Facebook's Marketplace and the thousands of buy/swap/sell groups are a vibrant market for people to turn their unwanted items into spare cash. The social media giant is reportedly looking for partners to tip in large amounts of money to back its crypto-coin in order to insulate it from the market volatility that dogs the cryptocurrency market. Here's what you need to know.
A Wall Street Journal report says Facebook is recruiting dozens of financial firms and online merchants to help launch a cryptocurrency-based payments system with each staking up to US$1B. If the company can convince five partners to join them that would make Facebook's coin one of the five most valuable coins by market capitalisation instantly based on current valuations.
Facebook has a team of about 50 boffins working on the project which is housed in a secured wing at Facebook HQ according to reports.
The advantages for Facebook are obvious. During the F8 conference last week, Mark Zuckerberg noted that the company was working on ways to make it easier for Facebook users to exchange funds. If it is successful in launching this coin and making it easy for people to move fiat currency then it could create a financial instrument that works across its various messaging and social platforms.
Much as Apple uses the media purchased through the App Store and iTunes Store to keep customers tied into their ecosystem, Facebook could create a system where doing things outside their platform is harder than doing it outside. And once you're in Facebook's ecosystem, getting out becomes harder.
Many pundits expect this new cryptocurrency to be launched during the third quarter of this year. That's possible but I think such a move would be impatient.
Facebook has a lot of fences to mend before it regains enough trust to become a financial services company. The company's recent record on securing personal data is quite terrible with two recent incidents of personal information being left unsecured. And that's on the back of its APIs being exploited by data mining businesses - a significant worry given that any new financial tools will likely need some sort of API support in order to make the coin usable outside of Facebook's walled garden.
Financial services might handle money but the most important commodity they manage isn't cash. It's trust and that's something the Facebook vault is lacking at this time.