8,000 kinds of money. It was a chaotic, confusing time to buy your groceries. Private banks issued notes with the promise of backing in gold and silver, but their actual value was anybody’s guess. Soon other companies—drug stores, coal mines, and of course railroads, the wealthy connectors of their day—jumped into the fray.
What’s old is new again in the hands of today’s barons of digital infrastructure.
On Thursday,The New York Timesreported new details about Facebook’s efforts to produce its own digital coin. Facebook’s first foray into blockchain will reportedly take the form of a so-called “stablecoin,” where the value of its digital currency is backed by the physical kind—in this case, a basket of global currencies. The idea is to tamp down the rampant speculation and tumult that have plagued other cryptocurrencies, like bitcoin, making the coin easier to someday use to buy your gas and meals (or, who knows, your neighbor’s cat tower on Facebook Marketplace).
The company’s blockchain team has reportedly grown to more than 50 people—cordoned off, theTimessays, in a wing with restricted key-card access—and expects to release a product within six months. Facebook’s plans have been rumored since April, when the company tapped David Marcus, former head of Facebook Messenger, to helm a dedicated blockchain team.
The new coin would leverage the built-in connections of WhatsApp’s more than 1.5 billion users—and potentially billions more should the coin come to Instagram or Facebook itself. That alone would make it an instant competitor to Venmo (and its owner, PayPal), and to China’s WeChat Pay, which is attempting to make inroads globally, including in the US. Neither of those companies, however, uses a blockchain to send money, or even uses its own coin; WeChat users in China pay in yuan, just as American Venmo users pay in US dollars. Facebook’s clearest advantage, in using a coin backed by multiple currencies, would be to allow users to send payments across borders cheaply. In December, Bloomberg reported that the coin would initially be tested with WhatsApp users in India, where demand for cross-border payments is strong.
The question, however, is what a blockchain-based coin gives Facebook that tried-and-true payment methods can’t? Blockchains present an array of hurdles, especially relating to privacy. Bitcoin, for example, offers a relatively transparent record of transactions, which is no
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