GlobalCoin: a bad name that’s going to be good for crypto
Facebook’s new cryptocurrency GlobalCoin is going to be a big deal – whether or not it actually gains any real users.
Ten years ago, Facebook experimented with its own currency: Facebook credits. It was a great idea, in theory. An on-platform currency with which users could tip each other, pay for services, send money, and more. Back in those days, blockchain was a barely-known concept, and this was a centralised currency – though that probably wasn’t the reason it didn’t catch on.
Facebook’s new foray into electronic cash – internally called GlobalCoin – will be different. The name might evoke shady one-world government forces, but it can’t fail to be a big deal. We don’t know a lot about the technical details; for example, we don’t know anything about the blockchain on which the coin will be hosted. (Will Facebook develop its own chain, use an existing protocol, fork and adapt a popular blockchain? Presumably the first, but those details aren’t public. How much functionality will on on-platform – that is, how will the company tread the line between maintaining the openness and security of cryptocurrency with imposing technical overheads on users, such as storing private keys?)
We do know that the project is slated to launch to a dozen or countries in the first quarter of 2020, and that Mark Zuckerberg has consulted with Bank of England governor Mark Carney, as well as sought regulatory assistance from the US Treasury – and that Facebook has been in talks with Western Union and various online merchants. He has even been in talks with Gemini, the stable coin run by none other than the Winkelvoss brothers – awkward! There are also rumours that GlobalCoin will be backed by a portfolio of real-world currencies – USD, CNY, EUR – to avoid volatility. Essentially, it would be a version of USDT that is actually regulated and fit for purpose.
What we don’t know is how popular it will be. But the odds are it’s going to be a very big deal for Facebook and for crypto as a whole. There’s one simple reason: network effect.
Ten years ago, when Facebook last tried this, both crypto and social networking were in a very different place. Neither had much in the way of network effect. Bitcoin was barely more than a one-man experiment. And Facebook’s userbase was 200 million: large, for sure, but still only a tenth of what it is today, with over 2.4 billion monthly active users. We know that the value of a network is proportional to the square of its size, which is why bitcoin’s price has soared since its inception and may continue to do so for some time yet. It also makes Facebook approximately a hundred times more valuable today than it was back then.
Facebook’s influence stretches over a third of the planet. Crypto’s userbase is still very limited. Facebook is about to put a ground-breaking idea in front of hundreds of millions of new users. Blockchain money is about to go mainstream – in a big way.