Always one for the headlines, Facebook has acquired cryptocurrency startup Chainspace, giving fuel to claims the social media giant is pushing ahead with plans to build a stablecoin.
What is a stablecoin, you ask? Great question. In the wake of the
cryptocurrency frenzy that has gripped investors of varying wallet sizes in
recent years, stablecoin offers a fresh take: a cryptocurrency pegged to a
global currency to ensure steady value, like the US dollar. There have been few acquisitions of
blockchain firms of a similar nature by major tech players, suggesting this may
just be the first deal of its kind.
For all intents and purposes, this
is a so-called “acqui-hire”, or talent acquisition. Indeed, the founding
researchers of Chainspace will be absorbed by Facebook’s blockchain group to
work on their expansionary project. Chainspace appears to have focused on
developing sharding technology, a potential method of allowing blockchains to
accommodate a large number of transactions in order to facilitate
decentralisation. Indeed, nothing would need to scale as fast, or as far, as a
Facebook Coin. So what, then, would such a currency look like?
3% off with FaceCoin
Facebook stands to build a cryptocurrency wallet with a unique
token that consumers could use in transactions with partnered businesses,
including those discovered through Facebook ads. Thanks to blockchain allowing
for relatively cheap, or even free, transactions, Facebook and its partners
will be able to avoid the usual credit card processing fees. If this were
passed on to consumers, potential users of FaceCoin might be reeled in with a
“3% off purchases made with FaceCoin” or a similar promotion.
P2P and micropayments
Friends are already able to send and receive money via
Facebook Messenger, but only with a connected debit card of PayPal account. By
offering cryptocurrency-based payments between friends, Facebook will be able
to allow a wider range of users settle debts for shared dinners, taxis, and
other expenditures via Messenger. In
practice, users might top up their Facebook Crypto wallet with a one-off
payment, possibly attracting a one-time transaction fee, from which point they
could send and receive tokens for free. If blockchain became the backbone of
peer-to-peer payments, this would surely only increase engagement with
Messenger for the app’s whopping 1.3 billion users.
A major issue for blockchain apps is the ability for users to
bring their identity with them, whereby securely connecting the strings between
your wallet, biographical information and online goods and services is nothing
short of a laborious process. Facebook is in a unique position, where it could
use its expertise in hosting a widely used identity platform to ease access to
such services. Yes, using an overtly centralized identity system to connect
with decentralized apps may seem counterintuitive, but Facebook could deliver
the convenient user experience necessary to unlock the next chapter of blockchain
As such, the Chainspace deal is game changing news for the
future of blockchain and cryptocurrency as a commercial tool, with an
acquisition by a major player such as Facebook sure to set off a spiral of
similar investments, with venture capital opening up to future acquisitions and
competitors hunting for similar targets. Still, for those holding on to the
ideals of decentralisation, mass empowerment and privacy- ideals that drove the
creation of cryptocurrency in the first place- this latest marriage in the tech
world might not be welcome news.
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