May 26, 2019

The promise of Facebook's GlobalCoin

Felix Salmon, author of Edge

Illustration: Aïda Amer/Axios

Facebook's new cryptocurrency, reportedly known internally as GlobalCoin, will be in "about a dozen countries" by this time next year, per the BBC. And it's going to be about more than just payments, according to an FT rep0rt this week — although the payments space alone is enormous.

Why it matters: "It should be as easy to send money to someone as it is to send a photo," says CEO Mark Zuckerberg. Given how many photos are shared across Facebook, Instagram and WhatsApp every day, it's clear that he sees an enormous opportunity here.

  • By the numbers: A single money market fund dedicated to Alibaba's Alipay service, Tianhong Yu’e Bao, had 588 million investors and $168 billion in assets at the end of last year. Mobile payments are both easy and ubiquitous in China, seamlessly bundled into social media apps.

But, but, but: You don't need to invent your own cryptocurrency in order to get into payments. Just ask Alipay — or, for that matter, Tencent, the owner of WeChat. Both of them are happy using China's fiat currency. And Facebook itself has incorporated dollar payments into Messenger since early 2015. So why create GlobalCoin?

  • What Facebook wants is not just to facilitate payments, but also to be able to print its own currency. That was the idea behind Facebook Credits in 2009: If you control your own coin, you can mint as much of it as you like and hand it out to users or anybody else at will.

What to watch: GlobalCoin has the promise of being a vastly more useful and sophisticated version of Reddit Coins — or, for that matter, airline miles. "Reward points are dumb," says Jeff Bandman, a crypto consultant and former CFTC official. "I’m not saying they’re a dumb idea. But a cryptocurrency is programmable digital software that you can put intelligence into."

  • Be smart: GlobalCoin can in principle be earned, rather than just bought. Amazon is already gamifying its jobs — that is, coaxing its employees to work harder by turning their jobs into a game with prizes — just as Uber has been doing for years. Perhaps soon Facebook too will become a game with valuable prizes.

The bottom line: The most important currency in the world, if you're a social media network, is attention. If Facebook ever dies, it will be because its users desert it for some other network, taking their attention with them. And so Facebook wants to give them incentives to keep coming back.

  • Right now, whenever you post to social media, you're doing valuable unpaid work for the Big Tech platforms. The users they value the most are the ones who create engagement and stickiness. If it had its own currency, Facebook could print money to reward such behavior.

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