Some interested consumers are wondering, how two-faced can Facebook get? First they removed all the advertising on a controversial technology, then eight months down the road brought it back. What changed? Facebook now has a piece of the action they didn’t have then.
In 2017, there was explosive growth for “cryptocurrencies” and the “Blockchain” technology that makes them possible. As a result of the boom, a plethora of newsletters, seminars, and publications suddenly started buying ads on Facebook promoting Bitcoin, Ethereum and many other crypto coins, while analyzing and shedding light on the happenings in this new and exciting space.
In early January 2018, as cryptocurrencies were peaking at record levels, Facebook suddenly pulled the plug, killing all advertisements for anything related. At the time, social media chatter indicated Facebook was jealous because they were on the outside looking in.
Officially, Facebook was “playing it safe.” Following the lead of their peers, they blamed the decision on a disproportionate amount of scammers and opportunists.
As reported by analyst Recode, “that sudden rise in crypto created a mad dash by consumers who wanted in on the craze, and some shady businesses were trying to capitalize by promoting scams, hence the ban by Facebook. Others like Google, Twitter and Snapchat also banned crypto ads.”
It was a decisive blow to many small operations promoting their new technologies based on the Blockchain. The effects echoed into the price of the cryptocurrencies. By the end of 2017, one bitcoin traded for nearly $20,000. It has since declined to just over $6,000 per coin as of July.
Leaks and news articles suggested Facebook was working quietly behind the scenes to roll out a cryptocurrency of their own.
They started studying Blockchain technology almost a year ago, “when a member of its corporate development team, Morgan Beller, began looking at how the social platform could use the emerging technology,” Tech guide Cheddar reports.
“Facebook is exploring the creation of its own cryptocurrency, a virtual token that would allow its billions of users around the world to make electronic payments,” sources “familiar with Facebook’s plans” confide. “They are very serious about it.”
Serious enough to poach some highly impressive talent. In May, Ms. Beller’s work caught notice when Facebook announced that “the vice president in charge of the Messenger app, David Marcus, would lead a new team to ‘explore how to best leverage Blockchain across Facebook, starting from scratch,’” Cheddar writes.
Marcus, the former president of PayPal, which already runs the money transfer feature in Facebook’s Messenger app, left his position on the board of Coinbase, “which runs one of the most popular cryptocurrency exchanges.” He left because staying would be an obvious conflict of interest.
Marcus told TechCrunch he was leaving “because of the new group I’m setting up at Facebook around Blockchain,” adding that “getting to know Brian [Armstrong, CEO of Coinbase], who’s become a friend, and the whole Coinbase leadership team and board has been an immense privilege.”
It’s easy to see the benefits a social media giant like Facebook could reap from putting the ability to transact payments instantly around the world at the fingertips of their reported two billion platform users.
Facebook has been accused in the past of suppressing things on their own platform they find hostile or competitive but nobody knows exactly how their algorithms actually work, so proving those types of claims boils down to waiting for them to admit it.
Now, Facebook has a finger in the Blockchain pie and glory be, crypto related ads are back on sale, with certain restrictions.
Advertisers must be approved “through an application process” before they can promote crypto products. Ads promoting binary options and initial coin offerings are still forbidden. “Interested advertisers may have to show Facebook ‘licenses they have obtained, whether they are traded on a public stock exchange, and other relevant public background on their business’ in order to receive permission to run crypto ads.”
Nobody seems to notice that the same restrictions could have been put in place before to avoid cutting everyone off. There’s no denying, the pause gave them a chance to catch up.
Facebook’s Messenger app already allows users to interact, share files, and transfer money. Adding a type of FaceCoin is a natural extension that would allow for Facebook users to directly transact with Facebook’s advertisers. You could use your FaceCoin for more goodies on your virtual farm for example.
“Because Blockchain can make transactions free or very cheap, Facebook and its partners could sidestep the typical credit card processing fees. That would potentially allow Facebook to offer users ‘3% off purchases made with FaceCoin’ or a similar promotion,” TechCrunch advises.
Rather than crassly appearing to be jumping onboard the cryptocurrency gravy-train, Facebook is playing up Blockchain’s other benefits to sell the idea to the public. Because of the way it works, everything in Blockchain format is “public” and “transparent.” Transparency doesn’t mean you can see the data. That is locked up as tight as anything possibly can be.
The difference can be described using Google docs or sheets as an example. The traditional way of collaborating on a creative project is for one person to write something, then exchange it with the other person for their part. The document or contract could only be in the hands of one person at a time.
With Google docs, multiple users can modify the same document at will in real time without generating conflicts. Nobody can ruin it by spilling coffee on it because everybody has a copy. It is transparent because the system automatically tracks every change by all users, with time stamps.
In a Blockchain for beginners article, BlockGeeks writes, “Information held on a Blockchain exists as a shared, and continually reconciled, database.”
