New details recently emerged about one of the most discussed and anticipated cryptocurrency projects in the sector – TON. The new blockchain platform has been in development by Telegram, the WhatsApp rival instant messaging service.
I’ve been following the development of TON since Telegram raised one of the largest initial coin offerings (ICO) in the sector. In 2018, they made around $1.7 billion from two private token sales. Since then, it has been assumed that Telegram is the clear pack leader among social networks developing their own cryptocurrencies. The communication giant is well on track to reach its launch date of October 2019.
Reports break of Facebooks’ proposed cryptocurrency
While the industry has been following Telegraph with avid interest, little attention was on Facebook’s moves in this sector – until recently. It’s now clear from a major investigative report, that Facebook has its own blockchain project, and it’s much further forward than anyone knew.
While the project has long-been an industry rumour, until a detailed report was released on 5 June 2019, we had no real details. The report, from The Information, dug up various news pieces relating to Facebook’s own currency, and shortly after it was published, many aspects were validated by a Facebook executive. Before the expected white paper, which is flagged for release in the next week, here’s what we know about Facebook’s currency and what it means for the digital economy.
Facebook builds a team of experts
The Information report says that the cryptocurrency project started around 12 months ago, when Facebook employed the former president of PayPal to run it. In January 2019, Facebook employed the whole team from a blockchain start-up called Chainspace.
It’s estimated that more than 100 staff are now on the Facebook project. Earlier reports from the BBC say that the new cryptocurrency is known as GlobalCoin, but there is no further evidence for this. In fact, all sources point towards another name: Libra.
For example, in May 2019, Facebook registered a company named Libra Networks in Switzerland, and bought the trade mark. According to The Information dossier, Mark Zuckerberg himself is highly involved in the project, with other high-level Facebook leaders, such as COO Sheryl Sandberg, remaining sceptical.
Currency will launch in developing countries
The token, or ‘coin’ acts as a borderless currency. There will be zero transaction fees when it’s used on the Facebook platform, which includes WhatsApp, Instagram and Messenger. It’s expected that Facebook will be marketing the coin mostly in developing countries, and this is where it’s anticipated it will gain most traction.
The user base for Facebook and associated platforms is more than 2 billion around the world. And many of these people are from countries that do not have reliable financial institutions and have to pay extortionate remittance fees across borders. If these users take up Libra they will boost its real-life value, Libra could change various aspects of personal finance, from cross-border payments, general e-commerce and people sending money to each other.
In an article for Forbes, Caitlin Long, a Wall Street veteran says that: Facebook’s cryptocurrency will be a powerful force for good in developing countries.
How will Facebook’s coin retain value?
The Information report says that it will be linked with several currencies and low-risk securities. No details of how this will work, or which currencies will be included are available. Plans are afoot for the company to provide ATM terminals in the offline world, so that Libra users can exchange the cryptocurrency for fiat currency. Employees of Facebook will also have the choice to be paid partly using the token.
With so much negative press surrounding Facebook’s ownership and control of massive amounts of user data, some are expressing concern that the company now intends to exert the same control over online currency. However, it appears the company is ready for this, and has incorporated some decentralisation into its model. Facebook has reportedly been communicating with a high number of technology companies, Fintech experts and financial institutions, in order to recruit them into an independent group that will provide oversight and regulation.
As for who will validate transactions on Facebook’s blockchain ledger, this will be left to very few. To obtain a license for node operation on the blockchain, entities will need to pay $10 million. The network will launch with 100 nodes, according to the investigation by The Information.
Industry reaction to Facebook plans
The industry has reacted with intense debate over what Facebook’s coin will mean, and how it will affect others in this space. Whatever the ins and outs, it does look like Facebook is making moves to deliver user-friendly, easily accessible financial services to millions of people who have little access to them at the moment.
Libra will launch first in India, which has the second largest number of people who use no financial services and have no bank account. This suggests that Facebook’s path is set on disrupting the sector in order to give access to people who would benefit.
However, a key difference some experts are seeing with Libra is that Facebook will become another layer of traditional banking. Cryptocurrency expert, Juan M. Villaverde tells CoinTelegraph that as Facebook will have to act as custodian for every payment on its network, it will essentially work exactly like a bank or credit card company. This puts Libra on the competitive level with traditionally established payment processors, very different from cryptocurrencies Bitcoin that aim to obliterate these traditional barriers completely.
However, others believe that Project Libra will lead to a much wider understanding of cryptocurrency and, in that way, help other tokens become mainstream. Caitlin Long opines in Forbes that while Facebook will help people understand and want to use cryptocurrency, when they do want to try, it they will still choose the likes of Bitcoin over Libra.
Time will tell exactly what impact Facebook will have in the crypto space, and quite how much it will change the financial services landscape remains to be seen.