Facebook's bid to make crypto safe for business
Illustration: Aïda Amer/Axios
Facebook's plan for its Libra cryptocurrency illustrates one of Silicon Valley's most durable principles: Tech revolutions tend to start with a radical idea but don't spread unless the idea is made safe for business.
Why it matters: If Facebook succeeds in its bid to domesticate cryptocurrency, following in the footsteps of open source software and the internet itself, it could outflank the global currency system and leave the social network as keeper of everyone's money.
The big picture: In the case of Libra, the original radical idea of cryptocurrency was digital money backed not by a government but by math.
- Bitcoin introduced us all to the concept, but it hasn't gained traction for everyday users. It's still more of a volatile investment than a medium of exchange. It's also hard to spend on smaller purchases.
- Facebook's innovation with Libra lies in rewriting the crypto playbook to make the technology more stable, easy to use, and less threatening to the status quo.
- Libra will tie its value to that of a set of conventional assets, meaning you'll be able to buy something with it and probably not have to worry about giant swings in value.
- Facebook's point of control will be through your digital wallet — the software front-end for the currency.
How it works: Disruptive tech innovations typically don't take off until they are reconciled with capitalism.
- With Libra, Facebook aims to rebrand cryptocurrency from "that crazy Bitcoin stuff" to "here's an easy way to send money across borders and buy things online."
Flashback: In this effort it is walking the same path that key leaders of the open source movement followed 20 years ago when they set out to rebrand "Free Software," a radical idea with strong principles limiting the privatization of code.
- With the new "open source" name, looser licensing terms, and more business-friendly rhetoric, projects like Linux won the support of large corporations like IBM and became centerpieces of today's tech infrastructure.
- And Microsoft, whose CEO once called Linux a cancer, is now one of the biggest backers of open source software.
Don't forget: The internet itself has followed a similar route. The radical idea was a network that nobody owns and everyone can use.
- In the '70s and '80s, the network gestated within the university world, commercial activity was originally forbidden, and the culture and rules discouraged market-oriented behavior.
- Until as late as the mid-'90s it was considered bad behavior for individuals to own more than one domain name.
- In the early '90s Congress and the federal agencies that oversaw the early internet gradually loosened the reins, allowing the internet's infrastructure to pass into private hands just as the World Wide Web began taking off.
- The web made the internet safe for business, sparking the dotcom bubble and opening the door to Google, Facebook and lolcats.
Yes, but: Not all big tech ideas make this leap.
- Napster tried to domesticate the concept of peer-to-peer sharing but never found a way to square that technology with intellectual property law. Meanwhile, the broader concept of peer-to-peer was touted as a boost for efficient distribution, but that never really materialized.
- Digital music arrived in most Americans' lives by a different route, via Apple and streaming services.
- Peer-to-peer ideals powered the original "sharing economy," but the model that won out — pioneered by firms like Uber and Airbnb — is more like turbo-powered classified ads and rentals than coops and shared resources.
The bottom line: Libra faces tons of technical, economic, political and social hurdles. But Facebook has 2 billion customers and a lot of spare cash, which gives it a better shot than most.
- Also, it has strong motivation: If the company succeeds in pivoting from public to private communications, it needs to replace a lot of ad revenue. The payments business could fill that gap.
Shot: "If you think Facebook is powerful now, just wait until it’s, essentially, the global federal reserve." — Max Read in New York magazine
Chaser: "2009: The blockchain will undermine central power! 2019: The blockchain will help Facebook to undermine the central power of the state by using the rhetoric of decentralization to actually centralize power in its own hands." — Evgeny Morozov on Twitter