Facebook is probably not the company most people want to see dabbling in cryptocurrency, but the corporation’s launch of its new digital coin next year could finally lead to crypto’s mainstream acceptance, according to DMG Blockchain Solutions’ executive vice-president Steven Eliscu.
“We think it’s great. People have, for years, been trying to shoehorn Bitcoin as a medium of exchange,” Eliscu told IT World Canada shortly after Facebook revealed the details of its cryptocurrency Libra, which will let you purchase items or send money to people with nearly zero fees. “This idea of having an in-network payment system that is tied to fiat – it makes total sense.”
Eliscu described Libra, which is slated for a 2020 launch, as the evolution of PayPal, noting how Facebook wants its new cryptocurrency to be more efficient to use with fewer fees and more accessible for the people without bank accounts.
Facebook has said Libra will be tied to not only the U.S. dollar, but several other low-risk assets and fiat currencies (value that has been established as money, often by government regulation), meaning people can sleep a little easier at night knowing the price of the coin won’t fluctuate dramatically overnight. It will also be possible for Facebook users to send and receive Libra coins through Messenger.
This isn’t Facebook’s first push into the financial world. In 2011, Facebook launched Facebook Credits to be used for the purchase of all virtual goods in games. It failed not long after and was shut down in 2012. In 2017, Facebook Messenger Payments launched to allow users to send payments to family and friends. That also flopped, and was shut down last month.
But this latest move by Facebook isn’t ill-conceived, said Eliscu. Facebook is bringing cryptocurrency into the mainstream through its own platform with a long-list of companies, including Visa, Mastercard and Uber, already backing the digital currency. And while the project warrants skepticism due to Facebook’s horrible track record around data privacy and security, Eliscu said Libra is addressing one of the biggest challenges crypto has faced in recent years – developing a coin that’s actually worth using.
“I think the biggest quandary has been how do you develop cryptocurrency that’s useful as a medium of exchange,” he said. “With Libra, it looks like you can convert your finance currency to a Libra coin, and once you’re using Libra on the network you’ve eliminated the various types of fraud that are often associated with credit, debit, and prepaid credit cards. It’s very low friction. The reason this hasn’t been done before is because for it to make sense, you need a large network, like Facebook, which already has billions of users. Now you’ve got this large network where you can use blockchain as a mechanism for recording transactions.”
What about the miners?
It’s unclear how mining companies such as DMG will fit into Libra’s ecosystem. Unlike Bitcoin, which is an open system, Facebook announced Libra in partnership with 27 other major corporations. These founding members make up the Libra Association, which will be in charge of processing transactions for the network and maintaining Facebook’s version of the blockchain infrastructure powering the digital currency.
Facebook has said that by Libra’s tentative launch next year, the association will hopefully expand to 100 members.
That means only 100 nodes, or servers, will maintain the network. Compare that to Bitcoin, which currently has approximately 10,000 nodes globally to verify and broadcast transactions to the rest of the network. Together, these nodes help keep the Bitcoin framework decentralized. If one, or even a dozen nodes go down, the network is still secure because thousands of others are running.
Each founding member of Libra had to commit a minimum of $10 million to become one of the nodes on the network. With Bitcoin, anyone with the appropriate hardware can run a full mining node.
But despite these uncertainties, Eliscu expressed confidence in the company’s growing Mining-as-a-Service business, which is bolstered by DMG’s Mine Management Software.
“We think that fundamentally, this is a business that is here to stay for a very long time,” he said.
DMG’s CEO Daniel Reitzik agreed.
“The big revenue generator is obviously the mining right now,” he told IT World Canada, adding DMG’s mining facilities are running more than 11,000 individual miners representing various companies and clients. That’s about 20 per cent of DMG’s total capacity, he said.
“We have plenty of room to grow on the mining side and we’re seeing a lot more demand as opposed to six months ago.”