Call it a “cryptocurrency” if that makes it sound sexy, but this is still centralized — it’s effectively the same as the (already existing) Messenger Payments.
That's an example of something Facebook has control over. If someone wants to fork it, they could, but it wouldn't affect the code Facebook is running. A blockchain would differ in the sense that the community/hashpower could decide to do things Facebook doesn't want to do at which point they would effectively lose control of the chain.
Open source makes sense for companies because they want to share the collective engineering efforts - because often times the code itself isn't the thing being monetized directly. In the case of Facebook it's not the code that is worth billions it's the data they horde. In the context of a blockchain that would mean sharing that data with everyone instead of hording it and acting as a middle-man for advertising, which is very much against the business interests of Facebook or any company with that model.
If Facebook’s developer teams have faster build times, they can create more horrible, unethical, revenue generating features per hour.
FB could have kept Buck for themselves but chose not to.
True. They might not. But maybe they only want to threaten (e.g., Google Fiber) that X, Y or Z might be possible?
The other reason for such things is talent. If you want to attract top talent you have to (R&B) toys for them to play with. On the other hand, to say, "We'll never release this so let's not put any effort into it" is the road to irrelevance.
The budget for this effort vs the cost of irrelevance make such project a solid investment. Pointless in terms of product but essential to the brand.
Because if it is not - it is simply a centralized database of payments. Like an SQL table of transactions. This has been a solved problem for decades. Visa and MC processing servers all use cryptography in many parts of the stack, and yet no one calls Visa a cryptocurrency because of that. This is why if you see anyone use the word "cryptocurrency" when in reality they talk about a legacy centralized (thus lacking all decentralizations perks) database - you know they are assuming you have no actual knowledge about the area and are trying to buzzword you.
Forget about centralized/decentralized. There is an ecosystem around existing cryptocurrencies. Wallets, exchanges, dapps, etc. All of it wouldn't work use they an SQL table of transactions.
The problem with centralisation is that it enables a kind of corruption: entities can engage in both financial censorship and arbitrary money printing.
That being said a cryptocurrency does not have to be decentralised.
However it is very important to understand the difference.
Today even decentralised cyptocurrencies depend on centralised-exchanges, and the consequence is that despite the constraints built into a blockchain algorithm are able to sell unlimited amount of the crypto to users without actually being in possession of the algorithm-limited crypto.
A centralized cryptocurrency is just digital currency. It may be cryptographically secured against unauthorized transfers/access, but if it doesn't employ some sort of game-theory based custodial sharing scheme which is intended to incentivize decentralization of control (successfully our not), it's not using the 'crypto' protection in the special sense that cryptocurrency implies.
If it's centralized there's no point in having it be a distributed consensus blockchain. The only reason to do so would be to play on people's ignorance for marketing reasons. That or maybe they really are ignorant themselves, but I doubt it.
Trust in it to maintain its value if it is a stable coin. Alternatively, trust it not to be hacked or inflated if it isn’t. (As well as trust it to maintain whatever monetary properties they advertise to give it value as money.
Cryptocurrency mentioned. Blockchain mentioned. I really should've bought a card for this buzzword bingo.
Is this just PR or are they genuinely so clueless? If the former I wonder if they missed the shift this year where cryptocoins stopped being the coolest kid in the town anymore.
If a centralized company wants to roll out electronic payments through its services it can just, you know, do that. They don't need blockchain or cryptocurrency to become, well, Facebank.
> If a centralized company wants to roll out electronic payments through its services it can just, you know, do that.
Not it can't. There's a world outside of the US where whole businesses run on WhatsApp. There is no solution, simply none today that exists to allow anyone from any country to register and start making and receiving payments. Not Stripe, not Paypal, none. If Facebook can deliver something that can then be exchanged for real dollars, that could be huge. If a person in a small village in Peru can just start receiving money from another person in another country and that the only barrier of entry is having WhatsApp installed on your phone, this could get ridiculously successful overnight.
And how does that person in that small village in Peru converts their WhatsApp coins, or whatever they are called, into actual money?
And if the answer is: they do a transaction with someone else who wants to trade their money for WhatsApp coins then again, why do you need the blockchain versus a centralized WhatsApp currency.
Blockchain is a solution when there cannot be trust. If I trust WhatsApp, and you trust WhatsApp, and WhatsApp has a money exchange feature, we don't need the blockchain.
Why would it be more legal / legally easier to set up a service in Peru that turns WhatsDubloons into soles and vice versa, affiliated with a multinational company that converts WhatsDubloons into USD, than an entity that directly transfers soles and USD?
> If Facebook can deliver something that can then be exchanged for real dollars, that could be huge.
