Last year, Facebook suffered several high-profile scandals that caused its price to tank, and lost some of its “darling” status. But now Facebook is rumoured to be releasing “Facebook Coin”, a stable coin cryptocurrency that can be used for micro payments and peer-to-peer transfers. None of this has been fully confirmed yet, but the New York Times published an article last week alleging Facebook had a secret plan in place.
Facebook Can Capitalize
One of the most vocal predictions is coming from Barclays analyst Ross Sandler who believes this could bring in between $3 to $19 billion in revenue by 2021. With current revenues being around $40 billion in 2017, this shows the potential to be a game-changer for the tech giant. The current revenue structure for Facebook is almost entirely based on advertising revenue, and a new revenue stream would add stability as well as profit.
Facebook has already had a similar payment project that functioned like cryptocurrencies and was called Facebook credits. It was implemented in 2010 and was eventually phased out after not achieving the targeted adoption. This, as well as the fact that Facebook would likely have their profit affected by the interchange costs on customers converting fiat to Facebook Coin, are potential downsides of the project.
Many cryptocurrencies have to fight to gain cross-platform utility, but if Facebook Coin is implemented correctly, it would be endemic to three of the biggest platforms in the world: Facebook, Instagram, and WhatsApp.
Facebook Vying for Survival
Implementation of this will be difficult for the sole reason that trust in Facebook is down, no matter how hard Mark Zuckerberg to boost it with blog posts. There aren’t a ton of details, but it is safe to assume that the project would be structured like a stable coin, but with accessibility to the 3 big platforms. This would make it more well-known than Tether or TrueUSD (two of the top stable coins) and less volatile in price than Bitcoin (the common reason why investors avoid it).
Blockchain technically represents an existential threat to Facebook (and the entire incumbent technology industry in general). Just as these companies were able to disrupt the marketplace over the last two decades, blockchain technology and the decentralized ethos could be a destabilizing factor for Facebook.
Crypto Winter Creates Opportunity
A secondary effect of the crypto winter we’re currently in is the loss of jobs in the space. Although some have continued to build, other companies have gone under due to their inability to generate short-term revenues.
And for Facebook, this works out as an opportunity. They bring the stability of being one of the big 5 in the tech space, and are trying to expand into blockchain technology. Why not pick up a few experts on the cheap? Even if these employees are still at their company, Facebook could easily acquire some companies just for the expertise that would come with it.
Their continued attempts to improve their position in the crypto and blockchain world will likely play out in a big way soon. If the analysts are right about the potential revenue that could be raised from a stablecoin, then this could be the most “mainstream” use of crypto yet.