Bitcoin, which has recently attracted the attention of some of the world’s biggest technology entrepreneurs, is likely to soon get a major competitor: Mark Zuckerberg’s social networking giant Facebook.
Facebook, which was last week revealed to be working on its own cryptocurrency to rival bitcoin for the Facebook-owned WhatsApp messaging app, is trying to figure out how it can reposition itself in what Facebook founder and chief executive Mark Zuckerberg called a “privacy-focused” future that will likely weigh on his company’s bottom line.
In a world where Facebook is not as willing to trade people’s private information for ever-more targetted ads, facilitating bitcoin-like payments could be a way for the teenage company, which still considers itself a start-up despite its near $500 billion market capitalization, to keep its revenue growing.
Facebook founder and chief executive Mark Zuckerberg has said Facebook adapt to a “privacy-focused” future.GETTY
Facebook, which has already had some negative experiences of bitcoin, makes money on its social network by selling advertisements and in January this year posted a record profit of $6.88 billion for the final three months of 2018, compared with $4.27 billion the year before, with revenue rising 30% to $16.64 billion.
Meanwhile, daily active users and monthly active users of Facebook grew by 9% year-on-year with the company estimating it has two billion daily active users across Facebook, image-focused Instagram, and chat apps Messenger and WhatsApp.
While the money (and users) are still on the up at Facebook, it has been hit by repeated scandals over the last few years that’s taken its toll on Facebook’s share price.
In a blog post, Zuckerberg outlined his belief that a “privacy-focused communications platform will become even more important than today’s open platforms.”
“I believe the future of communication will increasingly shift to private, encrypted services where people can be confident what they say to each other stays secure and their messages and content won’t stick around forever. This is the future I hope we will help bring about,” Zuckerberg wrote.
“We plan to build this the way we’ve developed WhatsApp: focus on the most fundamental and private use case—messaging—make it as secure as possible, and then build more ways for people to interact on top of that, including calls, video chats, groups, stories, businesses, payments, commerce, and ultimately a platform for many other kinds of private services.”
This means that encrypted messaging, which has so far meant WhatsApp has been difficult for Facebook to monetize, will be used as the basis for new payment tools.
The Facebook share price was hard it in 2018 by a number of privacy and data related scandals.GOOGLE FINANCE
Slow uptake of bitcoin and other cryptocurrencies has left many investors disappointed after a 2017 bull run catapulted cryptocurrencies into the limelight and led to many predicting use of bitcoin would become commonplace.
With adoption failing to live up to expectations, and closely-watched institutional investment in the bitcoin and cryptocurrency sector stalling, the bitcoin price plummeted from its all-time highs of near $20,000.
The bitcoin price has fallen by some 80% over the last year or so, with the bitter bear market being labeled a “crypto winter” for its disastrous effect on the industry.
Some expect the likes of retail behemoth Amazon could spark the next bitcoin bull run if it chooses to integrate bitcoin or other cryptocurrencies on its platform, however, recent developments suggest tech companies are more inclined to build their own private cryptocurrencies, similar to J.P. Morgan’s recently unveiled digital token, than adopt existing ones that are harder to profit from and control.
The bitcoin price rose sharply in 2017 but has since fallen back. Mainstream adoption could send it higher again.COINDESK
Cryptocurrency startups such as San Francisco-based Coinbase and the Square-owned Cash App have demonstrated it is possible to make money off bitcoin and crypto payments and trading, however, for the same reason tech companies have long resisted moving in to banking, tight regulation and potential legal problems could mean Facebook ends up in the same position it is now, having to balance availability of its services against public scrutiny and bad actors.
A private Facebook digital token would minimize this risk and allow Facebook to skim a percentage off the top of transactions on its platform while keeping the undesireables such as criminals and terrorists, both longtime fans of bitcoin and public cryptocurrencies, at a safe distance.
