Love or hate the idea, a new Facebook cryptocurrency will likely soon be upon us. In fact, if the current round of leaks is correct, the social giant could announce the Instagram and Messenger-integrated coin in a whitepaper as soon as June 18.
Called GlobalCoin or Libra, the rumored coin will be aimed at the developing world, sources say, a sector that urgently needs new solutions for remittances. And unlike Bitcoin, it will be tied to a Währungskorb, or currency basket, according to a report published in the German magazine, WirtschaftsWoche.
What to make of it all?
Well, the crypto geeks I know are aghast. Surely Facebook won’t get it right, they worry. Rather than the crazy, chaotic anarcho-libertarian ethos of today’s crypto cosmos, a Facebook coin would only support corporate and government hegemony, they say.
The tech-business folks I know are a bit less negative: skeptical, but still excited.
They think it means that the cool tech that underlies crypto at last will get some primetime love and attention — and from people who understand how to make scalable software products with mass adoption, too.
Same as the old boss
It’s an old story we should know well by now.
First, you’ve got a revolutionary new innovation that threatens to disrupt the old establishment with wild new ideas — ideas that bring unusual new levels of power and agency to those outside the power structure. They stir up lots of trouble and a ton of excitement. Then, someone in the establishment who is fast and creative enough to catch on moves in.
The Internet was like that Remember how it was supposed to democratize information and free us all? But with the death of net neutrality and the rise of advertising-driven filter bubbles, the limited mode of online participatory democracy we’ve gotten turns out to be a seriously perverted version of what we hoped for.
Turns out the moneyed elites and megacorporations are able to use the Internet to achieve good old centralized information flow, albeit in a subtler and less thorough way than before.
It was the same with ride sharing. Uber’s transportation by the people for the people once sounded so liberating. But then VCs and sovereign wealth funds made it more about exploiting drivers than liberating riders.
By burning massive venture money, much of it from the Middle East, Uber and Lyft have been able to operate at a loss. That’s what lets them set their prices lower than more democratic and decentralized but less amply funded alternatives.
Doing this has gotten them massive market lock-in, enabling them to pay starvation wages to their drivers. The venture firms that funded them emerged as winners at the time of IPO, and regardless of whether the companies they built ever become profitable.
So what could have been a rich social positive is now just a twisted social negative. Sure, now people in the suburbs find it a lot easier to get a ride. But was that really worth the tradeoff?
This is basically the same dynamic by which deeply thought and felt social rebellions like hippy-ism and punk rock music got transmogrified into mass market fashion trends.
Co-option isn’t wholly terrible, of course. It’s one way that progress occurs. But much of the potential of the original revolutionary ideas gets lost in this process.
In the finance world, I’ve had a maxim for some time that “Every technology that starts out trying to subvert the mainstream global financial system, ends up being co-opted so as to make the global financial system more efficient.” For instance, Paypal’s founders started out wanting to make an alternative to fiat currency. They ended up pivoting to making a credit card company — and profiting from a fat acquisition thereof.
A key driver of the co-option phenomenon in the finance sector,in spite of its innate inertia and conservatism, the modern financial services sector is full of smart and tech-savvy people who are always willing to try new tools and new ways to make more money.
Many finance folks are too pragmatic and metrics-driven to be dogmatists. They don’t care what motivations or cultural sectors their tools originally emerged from, so long as they work in relevant ways.
Cryptocurrency began as an anarcho-libertarian alternative to fiat currencies, of course. And it’s arguably not doing a great job of serving that purpose. It has become a reasonable tool for small to modest scale money-laundering.
The ICO boom brought a fair number of scams, too.
Sure, crypto has directly led to the funding of some interesting and novel technologies that weren’t getting love from the mainstream venture funding world. But the larger cryptocurrency markets have become shady. And now everyone from the Russian mafia, the Chinese government, Wall Street players and crypto whales are manipulating them hard.
And blockchain technology is already gradually being integrated into the mainstream operations of financial institutions — a trend I expect to step up dramatically as the tech gets more mature and efficient.
When we get lucky, a radical innovation that gets co-opted accomplishes something more interesting than just being co-opted. It gets incorporated to the mainstream in a way that radically transforms the mainstream itself, propagating some fraction of its original radical values and dreams far and wide in the process.
The Internet has certainly done this.
