05 May 2019
How Facebook's secretive cryptocurrency might work
Since December, we have seen multiple reports about Facebook setting up a special division to explore the potential of blockchain technology and launch its own stable cryptocurrency, designed to minimize price volatility.
Now, an update from the Wall Street Journal has given some more insight into the effort, codenamed 'Project Libra', and how it might work.
Let's understand it.
Facebook looking to expand its footprint in the remittances market
Facebook has been testing payments with some users in India, and reports have suggested that the company plans to expand its footprints by developing a crypto-based payment network and a stablecoin tied to the value of a traditional asset, like USD.
This, as reports have indicated, could make it more stable than other crypto-coins and easier to trade or transfer.
Talks underway with leading financial giants
The WSJ cited multiple sources familiar with the matter to report that Facebook is in talks with dozens of online merchants and financial giants, including Visa and Mastercard, for Project Libra.
Essentially, the company is looking for investment of $1 billion, which would be used to back the value of the coin and prevent it from volatility, in exchange for lower transaction processing fees.
Facebook's coin may tie up with ads
Facebook's crypto coin, according to WSJ, may also tie to the company's ad network.
Basically, it could allow users to click on ads and pay for products using the coin issued by the company.
Then, the brands or companies, selling these ads and products could use those coins to buy more ads from Facebook.
The idea, to note, is still being considered.
More obvious use would be peer-to-peer transfers
Having said that, the more obvious use of Facebook coin would be for peer-to-peer transfers and payments on Facebook's own products.
WhatsApp has been testing payments for some accounts, and with several businesses already using the service to sell their product, Facebook coin integration would make a lot of sense.
The same could go for Instagram where people can buy products from within app.
However, there's no word on the launch yet
The work on Project Libra continues but there's no word on when Facebook might go ahead with the launch.
Also, the WSJ report suggests the company could leverage its humongous user-base and run the crypto-system more like a loyalty program in which you would get more coins after making a payment through them.
It may even work on some third-party partner websites/outlets.
Here's what Facebook's spokesperson said on the matter
"Like many other companies Facebook is exploring ways to leverage the power of blockchain technology," a company spokesperson said, adding that "this new small team is exploring many different applications. We don't have anything further to share."