There's absolutely zero reason for that something to be blockchain-based. They can just release Facebucks, a private fiat currency that's just backed by ... drumroll please... a relational database.
Perhaps your better-positioned brow could clarify exactly how the involvement of a blockchain would solve WeChat's problem and make it easy for Americans to buy in?
In particular, if it could be done, why isn't WeChat doing it? And if WeChat can't do it, why can WhatsApp do it?
because you still want the currency to have value if facebook closes one day, or stop supporting the idea. Facebook would endorse the currency, but the currency ecosystem would have a life of its own.
my guess is if facebook is working on its own blockchain currency, the algorithm describing the currency would be a bit different from bitcoin or ethereum. Contrary to what you read sometimes, those cryptocurrencies have properties that are not desirable for a real world currency ( aka inflationary and very poor number of transaction per seconds capacity).
I would imagine because actual commerce is built around it, rather than its valuation being mostly derived from speculative investment as a value hold.
Is anyone actually more skeptical in the long-term future of Facebook than of any altcoin?
(Remember that in order to prevent double-spend attacks, you need to ensure that nobody—and no potential mining pool—is sitting on more computing power than your network has. That's feasible for a single proof-of-work currency; it's technically impossble with even two unless one outcompetes and kills the other, and certainly practically impossible for a new one at this point. And if you're not using proof-of-work, what stability does the coin have once the corporate backer is gone?)
...or it could be they want to literally print money and have people use it in everyday commerce so they become a de facto Central Bank.
If it were merely an account one used to pay for things then they just get to take a small percentage in transaction fees but with a blockchain they can create a bunch of FaceCoins, sell them on the open market and if things go south with their cryptocurrency laugh all the way to the bank counting their billions.
India came up with UPI for this exact reason. Google Pay, Samsung Pay, Whatsapp Payments, etc. are all built on UPI in India. UPI is interoperable with all apps. So you can use whatever app you prefer. ie Whatsapp Payements can send money to someone using Google Pay directly.
you are suggesting that there is no value in blockchain and that cryptocurrency is not a good idea so Facebook and it's famous VP of Messenger and other Paypal execs were just trying to get into the hype. Or you can take another look and maybe the technology has something to offer. Don't mistake Facebook for an silly company.
The topic is stablecoins, with sources to websites that track that specific thing
Why would it be buzzword bingo if its an informative article that stays in context 100% of the time, include for what you consider buzzwords.
The actual criticism is that Stablecoins are just secured bearer bonds that anybody can issue inexpensively so you could see this happening for a long time.
It's not going to be the only client, but Facebook has the network effects working for them, so it would be pointless or more difficult to use another client. In addition, they'll build services on top of it that are tightly tied into their ecosystem.
I'd be extremely wary of FB's ambitions in this area. FB the social network will not last forever, and it seems obvious that companies like Google, Amazon etc will shift their business model towards secretive "enterprise" services, like AWS for the Pentagon, Dragonfly for China etc. Facebook tried to create it's own walled-garden Internet in India under the extremely deceptive "Facebook.org" initiative.
Awareness of stuff like Google+ breaches or FB's data sharing will soon become a thing of the past once these companies start dealing directly with governments and move away from public-facing products entirely. If FB starts to implement an India-specific version of China's "social credit" policy towards blacklisting suspected defaulters, with no recourse, the people likely won't even know who's supplying that technology.
Phone-based currency transfers like M-Pesa have been successful in Tanzania, Kenya and is available in India and Afghanistan. Unlike whatever FB will offer, it doesn't require you to use Whatsapp. I can't wait to see the permissions required on the new version of WA once that service is live.
Pretty interesting, Facebook generally does not have a reputation for 'jumping on the bandwagon' so I assume they have thought this through. Many of their whatsapp users live in very poor areas that are not traditionally served by banks. If they integrate a wallet into the app it may allow for a real use case. They would still need to provide some sort of 'convert to fiat' functionality for those same unbanked users though. Could very well result in them creating their own economic ecosystem in third world / emerging markets. Effectively locks in a new customer base and revenue stream.
High remittance costs are primarily caused by two things: exchange rates and KYC/AML compliance. I don't see how this would address either of those things.
Even with large & relatively liquidity cryptocurrency the spread to covert to local currency is large.
Right now if I want to get rid of a Bitcoin and get Vietnamese Dong I see rates from 89,286,016.80 to 90,135,312.89. The actual price according to Google is 93,851,364.64. So you're losing 4%, which is already comparable to a traditional remittance (the World Bank says 5% is the average cost for educated users).
Except this new cryptocurrency would be less popular and less liquid than Bitcoin, so the spreads would be higher.
There is a saying in German: "Bei Geld hört die Freundschaft auf", roughly translated to "don't mix friends and money". Let me tell you: it's a saying for a reason.