Open source has to a large extent achieved this, too. It hasn’t made proprietary software obsolete as Richard Stallman and other open source system (OSS) purists desired, but it definitely changed the world of software for the better, nudging things relentlessly in the direction of openness, inclusiveness and quality.
Looking at Linux, Android, Kubernetes, OpenStack, Raspberry Pi and all the rest, the revolutionary impact of OSS on the world is hard to deny. But the massive growth and success of OSS has in large part been due to the active contributions of large companies like IBM, Google and so forth.
The thing to remember, though, is that the very involvement of these major corporations has also led to subtle forms of co-option.
Take Google Tensorflow. It’s brought an unprecedented degree of polish and usability to open-source machine learning, leading to the mothballing of some earlier university-driven OSS ML tools like Theano.
But Tensorflow’s “open source, closed process” development methodology is in stark contrast to the open community development via which university-based ML tools tended to operate.
It’s more like Android’s development methodology — in which beautifully-crafted OSS code is designed behind closed doors, with corporate as well as community goals firmly in mind, and then released upon the world.
A Dystopian Nightmare Version of Cryptocurrency?
The details of the new Facebook currency are yet to be officially disclosed, and are still likely subject to change — but according to the rumors one reads online, it appears Facebook is releasing a stable coin pegged to a weighted average of multiple global fiat currencies
While created by Facebook, it appears the new cryptocurrency will be managed by a new, associated entity out of Switzerland.
This new token will be used for payments on Facebook but will be usable anywhere, not just within Facebook.
Rumors suggest partnerships with Visa and Mastercard are involved — in which case, one speculates, it may at some point be possible to use these standard credit cards to make purchases with one’s Facebook tokens.
As one crypto commenter on Reddit put it, what may be shaping up here is a dystopian nightmare version of cryptocurrency: a centralized, permissioned and completely monitored token system.
Supposing for sake of discussion these rumors are accurate, you’ve got to wonder why might Facebook do things this way, rather than simply releasing their own native cryptocurrency?
Could it be to reduce PR blowback that might emerge in response to the latter course?
For similar PR reasons, it seems likely that the Facebook currency is going to be open source.
But it’s almost sure to be Tensorflow-style open source and not Linux-style open source. And if it does unfold this way, it will be both a big step forward for crypto adoption and a big threat to the open and decentralized ethos of crypto.
Suppose we really do see a practically-usable global currency that is not controlled by any country — but is rather controlled by a nonprofit foundation that is in practice even if not in principle controlled by Facebook.
What we will have here is a divorcing of many of the core technologies of crypto from the philosophy of decentralization that is pervasive and central in the blockchain world today.
IBM’s Hyperledger technology is much mocked in the crypto world for not really being a blockchain in the full sense. In reality, it’s a distributed database with strong encryption woven throughout, but with centralized control at its core.
Now, this may be exactly what big companies need internally. But it’s a lot different than a decentralized network that is controlled and governed by its participants rather than by some central ruling entity.
Blockchain technology mixes up multiple aspects including distributed databases, cryptography and decentralized (consensus-based) control. Take away the decentralized control, and you have something that is just as likely a tool for oppression as for liberation.
Hyperledger is really only suitable for use within large corporations, not for widespread use in public networks. That way, it doesn’t really pose any threat to public blockchains like Ethereum, or public blockchain-based data management systems like Ocean Protocol.
In the case of the Facebook cryptocurrency, however, we may well have a situation where a centralized product makes it more difficult for a decentralized alternative to achieve adoption. If people get used to Facebook’s currency, we may see lock-in just as we have seen for Facebook as a social network, meaning that if in a year or two a really fast and easy-to-use decentralized crypto payment framework emerges, it will be hard to get users to switch.
What is clear is that — unless the new Facebook crypto flames out due to some failure of technical or PR execution — the crypto payment game is going to be changing quite significantly. Yet crypto is nothing if not fast-moving — so that any changes wrought by Facebook may be re-revolutionized by additional changes before too long.
Maybe someone will fork Facebook’s crypto code and integrate it with some scalable decentralized infrastructure so as to make an efficient but fully decentralized global currency.
Now imagine what might happen if some other popular social media firm chose to adopt a decentralized competitor currency as its own leading internal currency. Then things would get awfully interesting.
For aNewDomain, I’m Ben Goertzel.
Ben Goertzel is founder and chairman of SingularityNet, a decentralized AI and blockchain venture in Hong Kong.