments means that they actually have some chance to succeed.

There are good things to be said for disruption, but it strikes me as reckless to set out to disrupt the global monetary system, even with the best of intentions.

I'm sure those involved will be making all sorts of assurances as to how everything will be careful, but with a system that's as complex as the global economy it is hubris to think one can accurately predict the impact of this sort of a change.

I don't think it's too far-fetched to imagine a scenario in which adoption of FaceBucks has a not-insignificant impact on some of the world's smaller economies, to whose populations it will no doubt prove useful.

This would change those countries' economic behaviour, and in turn the behaviour of everyone they deal with, rippling through until it also affects those currencies FaceBucks are pegged to.

I don't see such a scenario ending well.

jamesviggy• 7 years ago

Reminder: A fiat-pegged "stable-coin" is only as stable as the fiat underlying it. The underlying fiat of Facebook's "cryptocurrency" has many disadvantages compared to Bitcoin.

momentmaker• 7 years ago

They might be using ChainLink as the oracle for sourcing price data feed.

CryptoPunk2• 7 years ago

What's the basis for that speculation?

Fjolsvith• 7 years ago

Coming soon, mining in Messenger.

lowdose• 7 years ago

Zuckerberg et al Snapchat a WeChat?

neonate• 7 years ago

http://archive.is/roYY9

WheelsAtLarge2• 7 years ago

I vote for the coin to be called, "The Zuck."

Facebook’s New Cryptocurrency Gets Big Backers

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