“This way of using the network has obvious benefits. The Blockchain database isn’t stored in any single location, meaning the records it keeps are truly public and easily verifiable. No centralized version of this information exists for a hacker to corrupt. Hosted by millions of computers simultaneously, its data is accessible to anyone on the internet.”
Technology futurist Ian Khan told a TEDx audience, “as revolutionary as it sounds, Blockchain truly is a mechanism to bring everyone to the highest degree of accountability. No more missed transactions, human or machine errors, or even an exchange that was not done with the consent of the parties involved.”
“Above anything else,” he adds, “the most critical area where Blockchain helps is to guarantee the validity of a transaction by recording it not only on a main register but a connected distributed system of registers, all of which are connected through a secure validation mechanism.”
The system relies on “nodes” which are simply computers of all sizes and types which act as administrative hosts of the network in a peer-to-peer sharing system similar to bit-torrent. Signing up as a node is purely voluntary and it requires a copy of the Blockchain “ledger” to be housed on the machine.
As an incentive to participate, each node is assigned “computational puzzles” to solve which when successful, win bitcoin prizes. That is the source of the term Bitcoin “mining.”
Blockchain was invented in order to create Bitcoin but once the methods and networks were in use, all sorts of spin-off applications were discovered. Former Treasury Secretary Larry Summers noted, “Bitcoin has the same character a fax machine had. A single fax machine is a doorstep. The world were everyone has a fax machine is an immensely valuable thing.”
A land registry is one of the not so obvious uses. Another is a concept called “smart contracts.” “Distributed ledgers enable the coding of simple contracts that will execute when specified conditions are met.”
One example cited in the Blockchain primer is “a derivative could be paid out when a financial instrument meets a certain benchmark, with the use of Blockchain technology and Bitcoin enabling the payout to be automated.”
With the new Internet of Things technology, you can monitor home appliances like your crock pot or your thermostat from anywhere. Most people wouldn’t think of setting the temperature on a thermostat to be a “transaction” which can be controlled by a “contract” but it can. That is one of the biggest opportunities for the smart contract Blockchain technology to be exploited.
Another useful application is for ride-sharing. The horribly old fashioned taxi has been replaced by modern ride-sharing services. If you want a lift you contact Uber who sends you a driver. “By enabling peer-to-peer payments, the Blockchain opens the door to direct interaction between parties.”
With elections on everybody’s mind this time of year, “by making the results fully transparent and publicly accessible, distributed database technology could bring full transparency to elections or any other kind of poll taking. Ethereum-based smart contracts help to automate the process.”
While Facebook administrators are generally forthcoming about changes and new products with their workers, “plans for Blockchain have been omitted from that roadmap, and top executives have been tight-lipped about any plans for crypto,” the people familiar with the discussions assert.
CEO Mark Zuckerberg’s internal announcement about Blockchain, “didn’t explain what specifically the team would be working on.”
“Like many other companies Facebook is exploring ways to leverage the power of Blockchain technology,” a Facebook spokesperson clarified after Cheddar’s story was published. “This new small team will be exploring many different applications. We don’t have anything further to share.”
Nothing is going to happen overnight. insiders believe “work on Blockchain technology and cryptocurrency will likely take years to materialize.” There are no plans at all for a “so-called initial coin offering (ICO) by offering a limited number of virtual tokens for the public to buy at a set price.”
Before they can do that, “Facebook will likely need to make acquisitions in the Blockchain and cryptocurrency space to develop its own virtual currency,” one source points out.
Using crypto for payments, “is just very expensive, super slow, so the various communities running the different Blockchains and the different assets need to fix all the issues, and then when we get there someday, maybe we’ll do something,” Marcus explains. Blockchain technology could also be used to help Facebook verify the identity of accounts and encrypt data.
You don’t have to worry about backing up the data because it is already copied on every network node. What you do have to worry about is losing your private encryption password, they tend to be long and awkward so not easily memorized. If anyone else finds it, the system thinks they’re you.
One of the biggest glitches “in the world of decentralized Blockchain apps is how you bring your identity with you,” TechCrunch observes.
“Securely connecting your wallet, Blockchain-based virtual goods and biographical info to new dApps can be a laborious process. Users typically have to type in long, complicated alphanumeric keys that are tough to remember and annoying to input.”
Not only that, “user experience design around identity in the Blockchain space lags far behind what we’re used to with mainstream social apps like Facebook Connect, which uses a OAuth single sign-on to let you instantly join apps without creating a new username and password, or filling out a profile and uploading a photo.”
It seems likely that Facebook will eventually go head to head with Coinbase, or even more likely forge a partnership with “the Blockchain mainstay” to speed things up.
Along with that prospect, it is even more realistic that the technologies will be used on “the enterprise engineering side” by adding decentralized storage infrastructure to save costs.
The real limit on Facebook’s ambition is how much the users trust them.