Facebook is getting into the blockchain business. On Tuesday, news broke that the social network was undergoing a massive reorganization. The company's assorted product execs were reshuffled into three major categories, and a handful of apps got new ...
Facebook is getting into the blockchain business.
On Tuesday, news broke that the social network was undergoing a massive reorganization. The company's assorted product execs were reshuffled into three major categories, and a handful of apps got new leaders.
But perhaps most intriguingly, the company now has a dedicated team for blockchain, the decentralized technology that underpins bitcoin and other digital currencies and cryptographic assets.
The experimental team is small — fewer than a dozen people, according to a source familiar with the matter. But it's a significant step for Facebook into a new and much-hyped field.
It's being led by David Marcus, the former PayPal president who most recently was in charge of Facebook's Messenger app. He's a seasoned company executive with experience in the traditional finance and cryptocurrency sectors. He's also on the board of the buzzy bitcoin startup Coinbase.
"They're definitely serious — this isn't a big company saying, 'Hey, let's try and get some press coverage,'" a former Facebook employee now working in the crypto space told Business Insider. "They're taking legitimate people in the organization who are very high quality." (The Instagram execs Kevin Weil and James Everingham are also joining the team, Recode reported, and Morgan Beller, Facebook's corporate-development executive, has been investigating blockchain.)
So what is Facebook's blockchain team actually doing? The company isn't saying, and in his Facebook post announcing the new role, Marcus said only that he was "setting up a small group to explore how to best leverage Blockchain across Facebook, starting from scratch."
One possibility is that the social network will use the tech behind the scenes to improve the efficiency of its payments and existing infrastructure— though it's unlikely, said Ned Scott, CEO of the blockchain-based social network Steemit.
"I think it's a very limited use case for what's possible with blockchain," he said, suggesting Facebook may have ambitions beyond payments.
So what might that look like?
Instead, he suggested Facebook might use blockchain tech to create a new platform for developers "as a tool for building apps and integrating the services of smart contracts" — contracts powered by blockchain that can run themselves — with digital tokens and currencies built into apps.
In this world, Facebook's finished blockchain product would look a lot more like Ethereum, a decentralized computing platform, than traditional digital currencies like bitcoin.
Facebook CEO Mark Zuckerberg.
Justin Sullivan/Getty ImagesA more currency-orientated route the former Facebook employee suggested was that the company might build a digital currency for its users, in the vein of FairCoin, a bitcoin alternative focused on building a "fair" economy. Apps and businesses could then accept the digital currency, and it could help provide financial products in emerging markets to the "unbanked."
Writing for the cryptocurrency news site CoinDesk in January, the crypto consultant Michael J. Casey speculated about how such a token might work: Users (and shareholders) would be given tokens in return for traffic on posts. All advertising on Facebook would need to be bought with the tokens, giving them value.
Of course, Facebook has tried its hand at an in-house currency before with Facebook Credits, a system rolled out in 2011 to help people pay for virtual goods and games on Facebook. The credits, however, proved to be more trouble than they were worth, particularly given the fluctuating exchange rates. Facebook killed Credits in 2013.
After the publication of this story, Cheddar's Alex Heath reported that Facebook is exploring this possibility. In response, a Facebook spokesperson told the news outlet that it is "exploring many different applications. We don't have anything further to share." In other words — Facebook might be considering building a digital currency for its users, but its also thinking about other blockchain applications too.
Lastly, a fourth option: Facebook could use blockchains to store and control users' personal information. Scott viewed this as unlikely.
"It would be difficult to suggest that all their data should go onto the blockchain, because blockchains are inherently pretty public, and that's sort of the antithesis of the Facebook model, which is to provide people with closed social networks," he said.
In short, it's not obvious what Facebook is up to right now. It's also entirely possible that at this point, even Facebook doesn't know what — if anything — it will end up building with blockchain.
Writing in Wired, the reporter Erin Griffith suggested that, to some extent, Facebook may just be trying to protect itself against any unforeseen eventualities.
"The risk of missing out — just in case the crypto evangelists are correct and blockchain technology turns out to be bigger than the internet revolution — is too great to ignore," Griffith said.
But those working in the crypto space argue that Facebook is being realistic about the tech's potential.
"I think, on a long enough horizon, they're probably seeing a vast potential for this technology and understand it could cut into their market share of community management," Scott said. "They want to be ahead of the game, for sure."
The former Facebook employee predicted rapid growth from the team.
"My guess is they'll explode," this person said, giving the example of the approach to the Messenger team by Marcus and Stan Chudnovsky, the new head of Messenger.
"Facebook showing up to the party is like the New York Yankees showing up to play high school baseball," the former employee added.
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