On the 8th of May 2018, Facebook announced it has set up a dedicated team to work on blockchain. It is, for sure, big news. But it did not exactly come out of the blue, at least for those in the fintech community.
No Alarms and No Surprises
On the 9th of January 2018, Facebook’s CEO Mark Zuckerberg said:
“There are important counter-trends to this — encryption and cryptocurrency — that take power from centralised systems and put it back into people’s hands. But they come with the risk of being harder to control. I’m interested to go deeper and study the positive and negative aspects of these technologies, and how best to use them in our services.”
Moreover, as previously reported in this article over how digital is reshaping the financial services industry, GAFA (Google, Apple, Facebook and Amazon), the big four tech companies, all want to be at the centre of the digital lives of their customers, and money and finance will play a vital role in this. Moreover, they have a great competitive advantage over traditional financial services industry firms, both regarding user base, UX and customer engagement. Facebook already offers peer-to-peer payments in the US and the UK. In light of that, it is not so strange that it is diving into the technology behind cryptocurrencies: blockchain. As the Radiohead sings, “No alarms and no surprises”.
What Is Blockchain?
As The Market Mogul explained in this article, blockchain is a list of every cryptocurrency transaction with details of the sender and receiver’s cryptocurrency wallet ID (cryptocurrencies are stored in digital wallets), along with the amount of the currency sent. This blockchain is public, and everyone can access it, but knowing someone’s wallet ID does not mean we know their identity, users still have anonymity. Blockchain is able to track the ownership of a cryptocurrency and ensure that is not exchanged more than once.
How Might Facebook Use Blockchain?
There are several hypotheses on how Facebook may use the blockchain.
Consider, first, what is known so far. The new internal team dedicated to exploring blockchain is led by David Marcus, former head of Facebook’s messaging app Messenger. Mr Marcus was also the former president of Paypal and has been acting as a member of the board of cryptocurrency exchange Coinbase since December 2017. Moreover, he is an early bitcoin investor. It is clear from his CV that Mr Marcus is a master in mobile payments and cryptocurrencies. According to Cheddar, Facebook is exploring the creation of its own cryptocurrency, a virtual token for electronic payments. In 2009, Facebook released Facebook Credits for purchases in games, but the feature was not successful and was shut down.
This could be one of the reasons why David Marcus is very cautious. During an interview at a conference in February 2018, he explained that
“[P]ayments using crypto right now is just very expensive, super slow, so the various communities running the different blockchains and the different assets need to fix all the issues, and then when we get there someday, maybe we’ll do something”.
The cryptocurrency use of blockchain is just one use case, among many others. Facebook may also be preparing for the possibility that blockchain becomes a regular payment method and adapt its platform accordingly.
Another option for Facebook is using blockchain to decentralise clients’ data, in light of the Cambridge Analytica scandal and GDPR in the EU. In this sense, blockchain is a tool to address the privacy concerns and ensure data security.
Whatever his goal, Mark Zuckerberg is far from alone, other GAFAs are also working with blockchain.
How Might GAFAs Use Blockchain?
According to Bloomberg, an Alphabet Inc. unit is developing its own distributed digital ledger that third parties can use to post and verify transactions, and several people in Google’s infrastructure group have been tinkering with blockchain protocols in recent months. In 2016, the company started a trial for developers testing blockchain.
Amazon offers the “blockchain as a service” in its cloud thanks to his partner ecosystem and infrastructure services. In particular, AWS (Amazon Web Services) provides the most in-depth capabilities and a large global infrastructure for building end-to-end blockchain platforms, cost-efficiently and at scale.
In December 2017, Apple filed a new patent application with the US Patent and Trademark Office that indicates is creating a system for certifying timestamps using blockchain technology. In the patent, the company declared that blockchain could protect a secure element if hackers compromise a single node.
In one-way or another, it seems that blockchain is here to stay. Time will tell more about who and what is next.
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