Facebook’s Cryptocurrency Needs to Prove Itself, Expert Says

Published on Lifewire

Written by Michelai Graham – Interview with Joseph Raczynski

Facebook is scaling back its ambitious plans to move into the cryptocurrency sector while users on the platform aren’t showing much confidence in the site’s new addition.

The media giant will likely launch its smaller scale Libra cryptocurrency project as soon as January. Libra was originally supposed to be a new currency backed by fiat money (a currency established as money by the government) and securities (tradable financial assets). Libra will now work as a stable coin, meaning it won’t fluctuate in value as it’s pegged to something like the US dollar or a basket of currencies.

“It was only a matter of time before a private company went down the road of their own cryptocurrency,” Joseph Raczynski, a technologist and futurist for Thomas Reuters told Lifewire in an email. “I was very excited to hear this was going to happen last summer, but skeptical to see how it would transpire.”

What Exactly Is Facebook Trying to Do With Cryptocurrency Anyway?

Cryptocurrency is the private industry’s brand new way to exchange value over the internet, Raczynski said, and Facebook wants to take advantage of that. 

Raczynski has been working with cryptocurrency since the creation of Bitcoin in 2011 and has even created his own cryptocurrencies before. He said the most appealing aspect of cryptocurrency is the security and ease of use. Unfortunately, cryptocurrency is still just an idea of the future for some people, which may be a struggle for Facebook as it plans to launch soon. 

“At its most basic, cryptocurrency is the representation of value on the Internet,” Raczynski explained. “The first stage that people should be cognizant of is that a cryptocurrency will be similar to a digital dollar.”

“It was only a matter of time before a private company went down the road of their own cryptocurrency.”

Facebook plans to launch a single dollar-backed coin, and eventually a wallet called Novi, to send and receive Libra currencies. Digital wallets are encrypted, Raczynski explained, so only the user would have access to it. With Novi, Facebook users can manage their digital coins within Facebook’s apps, including Messenger, WhatsApp, browsers, and other connected apps. With the use of a single currency, Raczynski thinks it will make the barrier to do things much easier to manage.

“Anyone using Facebook around the world could exchange their local currency for the Facebook currency,” he said. “Anything you want to buy, services rendered, or simply exchanging money could happen across the world with a unified Facebook currency.”

Are Facebook Users Ready for Libra? 

With all of the changes to Facebook’s cryptocurrency plans, users may be skeptical of its efficacy, yet the appeal of being able to easily send and receive money digitally may (eventually) trump those doubts. The social media giant is no stranger to discussing privacy, so it better be prepared to talk about its plans to track cryptocurrency usage on its site.

“Facebook is a lightning rod for controversy,” Raczynski said. “What they do or don’t do with users’ personal data and tracking user habits is a constant in the news and most people’s minds. It really is a broadening of what Facebook can do to trace and track habits and data patterns.”

Facebook users are probably already using digital wallets like PayPal and Venmo, and Facebook’s Novi will work similarly to those. What they all have in common is the fact that the platforms own and manage users’ digital wallets. 

https://www.facebook.com/plugins/video.php?href=https%3A%2F%2Fwww.facebook.com%2Fnovi%2Fvideos%2F859686647872438%2F

In the “real” cryptocurrency world, users have full ownership of their digital wallets, which are protected by private keys—a public address to share with anyone to make transactions with and a private one that shouldn’t be shared and essentially makes the wallet yours. So, while your money would still be yours via Facebook’s digital wallet, you don’t “own” the system it runs on.

Another important aspect to note is that while Libra is slightly more decentralized than a country’s own monetary system, like the US dollar, it’s still centralized around a number of companies serving as validators. While it might be a better system to use, according to Raczynski, it’s still susceptible to hacks because there are relatively small sets of attack points.

Why Is This Important?

This new currency Facebook is creating won’t rely on the government, and will instead be backed by an extensive portfolio of companies, including those in the Libra Association. 

“They have developed a governance where mega companies run computer nodes/servers that verify transactions between people or companies,” Raczynski said. “Now, in concept, this is similar to what Bitcoin established 11 years ago, only Facebook is run by upwards of 100 companies and their servers, rather than tens of thousands of computers which are not influenced by those private companies.”

In the not-too-distant future, Raczynski said, every asset people have will be represented by a cryptocurrency, from cars to real estate and beyond. This reach could also help people around the world who don’t have access to physical banks.

“Anything you want to buy, services rendered, or simply exchanging money could happen across the world with a unified Facebook currency.”

“There are few things that will be as technologically transformative in the world as cryptocurrency over the next ten years,” said Raczynski. “I am most excited about how it has the potential to help the unbanked, and [help] people living in developing countries rise up and take ownership of their own assets and build wealth.”

Despite Raczynski’s confidence in the growth trajectory of cryptocurrency over the next decade, people will have to learn more about crypto to believe using it on Facebook is a real thing, just as online shopping prompted much skepticism across the world when it first became reality. That, however, is on Facebook to prove.

Social Media: From Handcuffs to Handshake?

By Joseph Raczynski

The world of ever evolving social media can be legally and technologically confining for companies.  ALM recently hosted an event Social Media: Risks and Rewards at the Harvard Club in New York City.  The stage was set for the daylong conference by the keynote Joel Reidenberg, Professor of Law and Director at Fordham University School of Law.   He focused on the impact of Social Media from a user and business perspective delving into a web site’s terms of service, privacy policy and technology.

The lively discussion began with a poll of the audience.  Of the nearly one hundred senior level counsels in attendance, two had read the terms of service and five the privacy policy of LinkedIn.  Simply stated, most consumers do not look at the terms of a web site.  Increasingly alarming, as Facebook learned, social media sites tend to be unaware of what their “App” vendors are doing.  Blending this issue with social media name squatting, underutilized technology to aid awareness of policies, and an under educated social media public; attorneys are finding it an arduous task to craft appropriate policies.

Reidenberg makes several technological and policy recommendations:

  • If you are advising clients make sure you tell them to be transparent.  Use technology tools, e.g. popups or interstitial pages to make it clear to users information is being collected.  Ask, “Would a normal person be able to understand the terms and conditions?”
  • Focus on substantive fairness, i.e. the “The Grandmother Test”, as a company, can you describe to your grandmother what you are doing, and do it with a straight face?
  • Technology tools will be very important going forward.  Some of these exist, and some need to be developed.  For example, if you want your information to be deleted from a social media website, how to do this needs to be explicitly stated, but additionally the site needs technology tools to allow this to be automated.  Giving a user the rights to review and make adjustments to personal information will soon have to be the standard in the social media sphere.  Currently there is a disincentive for advertiser based companies to use these technologies because it decreases their revenue.
  • General public education will have to be enhanced.  Companies need to focus on how to raise awareness about helping people, especially children, to understand risks.

Lastly here are some interesting concluding thoughts from Reidenberg:

Privacy Policies:  A Neilsen rating report stated that 78% of the public thought that if a website has a privacy policy; it means they do not share personal information.  This is not the case.  A policy could clearly state all the information a user submits is sellable.

Prediction:  Facebook and similar social media sites could potentially be a prime candidate of a class action suit.  As they continue to collect volumes of information from its users, it is possible to hold them subject to the Fair Credit Reporting Act.  The reason, Facebook is increasingly being used to screen employees.

Ultimately if policies are transparent, technology is utilized, and education is enhanced, companies can fully embrace social media as an effective tool to better their brand.