If Facebook can pull this off they will have brought about the first universal internet currency, which would be a stunning achievement and could revolutionalize the web as we know it. Failed projects give us some idea of what their challenges will be.
Cryptocurrencies right now have a trade off between scalability and decentralization. Bitcoin is theoretically decentralized even though the reality is more complex. But theoretically anyone with a computer can randomly decide to mine the coin and participate in the network. This whole process is made possible by Proof of Work, which was the key brilliant idea that made bitcoin secure and possible. The problem right now is this algorithm doesn’t allow very many transactions per second.
Other currencies have experimented with something called Proof of Stake to solve the scaling problems but it’s not known if it can be as secure as proof of work. Facebook’s currency will probably use this method. The basic idea is that the holders of the currency vote for what happens on the network. It’s an interesting idea but it’s a very different direction than the key idea of bitcoin.
Another issue is that governments rely on setting interest rates to manage their economies. If an internet currency starts to take off that will limit their ability to do this. At that point you can expect major pushback.
And also, the cryptocurrency ecosystem is a huge target for hackers. Millions of dollars have been stolen over the last decade. Brilliant attacks have been created to exploit the tiniest flaws in code. The phone numbers of crypto enthusiasts have been hacked and their wallets drained. Hackers have even embedded malware on websites or servers to mine cryptocurrency on computers they don’t control. Facebook will need an iron clad security process if it wants to succeed.
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> Facebook’s currency will probably use this method...the holders of the currency vote for what happens on the network
What are you basing this assumption on?
From everything Facebook has ever done to date, I expect Zuckcoin will use the method of "what FB says goes, and if you don't like it, you can pound sand."
Which really boils down to 'what Zuckerberg says goes" so you want to put the control of a currency, perhaps used by 1bn real users, in the hands of a single greedy individual who has already shown contempt for users and their data.
Cryptocurrencies right now have a trade off between scalability and decentralization. Bitcoin is theoretically decentralized even though the reality is more complex. But theoretically anyone with a computer can randomly decide to mine the coin and participate in the network. This whole process is made possible by Proof of Work, which was the key brilliant idea that made bitcoin secure and possible. The problem right now is this algorithm doesn’t allow very many transactions per second.
Other currencies have experimented with something called Proof of Stake to solve the scaling problems but it’s not known if it can be as secure as proof of work. Facebook’s currency will probably use this method. The basic idea is that the holders of the currency vote for what happens on the network. It’s an interesting idea but it’s a very different direction than the key idea of bitcoin.
Another issue is that governments rely on setting interest rates to manage their economies. If an internet currency starts to take off that will limit their ability to do this. At that point you can expect major pushback.
And also, the cryptocurrency ecosystem is a huge target for hackers. Millions of dollars have been stolen over the last decade. Brilliant attacks have been created to exploit the tiniest flaws in code. The phone numbers of crypto enthusiasts have been hacked and their wallets drained. Hackers have even embedded malware on websites or servers to mine cryptocurrency on computers they don’t control. Facebook will need an iron clad security process if it wants to succeed.