Facebook's Libra project could be a watershed moment for the blockchain industry

This marks the social media giant’s boldest foray into the financial services industry.

By Liam Murphy Director, Wachsman

FACEBOOK’S RECENT ANNOUNCEMENT that it will launch its cryptocurrency Libra has once again propelled blockchain into the mainstream – and is perhaps a sign that the crypto winter is firmly behind us.

With the overall cryptocurrency market cap at $303 billion as of 21 June, it is estimated that fewer than 100 million people have access to crypto today.

Libra opens up the field to 2.3 billion people, which by any logic could make this a trillion-dollar industry and is certainly nothing to be sniffed at.

Bringing crypto to the masses

Facebook’s entry is a total affirmation of not just blockchain technology, but the concept of cryptocurrency, and brings a much needed sense of legitimacy to the industry.

Its entry into the space is of a magnitude far larger than anything the wider blockchain or crypto landscape has experienced thus far, illustrated by the number of news items written on the topic (a search for ‘Facebook Libra’ on Google brings up 216 million results).

Over the last 10 years, cryptocurrencies have encountered difficulties with accessibility, but the arrival of Facebook’s Libra promises interest in the space from the general public.

This initiative should serve as an on-ramp for mass market adoption once the benefits that cryptocurrency enthusiasts have long championed are realised, especially as the social media giant provides a completely unparalleled potential distribution network — no nation-state has ever had so vast a population.

Much like an advanced derivative instrument, Libra can serve as an asset backed by a multitude of instruments held in reserve, including fiat currencies and short-term notes.

Whether or not Libra and bitcoin can co-exist is a question of whether bitcoin can still survive as a deflationary store of value (like digital gold), whilst Libra captures the market for crypto day-to-day payments.

A watershed moment

Facebook, alongside its other social media platforms WhatsApp and Instagram, boasts more than 2.3 billion monthly active users, nearly the sum total of the world population in 1950.

With mass scale completely unprecedented in world history, Facebook, and its subsidiaries, are once again preparing to change the way we interact by transforming how international transactions are carried out.

Project Libra is a watershed moment for the blockchain industry and for cryptocurrencies. Through Facebook’s endorsement, blockchain technology has the potential to become a part of normal, everyday tasks and simple things like booking a car, paying for a meal, listening to a song, or planning a trip might soon be powered and enabled by digital currency.

Courting other industry giants

Marquee organisations, including MasterCard, Visa, Spotify and Uber, have contributed $10 million to join the Libra Association and will pay hundreds of thousands a year for the upkeep of the network’s validator nodes.

We can expect other big companies to join the Libra Association or else launch competitors. While some may underestimate just how big this move is, when Facebook chooses to do something – and brings along a consortium of firms made up of some of the world’s best-known companies – you can be sure that other firms will quickly follow suit. Google will certainly have to respond in some way.

Given the recent Cambridge Analytica scandal as well, the issue of Libra being a “centralised wolf in decentralised’s sheep clothing” weighs heavy on industry observers.

However, Facebook will not have sole control: they will have an equal say to other Association members, though they will remain the primary backer of the project for the remainder of 2019.

Disrupting the future of e-commerce

In a first-of-its-kind move, Libra will leapfrog fintech as we know it, bringing together social networks and big banking and in doing so, paving the way for people who don’t have bank accounts today.

Just as Amazon shattered the belief that goods must be sold in brick-and-mortar venues, Libra has the potential to transform the way things are bought and sold everywhere in the world. It could be a paradigm shift for payments. Could the partnership momentum result in a world where even Amazon has to provide support for Libra?

It remains to be seen whether Facebook will fulfil its lofty ambitions of providing financial services to the 1.7 billion people who have no access to a traditional bank account, but one thing is for certain: if successful, Libra stands to shake up the financial services industry in a way that no other company has ever done, marking a seismic shift in the control of monetary policy from central banks to private companies.

Liam Murphy is director at blockchain PR agency Wachsman.

Get our Daily Briefing with the morning’s most important headlines for innovative Irish businesses.