Facebook, Twitter and Telegram: A New Crypto Paradigm or a Glorified Voucher Program?
Facebook and Telegram’s launch of coins will be more of a game changer for social media and banking than for crypto.
Facebook is controversial, if nothing else. The world's fifth-biggest company by market cap, it's also the biggest social network by a comfortable margin. Yet, despite the fact that most of us use it, we've become increasingly suspicious of what it's been doing with our personal data. Ever since the Cambridge Analytica scandal (and probably long before), we've feared that such data isn't particularly secure or private, so we've been pushing back against the social media giant, as witnessed with last year’s #DeleteFacebook campaign.
But at the same time, those with an interest in cryptocurrency also have an appreciation that, for crypto to enter the mainstream, it will need the backing of a big corporation or two. This is why recent news of Facebook's apparent plans for its own cryptocurrency is something of a bittersweet pill to swallow. There's little doubt that the promotion of a digital currency by one of the world's largest companies will put crypto firmly on the map. Yet, given Facebook's reputation, it's hard to shake the suspicion that what Mark Zuckerberg and Co. end up offering won't be a cryptocurrency in the proper, decentralized sense of the word.
Still, even if Facebook and other social networks won't be producing the next Bitcoin or Monero, their dalliances with blockchain could be a game changer not only for crypto, but for other industries. Finance could be irrevocably altered, as banks and other financial institutions race to accommodate the use of digital currencies by social networks. Similarly, a new ecosystem of crypto-related services and platforms could emerge, as they attempt to capitalize on the creation of new digital money by the likes of Facebook.
Facebook, Twitter and Telegram
Rumors that Facebook is planning its own cryptocurrency have been circulating since at least last May, when anonymous inside sources told media website Cheddar that the social media giant was "very serious" about launching an in-app digital currency. Despite remaining unconfirmed, such reports have been bolstered in recent months, with a February article from The New York Times claiming that Facebook has been promoting its soon-to-be-revealed coin to a number of crypto exchanges.
The Times report corroborated a December piece from Bloomberg, which once again cited anonymous insiders and which affirmed that the cryptocurrency would be a fiat-pegged stablecoin used with WhatsApp, potentially with a focus on money transfers. Regardless of whether the coin would be used by WhatsApp, Facebook or Instagram (all owned by Facebook), it's readily apparent that Facebook is working on some kind of crypto-related project, since, in May 2018, it formed a blockchain group headed by David Marcus (a one-time member of the Coinbase board) to explore how its platforms could use crypto.
It's therefore only a matter of time before Facebook officially involves itself, in one way or another, in the cryptocurrency and blockchain space. And for those working within crypto, such involvement could have significantly positive implications for the industry. As Nigel Green, the CEO of deVere Group, tells Cointelegraph, Facebook's arrival "would indicate that digital money, as a concept, is fully mainstream and inevitably the way the world is going. This is something we have been arguing for a long time now — despite protestations from the likes of Warren Buffett."
Green adds that crypto's place within the mainstream has already been proven by the fact that Facebook and other social networks have been looking into the use of cryptocurrencies for some time. Indeed, aside from Facebook, Twitter has also been flirting with crypto. While there isn’t any reliable indication that it’s planning its own currency, the platform has become increasingly supportive of Bitcoin in recent months, despite temporarily banning crypto-related ads in March 2018 (as did Facebook). For example, CEO Jack Dorsey declared in a couple of statements from February that he believes Bitcoin will become the internet's “native currency,” and that Bitcoin is the only crypto he owns.
What's more, Twitter itself has been supporting a number of initiatives related to the Lightning Network, such as signing the Lightning Torch (aka LN Trust Chain), a project aimed at raising awareness of the network and testing its capabilities. And given that Dorsey is also the founder and CEO of Bitcoin-supporting Square, it's perhaps inevitable that Twitter will begin integrating cryptocurrencies into its platform sooner or later.
Even more inevitably, it's likely that the Russian-founded Telegram will release its own GRAM cryptocurrency by October (at the latest), as the popular messaging network plans for the launch of the Telegram Open Network (TON), a blockchain platform set to rival Ethereum and EOS for the development and deployment of DApps. Telegram already boasts over 200 million monthly active users (as of a year ago), so it’s likely that a large number of people are going to have the chance to use crypto on a daily basis once TON goes live.
Centralized or decentralized?
Much the same applies to the recently launched VK Coin from Vkontakte, another social network and the third most popular website in Russia. Combined with the movements from Telegram, Twitter and Facebook, such designs could see the world's social media titans become some of the biggest players in the crypto industry, if not the biggest players. And according to Green, this should give existing cryptocurrencies and platforms serious cause for concern.
"Facebook and Twitter have enormous influence, resources and reach, and it could be that they would take away some market share from existing cryptocurrencies."
However, while it's hard to shake the impression that Facebook (and other social media giants) would make big inroads into the cryptocurrency space, it still isn't obvious that the digital currency it's looking to launch will be a truly decentralized cryptocurrency. In light of how Facebook's whole business model revolves around controlling the data generated by its users, casual observers might be forgiven for assuming that it won't entrust the operation and validation of its currency to a scattered network of users, particularly when this currency will apparently be a stablecoin intended for use within the Facebook ecosystem.
“Facebook or Twitter coin is not a cryptocurrency,” Arthur Hayes — the CEO and co-founder of BitMex — told Cointelegraph. Hayes went on, saying:
“These will be tokens that ride in their ecosystems. Users must trust these companies to operate the network in good faith and protect their privacy. The only thing any of these tokens will have in common with Bitcoin is that the word “coin” might possibly be used in their names. These will have little to no effect on Bitcoin and other similar cryptocurrencies that operate on a public peer-to-peer network.”
Such doubts regarding decentralization have been reinforced by the news that Vkontakte's recently launched VK Coin doesn't appear to make use of blockchain technology in any appreciable way. However, despite such early blows against the credibility of social media coins, there are mixed opinions among experts and commentators as to how centralized any currency from Facebook, Twitter or anyone else would be.
Iqbal V. Gandman — the managing director of eToro United Kingdom — believes that Facebook's coin will be mostly centralized, although this doesn't necessarily disqualify it from being a “real” cryptocurrency. "Cryptocurrencies can be both centralized and decentralized," he told Cointelegraph. "The sheer nature of platforms like Facebook and WhatsApp, means their cryptocurrencies will be centralized. Facebook and Whatsapp are like walled gardens, i.e. you have to login to access them, so I think people will probably only be able to use their coins within those platforms, rather than elsewhere."
CryptoOracle's Lou Kerner is mostly in agreement with such an assessment. "Facebook is likely to have decentralized elements and centralized elements, as Facebook is obviously centralized and there is no functional decentralized governance system," he said to Cointelegraph. But other figures involved in crypto think such skepticism is misplaced, especially since Facebook has been so eager recently to polish its tarnished image.
"As far as I can tell, these cryptocurrencies would be decentralized, as Facebook is seeking to capitalize