If you need a plumber, in some parts of the world you’d be insane to open up the phone book and call a random one. You would call your cousin who’s friends with one instead. And probably cook them lunch when they come over.
Look at MLMs and which countries and groups they thrive in, vs ones that they would never take off in.
Because then they don't get to put out press releases with "cryptocurrency" in the title, thus missing out on the opportunity to raise their stock price via the game of Buzzword Bingo.
1. Facebook definitely doesn't have full and complete trust in their own systems, they are vulnerable to hacking, downtime, and mistakes just like any other service, and they know it. This is the same reason companies release messaging products with end to end encryption.
2. A traditional centralized database doesn't allow offline transactions with any degree of trust. I don't know if this is a problem they are solving, but in principle, something with a blockchain-like architecture makes it possible to provide cryptographic proof that you have the money and intend to transfer it without any server round trip and still be secure against many kinds of attacks.
But do you trust Facebook?
Also, regarding the "trust itself" part, it's not necessarily the case. How can one make sure database admin haven't changed some records?
I do not trust Facebook, but I trust my bank, which doesn't use cryptocurrency. I guess they use databases, with lots of controls, but a regular database nonetheless.
edit: I also trust PayPal, as I use it regularly, and it doesn't use a cryptocurrency. My point is that I don't understand why Facebook would need a Cryptocurrency to allow payments. As far as I know, WeChat doesn't use cryptocurrency and is probably the main payment system of China.
"My point is that I don't understand why Facebook would need a Cryptocurrency to allow payments"
Let me try to explain. You trust your bank and PayPal and it's perfectly fine. But only to the point things are going ok in general.
In some, say, areas, the situation is possible when you see a message on the doors and ATMs of your previously trusted for decades banks: "Sorry, no check out today". And it can long for days or even months.
And your previously trusted online e-money processor can freeze your funds for whatever reason - "fraud suspect, suspicious activities, server offline".
It is hard to imagine for citizens of some countries, but in my opinion, this is only matter of time when it happens.
Cryptocurrency and blockchains in general are indeed highly inefficient databases and a tiny Postgres server outperform them all in Transactions Per Second, that's true.
But Postgres database running on a centralized service won't give you a feeling of independence and trust the biggest cryptocurrencies can provide (sure, they are volatile in price and you need to manage your private keys etc, but still).
They could have a roadmap to slowly distribute initial stake over the time, for example (if used PoS, which I think the most probable plan).
And the case would be not to own the biggest stake and control everything, but instead having a popular cryptocurrency with APIs natively integrated with Facebook's services. It'll bring new users and developers to their platform, which has the real value.
Also more ways for a huge American company to mess with my life if anyone human, bot or algorithm working there has a bad day at work. (if anyone doesn't catch my drift here, losing access to your mail account happens, getting it fixed most likely involves either knowing a person working with said company and/or hitting the front page of HN or another watering hole.)
I think we underestimate how “mainstream” digital currencies could be if the UX is right. In a lot of ways we already deal with “centralized” digital currencies already in the form of loyalty points with airlines, hotels, food/coffee chains, grocery stores and gift cards that can only be spent at specific merchants I.e. currencies that have some value and can be used to pay for things.
There’s more potential than just payment transfer. It could be used as a currency outside the context of WhatsApp money transfers. Facebook could become the central bank of the internet.
Unless there is a complete collapse of the Bitcoin blockchain and it's ecosystem there is no way any cryptocurrency will take over Bitcoin as the number 1 currency on the internet
If this allows Facebook to monetize WhatsApp without introducing ads and the privacy corrosion they would bring, then this would be a very good development.
On the contrary. If facebook controls minting the coins but can't control transactions using the coins, it'd be perfect, much better than the decentralized cryptocoins we have today. It would instantly bypass state controls on money transmission.
They'd probably run into trouble cashing out their coins in that case, though.
I'd rather have state control over money than for-profit megacorps, especially one with such an appalling reputation as "They 'trust me', dumb f---s" F--ebook. This is one of the issues they're finding with the move to a cashless society in the Nordic countries[0], i.e. the monopoly over money moving from the state to the private sector.
Why? Creating coins and transferring coins are completely separate things. They're intertwined, in bitcoin, because bitcoins are created in transfers. But there's no fundamental reason for that to be the case.
If facebook controls the mining, then they have the power to change the blockchain, which in effect would defeat the whole point. They effectively have a database with some very unnecessary complexity. It wouldn't bypass state controls because they would still need to abide by laws.
I don't think the purpose is to create their own money, but to create a vehicle that takes advantage of crypocurrency-like protocols.
