Facebook coin competes with PayPal and credit cards – Not other crypts.

Crypto enthusiasts are thrilled to learn that the world’s most important social media giant is jumping into the air, something they hope is “that it will work wonders for crypt deployment.”

I don’t like to be the one who throws cold water into a burning fire. But if you’re one of them, think a little and ask yourself these simple questions:

1. Is Facebook creating a real cryptographic asset … or just a blockchain version of PayPal, Apple Pay or a credit card? In other words …
2. Is Facebook really moving into the airspace of cryptocurrencies … or is it just bringing some of the features of cryptocurrency to the traditional fintech sector?

All references indicate that this last …

Which isn’t necessarily a bad thing. But let’s be realistic. Apart from the quick greeting of Distributed General Ledger Technology (DLT), it is unlikely to do anything for open, unauthorized distributed general ledgers like Bitcoin, Ethereum, EOS, Cardano or Holochain.

The whole idea of Facebook “Bitcoin” is to be Oxymoro.

But here are some scenarios that Facebook characters can do …

1. Identify inefficiencies in the current global financial system.
2. Among them, note that much of this sector in the world is underestimated by traditional financial figures. Many do not even have a bank account.
3. In addition, note that existing payment systems are often very vulnerable to hacking and theft.
4. Integrate some of the key features of the blockchain or other distributed general ledger technology to remove the worries of traditional financial systems, and the new backbone of the payment system is ready to serve.

Is Facebook ready to go in that direction? One hint from this comes from their recent publication, where they mention that they want to launch their new project in India for the time being. It is no coincidence that India is the second largest country without a bank account … The second, following China.

Can they offer a user-friendly financial service to millions of users who have virtually no other way to access banking? Definitely. And even if they do, it will be one of the biggest breakthroughs.

But make no mistake: Facebook coin is not a competition for cryptocurrencies. The reason for this …

First, Facebook coin has nothing to do with Bitcoin, which represents the original concept of decentralized digital money.

The core value of Bitcoin and its descendants lies in their idea that the assets do not involve any intermediaries or custodians.

In a world where there are endless financial intermediaries and an unpredictable number of counterparty risks, the key reason why Bitcoin was created was to help users take direct ownership of their assets without the karma of someone else interfering with it.

Except for cash, how many other asset classes have this feature? Not as many as you think, and you certainly can’t have a Facebook coin.

Second, probably every Facebook coin will be centralized and manageable by management.

Which contradicts two basic principles of cryptographic assets – Decentralization and Resistance to Censorship.

Why? Because Facebook is looking for a way to offer its customers a payment service. To that end, it must act as both a counterparty and a custodian for each transaction through its platform. He must confirm each payment that users make or request. As well as banks, credit card companies or PayPal.

Third, unlike Bitcoin, potentially every Facebook coin will be manipulated for the benefit of Facebook owners, and to the detriment of users.

As Facebook’s decision-makers control the company that manages all transactions on their platform, it is clear in itself that any activity they currently consider to be “illegal” is prohibited for whatever reason; creators, recipients will be blocked from the social media platform; their assets are frozen.

Again, this is a step away from real cryptocurrencies, where only the real owner of the property can decide what to do with them.

How could Facebook manipulate its coin? Too early to say. But two examples that came to mind:

Transfer of capital for secret purposes. It is rumored that Facebook is planning to create a so-called “stable coin” – an asset secured by money in a company’s account.

If so, in addition to checking the coins as a caregiver (storing them on your behalf), Facebook may use the money, supposedly to ensure stable coins, but in fact for other purposes.

In essence, this is no different from the activities of today’s banks.

Privacy rights breach. As Facebook has already sold users’ personal data, it is possible that they will also sell the user’s financial data. Remember: Facebook’s whole business model is to collect user data – often without the users’ knowledge – and then sell it to the highest bidder.

The thing is, until now, their data revolves around user preferences – spots and displacements. Moving into the fintech sector, Facebook can add financial data and spending habits to its existing large user base.

Facebook coin: A new layer on top of the old system.

Bitcoin: A completely new system.

In conclusion …

Facebook coin will compete with existing payment providers. Cryptographic coins, such as Bitcoin or Ethereum, have been designed to split them from the beginning.

Facebook coin will be another layer, for the existing financial system – another intermediary, another counterparty, in addition to all the existing risks. Bitcoin and other cryptocurrencies are designed to remove these old-fashioned layers.

The best,

Juan

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Translation: Lucreds Plus OÜ