It is no secret that social media giant Facebook is working on cryptocurrency, which is reportedly set for launch very soon. The currency will be called as Facecoin, and Facebook will use through its platform and subsidiaries like WhatsApp, Messenger, and Instagram.
However, the company has tried to keep the project under wraps, with just one official statement coming out, which stated that the company is exploring possibilities to utilize blockchain technology. It further added that a small team had been set up to explore various applications to put blockchain at its potential best.
Several reports have confirmed that the digital currency Facebook is working on will be a stablecoin. This means that Facecoin will be backed by traditional assets like Gold, Silver, or stocks, hooking them on the cryptocurrency’s blockchain. A similar digital coin named “Gram” is also being developed by privacy-focused messaging app Telegram.
On the contrary, for other cryptocurrencies which have a fixed amount of coins/token in circulation and constant price fluctuations, the price of Facecoin will be fixed, and the number of coins in circulation will keep on changing depending on the demand. Hence, it won’t be subject to speculation like Bitcoin, Ethereum, Ripple, and other such digital assets.
Reports have emerged claiming that the price of Facecoin will be linked to the US dollar or a combination of the dollar, Euro, and Yen. However, a group of analysts and crypto experts have opted for being skeptical towards Facebook digital coin. Prof Alistair Milne, department of financial economics of Loughborough University recently stated that the most common feature in all cryptocurrencies and blockchain finance projects announced during the last four years is that they all were overhyped and exaggerated.
Prof Milne claimed that while working on a project, he found that about 103 new programs were launched since 2015, applying blockchain technology to financial services. However, most of these, if not all, have quietly wrapped up operations, he added, while none of them could reach commercial scale.
According to experts, Facebook’s Facecoin could be quite similar to WeChat pay, which is the world’s largest mobile and internet payment solution. The step what made the Chinese mobile payment application so successful, was its integration with WeChat messaging app. Currently, it has over 900 million active users. Facebook could repeat similar success by integrating Facecoin with WhatsApp and Instagram.
However, the major difference between Facecoin and WeChat Pay is that the latter is not based on blockchain/cryptocurrency. In fact, it is based on conventional servers to transfer payments from bank accounts. Facecoin will ask people to trade traditional money in exchange for the cryptocurrency, which quite different from traditional money transfer applications.
Regulatory authorities across the globe are becoming stricter and laying stringent rules for ensuring transparency in crypto transactions. This has already made the general public wary of them. Since the beginning of 2018, cryptocurrency markets at large have been at a downfall, with almost all major currencies bleeding. The largest digital token Bitcoin witnessed a losing trend in prices for six consecutive months, finally breaking the streak in February this year.
This indicates that public faith in cryptocurrencies is still quite uncertain, which isn’t great news for Facebook. But there’s another side to the story too. Facebook intends to target the Facecoin mainly towards cross-border transactions, which can be a success as currently, cross-border transfers are quite expensive.