Whenever a big player enters – or even considers entering the space – cryptocurrency markets swoon. Names like JP Morgan, Facebook, and Twitter provide a sense of validation for investors and hope that the good times are still ahead. But it was Mark Zuckerberg’s “A Privacy-Focused Vision for Social Networking”, which the Silicon Valley mogul posted on Facebook, that got Kik CEO Ted Livingston talking.
An Ecosystem of Value Transfer
Facebook intends to launch stablecoin powered remittances starting in India, utilizing their Whatsapp platform. In “Facebook Isn’t Going After Bitcoin, It’s Going After the Dollar,” Ted Livingston’s response to Mark Zuckerberg’s original post, he references WeChat’s success in the value transfer space, highlighting the “WeChat Playbook”.
Make it compelling for people to bring their money into messenger
Make it easy for them to move their money around
Create more and more reasons for them to keep their money inside messenger
Approximately 900 million people use WeChat for daily transactions, amounting to approximately $10 trillion in payments annually. Combining the vast offerings available on WeChat with the sheer number of daily users has created an ecosystem that allows your money to do more within than without. Livingston proposes Facebook could assume a similar role, going so far as suggesting that it could replace the U.S dollar…When you consider Facebook’s average daily user rate of 1.5 billion, this becomes less and less far fetched.
Money Remittances in India
India is primed for disruption– it is the world leader in remittances, with approximately $69 billion dollars being sent home in 2017. Additionally, the WhatsApp encrypted messaging service is vastly popular there, with more than 200 million active users. Today’s money remittances services are cumbersome and expensive. They take 3-5 days to clear, and subject users to excessively high fees; for instance, the average fee to send $200 is $14. Applying additional financial strain to the families relying on these funds. Facebook’s stable coin reduces volatility commonly associated with cryptocurrencies and has the potential to drastically reduce the cost and wait times experienced with money remittance services today. Additionally, this will all occur within an application familiar to the users, in a peer-to-peer fashion. Livingston suggests that people will initially take money out of the system, but Facebook, like WeChat, could easily add more services over time to entice users to keep their value in the system.
WeChat effectively replaced cash in China, could Facebook do the same for the world? Empowering a vast existing ecosystem of users to move value around in a seamless fashion sans the oversight, and providing all the offerings that they could want creates a one-stop shop for money. Money literally becomes worth more within the ecosystem because it can do more there: quicker, faster, easier.
Buying Coins & the Futility of Utility Tokens
Many projects require investors to swap out their valuable fiat for a “utility” token.” The cash invested has more utility than the token, and effectively results in an instantaneous drop in value. The reverse is true with WeChat and Facebook’s potential blockchain solutions. Users receive increased value by entering the ecosystem, so their money has more utility there. WeChat, however, does not require its users to purchase a cryptocurrency.
As Facebook slowly expands into offerings beyond remittances, it may become more advantageous for users to hold Facebook’s stablecoin as opposed to fiat currency. But in the meantime, it seems that the cryptocurrency will be used as a conduit to send funds from one place to another, with the stable coin aspect maintaining the value of the transfer.
Although stablecoins are pegged, in this case to the US dollar, they are not readily accepted by merchants and face similar limitations to their “utility” token counterparts. This is hardly beneficial to cryptocurrency adopters not engaged in money remittances. So, is there a way to bypass the requirement of purchasing cryptocurrency and get straight to using blockchain? Can Facebook utilize its massive 2.7 billion user base to engage the wider blockchain community and beyond?
Loyalty & Rewards Points – Currency Sitting in the Pockets of Millions
In the United States alone, $48 billion dollars in points is generated every year across Travel & Hospitality, Financial Services, and Retail. Of this, in excess of 16 billion dollars worth goes unused, never to be redeemed. Additionally, the average US household is involved in 29 different loyalty programs – leaving a lot of people sitting on a huge supply of idle capital. Loyalty points are unique in that they are already considered a form of corporate currency, but inefficiencies in existing infrastructure make them less useful than they should be.
“Today’s loyalty programs exist in silos – they do not allow for cross-program value transfer,” said Al Burgio, founder of DigitalBits, a Toronto-based blockchain project working to tokenize the points economy. “Many times, consumers are left with points applicable to offerings that they do not want.” Utilizing asset tokenization and a multi-hop decentralized exchange, DigitalBits allows programs on the blockchain to communicate with one another, facilitating the transfer and trade of points.
“Blockchain technology can be applied to address frictions experienced in the loyalty industry today,” said Michael Luckhoo, Chief Strategy Officer at Fusechain. “We can enhance the utility of points by bringing them closer to the role of digital cash – consumers should be able to optimize their consumption based on preference. If you hold $500 worth of Starbucks points, you can, say, apply that value to your airplane ticket.”
Users are familiar with loyalty programs. They know how to accumulate points, and they have been doing so for years, so much so that billions of dollars of value sits in the points economy. These are assets that they have earned through their purchases and activities – users own their points.
So, what if Facebook’s users were able to spend their accumulated points? Instantly, billions of dollars in value is injected into the ecosystem – the US loyalty market stands at $100 billion in accumulated liability. A reminder that this is value already owned by consumers, and does not require conversion from fiat to a cryptocurrency.
Combining the vast number of users on the platform and the wide array of loyalty programs creates a robust marketplace for points to flow freely between users – by optimizing their consumption users will finally be able to leverage the true value of their points.
As more participants from the consumer and program side enter, the offerings and diversity of assets increases. This encourages users to keep value in the network, transforming a system that supports money remittances into a dynamic value transfer platform. This is all done in a peer-to-peer, permissionless environment.
Mobilizing the Points Economy
WeChat provided a platform to do more with your money, and Facebook looks to do the same. Until now, these solutions have ignored the massive asset class that is the points economy.
“These platforms fail to empower consumers to mobilize an asset class that they have owned this entire time, but until now has been severely restricted,” says Mr. Luckhoo.