TLDR. Facebook’s move into crypto enabled payments has led to hyperbolic reactions that Bitcoin will be roadkill in front of their thundering truck. This post argues that we are nearing the end of the Facebook era and that the Bitcoin honey badger is not scared of Facebook and that Facebook is moving into dangerous territory where they will be competing with other behemoths.
Note: original post written June 1st. As the news about Facebook is changing so fast, we add some updates which are identified using red.
This update to The Blockchain Economy digital book covers:
- What we know and don’t know about Facebook’s stablecoin
- Bitcoin is the honey badger that is not scared of Facebook
- Big players who will feel threatened by Facebook
- The end of the Facebook era is coming
- No, don’t short Facebook, yet.
- Which companies should be most worried
- Context & References
What we know and don’t know about Facebook’s stablecoin
The news outlets did a copy/paste on Facebook Press Release. Plus we get the salacious factoid that Mark Zuckerberg spoke to the Winkelvoss Twins.
PR also tells us that all doors are open to Facebook, telling us about conversations with:
- Bank of England governor Mark Carney.
- Officials at the US Treasury.
- Western Union.
Facebook has the clout to talk to anybody on the planet, not matter how high and mighty, but talk is cheap.
What we don’t know:
- what will be the the real name of Facebook’s stablecoin when it finally launches? PR says it is “internally dubbed” GlobalCoin but that is too close to GlobalistCoin and that does not play well in the cyperpunk/anarchist/libertarian crowd that loves Bitcoin. There is a cute sounding internal name which is Project Libra, which maybe more consumer friendly.
- When Facebook will launch. PR says “first quarter of 2020”.
- Where Facebook will launch. PR talks about “in a dozen countries”. Earlier PR in December 2018 talked about India as launch venue.
- What Facebook will launch. It will be a cross border digital payments system aka a remittances system.
- Which Fiat currencies they will peg to. Early stories indicated USD, but more recent stories indicate a basket (but we don’t yet know basket contents.
There is lots of negative sentiment. You can expect this from the privacy and crypto crowd. It must be more worrying when Bloomberg, which is hardly known for bleeding heart anti establishment ranting, has this headline:
Dr. Evil Would Love Facebook’s “GlobalCoin”. “More than 2 billion users spending one currency, controlled by one billionaire. What’s to worry about?”
Facebook’s strategy in the past with negative sentiment has been to take one step back, issue an apology, then proceed to do exactly as they had planned. However that may not work today, because Facebook’s Stablecoin is between a rock & a hard place. Bitcoin is the rock. The hard place is all the big players who will feel threatened by Facebook.
First the rock…
Bitcoin is the honey badger that is not scared of Facebook
You cannot shut down Bitcoin. Facebook can lobby Governments all they like and Governments would love to shut down Bitcoin and do deals with Facebook, but you cannot shut down a decentralised permission less network. You need a CEO that you can pull onto the carpet and grill.
During the last two weeks, with lots of media attention to Facebook’s cryptocurrency, the Bitcoin price has been rising fast.
Next, the hard place….
Big players who will feel threatened by Facebook
The hard place is all the big players who will feel threatened by Facebook.
This is a huge move by Facebook. They are moving well beyond their media comfort zone into currencies, payments, remittances and e-commerce. The big players in those markets, including Governments, will feel threatened by Facebook’s move into their territory.
The end of the Facebook era is coming
You can see trend from the chart at the top of this Chapter (based on research by Daily Fintech) – the dominance years are getting shorter. Our thesis is that decentralization won’t lead to one dominant company because dominance is a feature of centralization. In the decentralization era, dominance may go to a leaderless open source protocol (Bitcoin), with many companies thriving within the ecosystem created by that protocol.
I never got the Facebook habit. I am as addicted to social media as the next 21st century human, but my social drugs of choice tend to be blogs, Twitter, Whatsapp, YouTube, & LinkedIn. Occasionally I can only see something online if I have a Facebook account. So I set up a fake account and enjoy the recommendations I get from that fake account where I am a woman born in 1997 in Chiang Mai, who now lives in Mongolia and who studied Thermodynamics at The College of Hard Knocks. My bio says “FB algos do not deserve to know me”.
The usual way that big tech eras come to an end is a mix of:
- Regulation. That is happening to Facebook in Europe and China and there is even political pressure in America
- Disruptive Technology. In past eras, the regulators jump on board just when disruptive technology is doing a much more effective job. For example, IBM could manage regulators but could not control PCs, Microsoft got sideswiped by the Web, Google by Social. In the coming transition, centralized services will be replaced by decentralized services.
Facebook the service is no longer cool, even if Facebook the company controls the two biggest competitors – WhatsApp and Instagram. Soon Facebook the service will be a digital landfill populated by:
- Robots. Data mining via Bots is big business on Facebook and on the open web as a simple search tells us.
- Institutions selling you stuff. Institutions, both political or corporate, use pinpoint personalised marketing to make sure you buy/vote what they want. My little messing with Facebook’s algos is not likely to do them much harm, but billions tuning out ads will damage them at some point.
- People willing to view ads for a fee. Pay to view ads is desperate race to the bottom by sites with low quality content. Advertisers get the attention of the people with the least money or influence brought in by Mechanical Turk to compete with robot scam traffic.
No, don’t short Facebook yet.
Mark Zuckerberg is one is the greatest entrepreneurs of all time. He has navigated one big disruption before. When mobile threatened the Facebook franchise he solved the problem by buying into the game at great cost with the WhatsApp and Instagram deals.
So, don’t count him out. He could pull it off with GlobalCoin. The odds are against him because this disruption is different:
– mobile changed delivery front end but the core concepts of centralized data to sell advertising remained valid.
– Decentralized Blockchain networks challenge the core concepts of centralized data to sell advertising.
It is inconceivable that Facebook, which has a market cap of over 500 Unicorns (ie over $500 billion), could head into a deep decline. Look at past eras and the dominant company of the day looked equally invincible.
Although Facebook’s long term decline is inevitable, don’t try shorting Facebook stock yet as there is a big difference between inevitable and imminent.
There are companies that should be worried by Facebook’s move into crypto-enabled payments. They could be accidental roadkill as Facebook searches for relevance in a game that they no longer control.
Which companies should be most worried
A. Decentralized social media companies funding via Tokenomics such as Steem and Brave. Content creators will prefer to be paid in either Bitcoin or a stablecoin than an Altcoin that lacks liquidity
B. Remittances companies such as WorldRemit and Western Union. The latter may do OK as Facebook will need their off ramp into local Fiat, but that will be a hugely reduced role.
C. Facebook look like they may compete most with Banks. So Big Banks like JP Morgan may have most to fear.
Context & References
Facebook Ambitions in Fintech. Note date (2014); over 4 years ago we were forecasting this move by Facebook.
I have no positions or commercial relationships with the companies or people mentioned. I am not receiving compensation for this post.
Subscribe by email to join the other Fintech leaders who read our research daily to stay ahead of the curve. Check out our advisory services (how we pay for this free original research).