According to many industry observers, it is now something of an open secret that social media giant Facebook will be launching its own digital coin sometime in the not too distant future. After a lot of discussion, it seems that Facebook is finally taking positive action and will indeed soon have a bespoke cryptocurrency, but questions remain as to what form this will actually take and whether or not it will have an impact on CFD crypto forex traders.
With the question of how crypto can gain a wider acceptance being an ongoing debate that has long raged within the community, the thoughts of many are that Facebook entering into the arena with its billions of users is certain to be a watershed moment and a gamechanger in the evolution of digital coins. However, no one outside of the company knows exactly what form a Facebook coin will take.
Transparency
One of the keystones of the original Bitcoin white paper that has become an established tenet for many crypto enthusiasts is the idea of transparency. The whole basis of a blockchain being open for all and outside of centralized control has been a fundamental part of the overall concept and carries much of the appeal for Bitcoin and similar rivals to existing users.
Facebook doesn’t have the best reputation when it comes to the way it deals with data in an open fashion, indeed, various news stories and scandals over the past year or so regarding the issue have had significant negative impacts on its stock values. Essentially, the whole Facebook business model is based on collating large volumes of amounts of data, much of it of a personal nature, from individual users. What it then does with the information thus collected has been the source of many of the problems it has faced in recent times.
Juan Villaverde, leader of the Weiss Ratings team of analysts and computer programmers who created Weiss cryptocurrency ratings and an econometrician and mathematician devoted to the analysis of cryptocurrencies, thinks there is a basic problem here.
“User data is their single most valuable asset. And all the data is owned, controlled and monetized exclusively by the company”, Villaverde points out. “So, how can Facebook marry a private, closed, centralized business with a public, open, decentralized technology? It’s a head-scratcher. In fact, CEO Mark Zuckerberg himself says he hasn’t ‘figured out a way to make this work out’”, he adds.
Villaverde suggests that the answer would be for Facebook to create a digital asset-backed with US dollars, essentially an FB stable coin. This would allow full control by the company and effectively mean that they had created their own rival to PayPal rather than a full-fledged cryptocurrency.
Blockchain technology
At the heart of digital coins lies blockchain technology, but Villaverde doesn’t believe this is the reason for their security. “Truth be told, the main reason cryptocurrency records are more secure and more private is not because they use blockchain or other Distributed Ledger Technologies. It’s because no central authority controls them; no one has the authority to change or remove them”, he says.
If records are tamper-proof only because they are not actually owned or controlled by a particular entity, this is sure to go against the whole ethos of how Facebook has operated up to now. So, if Facebook did adopt blockchain tech and use it to create tamper-proof records it won’t be on the same basis as how cryptocurrencies currently work. “Once you uproot that technology from its native system and transplant it to a centrally controlled organization like Facebook, the security and privacy benefits are largely out the window”, claims Villaverde.
Bitcoin
Perhaps the biggest question that needs to be addressed whenever the arguments about the wider acceptance of digital coins begins, is how does the originator fit into things? Bitcoin was created to create a totally new way of making financial transactions happen, it wasn’t intended to be an overlay on top of existing infrastructure. Using an open, shared database in the public domain offered the chance to transfer funds securely and privately without the intervention of a third party.
Bitcoin has achieved this as millions of users know. The network has never been hacked and there are no controlling third parties involved in the processes, even the miners of coins don’t know where their efforts end up. Distributed Ledger Technology has proved itself to be fit for purpose and up to the task. The way that personal data is encrypted to remain private and be secure is one of the big reasons that many major corporations have been interested in co-opting the tech, but the in-built openness of blockchain often doesn’t sit well with their operating procedures or history, and that includes Facebook.
Crypto futures
With the Bitcoin network being a working system with transaction volumes going up and fees being more affordable, the impact of the Lightning Network is certain to see growth accelerate even more. For those CFD traders interested in crypto forex markets, volumes are an important factor. Wider acceptance, whether it is for Bitcoin itself or any other digital coin, is an important thing to keep tabs on. If Facebooks entry into the sector does turn out to be a stablecoin of some kind, it might have less importance for CFD trades or it could be a gamechanger that turns current perceptions on their heads. Either way, it’s certain to be big news and make even more people aware of crypto and that can only be a good thing in the long run.