Facebook's future Libra may lie in its blockchain, and what third-party developers do with it.
It will not be a big stretch to say that the biggest announcement related to crypto protection this year came outside its ecosystem. Facebook announcement about Pound, a global cryptocurrency and blockchain for trading on its network, has pushed cryptocurrencies from their former status into the subject of heated international debate between economists and governments.
Since the project was launched by Facebook, a company with a history of circumventing regulation and jumping with a gun on privacy issues, it has also come under fire and warning from regulators about the dangers of mixing payment and social data.
Nearly six months and three Congressional and Senate testimony later, the dust has not yet settled. Meanwhile, Libra itself has undergone changes. Potential board members of the governing association left the platform. The company's initial aggression has been replaced with caution. “…Our views [about Libra] have become clearer,” Facebook CEO Mark Zuckerberg said during a congressional hearing. This clarification could mean moving away from Libra, the cryptocurrency, to Libra, the blockchain.
Libra is not Facebook's first attempt
When it was first announced in June, Libra was touted as an attempt by Facebook to “cash out non-banking” by providing money transfers via mobile phones. This splendor of the prudent mission statement, however, obscures the business opportunities of the social media company in the payment industry.
Research firm Mordor Intelligence estimates the global digital payments market will reach $ 2024 trillion by 7,6, averaging 13,7% per year. To get an idea of how these numbers translate into income, consider the Venmo case. Peer-to-Peer Payment Service (P2P) PayPal reported revenues of $ 4,38 billion, processing over $ 27 billion in payments in the third quarter of last year.
Facebook has experimented with various methods to enable payments on its platform. His most significant venture to date has been the inclusion of payments in Facebook Messenger. The service was launched in 2015 and is currently available to users in the US. (It was discontinued in the UK and France earlier this year).
WhatsApp, owned by Facebook, which is also the world's largest messaging app by number of users, has already rolled out a solution to enable mobile payments in India. (By the way, the country has one of the largest non-bank populations in the world.) The tests received approval from the Indian government, even though the likelihood of a Libra launch there is small.
“Thinking of this [Facebook payments industry initiatives] as a betting portfolio, WhatsApp Pay is a low risk, medium reward game because it is based on playing within existing rules with the current user base and is a relatively safe bet,” Hasan said. Ahmed, managing director of eToro trading platform, in an interview with crypto-hunter.
Just last month, Facebook expanded its network of payment services, by launching Facebook Pay, a service that provides a secure transfer of money between several products in the set of Facebook, including Facebook Messenger, Instagram and WhatsApp.
Past and Present Libra
At first glance, the Libra initiative seems to be an attempt to increase revenues through the provision of payment services in emerging economies and to occupy a niche in the growing but expensive international money transfer market. According to World Bankas technology reduces geographical barriers, remittances or money sent home by foreign workers will be the largest source of external financing in developing countries.
But high costs and existing regulation are a stumbling block to this growth. Facebook's geographic reach coupled with tech loans makes it an ideal candidate to solve this problem.
Michael Potre, managing partner of Terraform Capital, told us that future profits in the payment industry depend on international transfers. He introduced two possible ways in which Facebook can implement such a system. The first method involves the use of a system similar to Fed wires. In this method, funds are sent to countries of destination using counterparties that use local channels, such as local banks and money transfers, to make final transfers.
The second method is similar to the model used by payment companies such as Western Union. The process includes the establishment of local subsidiaries of parent organizations to complete the transfer. The bottom line is that the responsibility for the entire transaction lies with the payment company. Unlike the Fed wireline method, where each company is only responsible for part of the transaction.
According to Putre, Western Union's international transfer system seems to be more in line with the values of the crypto-faithful. “… [It] includes less reporting to governments, more control over customer information, and they [payment services] can charge where they want and in the amount they want,” he said.
The problem is that cryptocurrencies may not be needed for this business model. Earlier this year, Western Union revealed that remittances in Ripple cost five times more than in their own network. A financial services company also said in your blogthat cryptocurrencies still have to cope with management, compliance, and volatility.
Moreover, as Libra's regulatory blow has demonstrated, scale does not guarantee success.
“Building payment services on a communications platform is not a surefire path to success, as Google has discovered,” Ahmed said, referring to the tech giant's previous attempts, Google Pay and Google Wallet, which were shut down.
Calibra could be the future for Libra
Calibra, the Facebook wallet for Libra, is a potential solution to the Facebook dilemma. The wallet extends the concept of peer-to-peer communication across borders, allowing users to transfer currencies, digital or paper equivalents to different parts of the world. It also minimizes the regulatory risk associated with the introduction of a new coin, which, according to its critics, could threaten the economic sovereignty of countries.
In that sense, the future of Libra, the cryptocurrency, could be cloudy. Facebook is already in "quiet talks" to join The Center, a consortium for stablecoins, according to a Fortune report released today. It's not hard to imagine a future where Calibra wallet transfers are made using stablecoins issued by governments or approved by third parties, rather than Facebook's own coin.
Removing a coin from the blockchain will also allow Facebook to promote Move, a programming language for blockchain, for third-party developers. The business implications of third-party developers linking Libra, the blockchain, are huge.
Fortune quoted an analyst as saying that the introduction of Libra “could be compared to the introduction of Apple iOS for developers a decade ago.” (For context, Apple said quarterly revenue from its service division in recent results was $ 12,5 billion).
“If I had to do it all over again, I would probably focus more on what it really is, which is a new payment system,” Calibra co-founder David Markus told Fortune.
This may be another way to show that Libra, like a coin, in fact, cannot be the key to understanding the Facebook blockchain project.