For example, perhaps they'll let users generate their own keys, thereby letting everyone transact freely with each other. This may allow FB to wash their hands of KYC laws except for those depositing and withdrawing fiat directly.
Facebook would still be maintaining the ledger, which means there's no such thing as letting everyone transact freely with each other. It's like the bank saying they're not liable for KYC procedures because it's their customers who initiate the transactions.
stablecoins aren’t mined, they are created by the issuer at their discretion. Technically they should create a coin for every deposited dollar, but I wouldn’t be surprised if Tether or other stablecoins run a fractional reserve scheme behind the scenes.
I’m curious on Mark Zuckerberg’s take on cryptocurrencies. He was big on p2p file sharing as a business model when starting out FB. I don’t think he has had any public comments on Bitcoin
Knew this would happen one day. Big tech has 0 reason to use third party coins when they do literally everything in house. FacebookCoin, AmazonCoin, etc., will work 100x better too—not just technologically but also in interopability with current banking infrastructure and government regulators. Decentralization is objectively worse for user experience all around. If a centralized trusted authority like the FED or a FANG corporation could make electronic cash, then people will happily use that because they don’t care about privacy or cypherpunk ideals.
Zero reason for anyone to use Bitcoin/Ethereum/Monero when these exist. (Unless they want to commit crimes—and yes, that’s how it would be perceived.)
"Crime" is subjective. Many things that are perfectly reasonable, harm nobody and are legal in EU and US are outlawed in countries governed by less democratic regimes. I would non equate a crime to evading a law (which may be introduced and enforced by a criminal government).
Doesn't your argument apply to regular money as well, i.e.
"Zero reason for anyone to use Bitcoin/Ethereum/Monero when regular money exists. (Unless they want to commit crimes—and yes, that’s how it would be perceived.)"
Regular money can't be sent peer-to-peer and independently of the banking infrastructure/governments. Questionable utility, yes, but this is the value proposition. FacebookCoin would achieve these objectives far better than the grassroots coins. So no one would need to use the grassroots coins for any practical, non-ideological reasons.
This article probably isn't true, but something like it is going to happen someday.
Bitcoin isnt used for everyday transactions not because of its reputaiton. Its because its inconvenient, and people like a stable currency. The reputation followed what people buy with bitcoins
When I pay someone 1000$, I expect that to arrive as 1000$ (excluding fees here). With stable currencies that is a pretty safe bet, unless the transaction takes days.
I don't get this, is there a financial difference if Facebook holds the money and stores the "amount" in WhatsApp vs. a cryptocurrency with tokens stored in WhatsApp that you can only use in WhatsApp? I'm too stupid for this.
This is the WhatsApp strategy in full effect: Advertise how privacy-friendly your service is (blockchain, decentralized, end-to-end encryption) and make it all proprietary and lock it down so that you (FB) still have full control
As they are trying to build an economy, they will have to bring both consumers and merchants to their platform. Exposing a bunch of people to new money is not enough, they need to be able to buy something useful with it.
Facebook will have to build something that its users want to buy, and then find something for the users to do to earn fbcoin.
Maybe they could allow ads to be purchased in fbcoin, and pay users to translate ads to their native language for fbcoin.
Facebook has a ton of merchants already using pages and groups. Also, their 'marketplace' feature has more or less replaced craigslist and ebay in my city.
Payment sector specially in India is highly regulated, with even WhatsApp current application for UPI payment licence in Legal limbo because Facebook specially having bad name/luck with Regulators. Highly Doubtfull that current regulation will allow Cryptocurrency in any form as payment mechanism. Most that could be allowed would be glorified anti fraud Secure logger.
Facebook was hiring blockchain engineers during the hype late last year - so I guess they have to ship something to justify the team. I think nothing in this scenario requires a blockchain.
I can't tell if this is sarcasm (and you know something I don't), or you're being serious. I would agree if you're being serious, despite the lack of news coverage, based on a few points:
- $1.7B raised in ICO: This is far more than has ever been raised in any other ICO. I also think it says something about investor optimism. I'd bet that this was a data point in Facebook's decision to do something similar with WhatsApp.
- Telegram's development team: Some of the best in the world. They've done a lot with a few highly talented programmers and mathematicians.
- 200,000,000+ monthly active users as of March 2018.
And they did a lot right (open source clients, bots, channels, proxies). But their secret chat implementation is weird (literally every crypto expert has the same question: "why did you pick these extremely unpopular barely known primitives to reinvent your wheel?")
To steal the Bitcoin/Ethereum market share. It doesn’t need to be better. People just need to think it is. That’s the reason buzzwords and marketing exists.
Seriously? With all the security breaches they had this year, Instagram too, do they really expect people to trust them with cryptocurrency? I have no idea how they thought this is a good idea.
