What we know about the Facebook crypto right now
If you are anticipating being able to use the new Facebook cryptocurrency to play slots, slow down and temper your expectations. There is no indication that Facebook will allow such activity - at least following the initial launch of what they are calling 'GlobalCoin'. There is still a lot we do not know about this new digital asset.
Facebook hinted they were looking at getting into the crypto business more than a year ago when they started making subtle moves pointing in that direction. Their crypto plans were confirmed earlier this year (2019). Now, it appears as though Facebook is on the cusp of actually launching its coin by the end of June.
Techies and Facebook fans alike are already salivating over the possibilities. Lots of grandiose theories are bouncing around in the cyber sphere. Some of those theories have value while others are best ignored. The question is, what do we know for sure about GlobalCoin? We know at least a few things.
1. We know it is a stablecoin
The first thing we know is that GlobalCoin is technically a stablecoin rather than a pure cryptocurrency. What makes it stable? GlobalCoin is pegged to the U.S. dollar. If you don't know what that means, here's what you need to know: its value will be determined by the value of the dollar. As the U.S. dollar strengthens on the global stage, so will GlobalCoin. Any weakness in the U.S. dollar will be simultaneously reflected in GlobalCoin.
It is no surprise that Facebook decided to go with a stablecoin. The people that run the world's most dominant social media organization are not dumb. They understand technology. They certainly understand economics. They know that if they are going to risk the reputation of the company they have built, they are going to have to minimize that risk. The best way to do that is to go the stablecoin route.
2. We know GlobalCoin will be quasi-independent
Facebook has allegedly been in talks with financial regulators for some time now. We know that they have been talking to the SEC as well as the Bank of England about both risks and regulations. Why the worries? Facebook does not want to have to deal with accusations of trying to centralize currency on a global scale. They also want to make sure they steer clear of compliance issues.
The company has apparently decided that the best way to make everyone happy is to turn control of GlobalCoin over to an independent foundation. That foundation will be made up of tech experts, investors, and node operators. It will ostensibly control every aspect of GlobalCoin from its initial launch forward.
Having said that, it is hard to believe that this independent foundation will be truly independent in every way. Remember, this coin has Facebook's name written all over it. No matter how independent control appears to be, GlobalCoin will always be associated with the Facebook brand. Company officials are not likely to remain silent in the background if this independent foundation does something with GlobalCoin that could potentially hurt Facebook.
It is for that reason that we suggest the independent foundation is more of a quasi-independent organization whose complete independence will rely on keeping its masters happy. As long as they don't roil company feathers, interference should be minimal.
3. We know developing countries are the target
Some have speculated that Facebook doesn't just want to compete with Bitcoin, they want to beat it. A big part of that strategy is to target developing countries where fiat currencies are not necessarily stable. The theory is that providing these countries with a stablecoin will not only shore up their economies, but also encourage cross-border commerce in the same way the euro encouraged commerce in Europe.
If Facebook's theory proves correct, actually surpassing Bitcoin in terms of cryptocurrency dominance will be nothing short of a miracle. It is one thing to target the developing world in hopes of helping them achieve some sort of economic equality, but it's another thing to do so with something as technologically heavy as a cryptocurrency.
How many people in those developing countries have daily access to mobile devices or computers? How many of them actually use Facebook enough to be comfortable with it? How many businesses in those countries trust Facebook enough to use GlobalCoin as a primary means of commerce?
These are all important questions that do not have answers as of yet. But it is a safe bet that the answers will not be what GlobalCoin enthusiasts are expecting. It's not likely GlobalCoin will supplant Bitcoin as the leading cryptocurrency. And if it does manage to at some point, it won't be for years to come.
4. We know Facebook is offering it to employees
Once GlobalCoin is officially in the marketplace, Facebook employees will have the option of electing to be paid with it. We completely understand why company leaders would want to do this. The more employees electing to be paid in GlobalCoin, the more relevance the coin has as an alternative monetary system.
Imagine if 50% of Facebook's employees elected to receive GlobalCoin payments. That would amount to the equivalent of millions of dollars flowing into the U.S. economy every year by way of a stablecoin backed by the U.S. dollar. In short, that would instantly give GlobalCoin economic credibility. It would give GlobalCoin legitimacy.
It remains to be seen how many Facebook employees will actually take the company up on its offer. We may not know for quite some time. Moreover, adoption is likely to be slow unless and until Facebook can demonstrate utility for its coin. If employees cannot spend their coins like fiat, there will be little incentive for them to get paid in GlobalCoin.
5. We know nodes will be expensive
Facebook is not launching an ICO as far as anyone knows. So how do they intend to raise the money necessary to give GlobalCoin monetary value out of the gate? By charging a fee to all node operators. And make no mistake, that fee is not cheap. According to Forbes contributor Billy Bambrough, Facebook intends to charge $10 million for the privilege of operating a node on its network.
That kind of money is significant even for big-time operations that have the resources to pay the fee. In exchange for their $10 million, node operators will mine coins and have a place at the table in Facebook's independent foundation.
Some remain skeptical about Facebook fee structure. On the one hand, $10 million could end up being a drop in the bucket if GlobalCoin goes on to supplant Bitcoin as the world's dominant digital currency. Surpassing Bitcoin would mean GlobalCoin was worth a lot more.
On the other hand, any perceived lack of value or utility could frighten away node operators. They have to consider that GlobalCoin is a stablecoin backed by the U.S. dollar. That means any coins they accumulate will be subject to the same economic stresses the dollar faces. Will it be worth them to spend $10 million to mine coins so closely linked to the U.S. economy? Perhaps, but there are no guarantees.
6. We know that rivals are not nervous
Last but not least, we know that Facebook's cryptocurrency rivals are not nervous. In a normal economic scenario, competitors would be quaking in their boots to know that a corporate giant like Facebook was poised to begin infringing on their territory. We are not seeing any such fear at this point. In fact, it would appear as though Facebook is being encouraged by its competitors.
The interesting thing about cryptocurrency is that there is plenty of room in the pool, so to speak. As a concept, cryptocurrency is not about market dominance and profits. Bitcoin itself was not established as a moneymaking venture. It was created to be an alternative monetary system that leveled the economic playing field on a global scale.
Bitcoin isn't worried about GlobalCoin because the point of their platform is not to make money. If Facebook's GlobalCoin does make money for the company - and most experts believe it will - that is fine for Facebook. We expect that from a company whose sole purpose for existence is to turn a profit.
GlobalCoin and Bitcoin can exist side-by-side without either one harming the other. And guess what? There is room for an unlimited number of other coins as well. That is the nature of the cryptocurrency universe.
The world does not need a single coin to function in the arena of digital assets any more than it needs a single fiat to facilitate day-to-day commerce. There is plenty of room for global coins, national coins, and even regional and local coins. There is plenty of room for industry-specific coins - like a coin used only for online gambling.
At the end of the day, we know that GlobalCoin is just around the corner. All indications point to its initial launch before the end of June (2019). When it hits the market, expect a feeding frenzy in the early days. But then expect GlobalCoin to stabilize and become just another coin in the crypto universe.