Tuesday, 2nd July 2019
Better the devil you know….
Avid followers of the financial news cannot help but be aware of Facebook’s plans to enter into the world of cryptocurrencies….
Acres of column inches have been devoted to the subject over the last fortnight….
Mark Zuckerberg and his corporate apparatus are calling their new cryptocurrency Libra….
It will be introduced with the intention of enabling users to spend and transmit money all over the world at next to no cost….
If Libra catches on and achieves significant take-up amongst Facebook’s huge user base, the time might not be far away when online life becomes impossible to negotiate without a wallet replete with Libra coin….
In my book, that would be a dangerous and undesirable state of affairs….
- How it will work….
Libra will be what people who know about these things call a ‘stable coin’….
It will be pegged-to – and purchased with – a tranche of fiat currencies like the dollar or the pound or the euro….
The idea is that this connection to stable (relatively) domestic fiat currencies will render the Libra coin less volatile than something like Bitcoin, for example – a crypto that isn’t pegged to anything and suffers from extreme volatility as a consequence (as the last week amply demonstrates)….
You’ll be able to buy Libra ( as much of the stuff as you like) with British pounds – either on your phone or on some kind of top-up card….
And then you’ll be free to spend your Libra coins on goods and services with Facebook or with myriad online partners signed-up to accept the currency….
eBay, Uber, Lyft, Spotify and Visa are among the corporate giants that are already thought to have signaled their intent to get involved and partner up with Libra….
And you will also be able to instantly send Libra direct to individuals all over the globe via Facebook-owned apps such as Facebook Messenger or WhatsApp….
That’s the basics. And at this point we could embroil ourselves in technical discussions about permissions registers and regulatory issues and all the other head-scratching material that 80% of people don’t have the first clue about – me included….
But I don’t want to get into that rabbit hole this morning. Instead, I want to talk about one thing….
And that one thing is why I have absolutely no plans to sign up to, adopt or use the Libra cryptocurrency….
- It’s a question of control….
For me, one of the primary benefits and key attractions of Bitcoin is that it offers a decentralized peer-to-peer payment network that is powered by its users with no central authority or middlemen who can get involved and interfere….
How that aspiration pans out into the future is yet to be seen….
But that ‘decentralized’ aspect of the cryptocurrency was a primary ambition at the outset of Bitcoin’s journey….
Where fiat currencies are concerned, government and central banks can interfere, manipulate and control as they please….
They can exert economic influence via monetary policy – inflating or deflating the money supply at will….
They can dictate how money is transferred – enabling them to track currency movements, to dictate who profits from those movements and to impose whatever taxes on those currency movements they see fit….
- Bitcoin – outside the system….
Bitcoin is a financial system that effectively sits outside that traditional model of central control….
It offers an alternative to that centralized system. No government or central bank can get its tentacles into the Bitcoin game….
Taking government and central banks out of the game might be a positive development. It might also prove to be a negative one….
You will find plenty of people who would argue strongly either way. It’s an interesting debate that is set to run and run into the future….
I have no idea where that debate will lead or how it will pan out. All that will come to pass in its own good time….
- But I will say is this….
Libra has the potential to transform Facebook from a mere corporate entity into a virtual currency-producing super-state….
Facebook already has huge user numbers and Zuckerberg already wields huge influence….
Libra – a currency without borders, that can be used instantly and sent from mobile phone to mobile phone – has the potential to deliver previously unimagined power into the hands of the tech billionaire….
And I don’t see that potential development as an improvement on the current model dominated by government and central banks….
Can Facebook be trusted not to interfere, manipulate or otherwise tamper with the public ledger it would be responsible for overseeing?
Nobody knows for sure….
Maybe Facebook and Zuckerberg have all the right intentions. But, if you ask me, the omens don’t look too good….
- A dubious track record….
Facebook is one of the biggest companies on the planet….
And it has made Mark Zuckerberg – the man in complete control of the company – one of the world’s richest men….
But, despite its overwhelming commercial success, Facebook careers from one controversy to another – all of them revolving around issues of trust and the misuse of data….
Remember the Cambridge Analytica scandal? Facebook exposed data on up to 87 million Facebook users to a researcher who worked for Donald Trump’s presidential campaign….
Apparently, it wasn’t intentional. Zuckerberg admitted to mistakes having been made. He promised to do better….
But concerns remain about how the sprawling social media giant operates….
Zuckerberg has faced allegations in a Californian court that he developed a ‘malicious and fraudulent scheme’ to exploit vast amounts of private data to earn Facebook billions….
There are claims that internal emails reveal that a cynical and abusive system was put in place to exploit access to Facebook users’ private information….
Right now, in the US, Facebook is under criminal investigation for allegedly sharing user data with Amazon, Apple, and other companies….
There are concerns that Facebook users are being tracked and monitored by the corporate giant – even when they are not logged in to the Facebook site….
And these accusations, allegations and proven cases of malpractice and abuse are just the tip of an enormous iceberg….
Facebook’s corporate CV isn’t exactly glowing….
- Neither credible nor desirable….
Given Facebook’s questionable track record, is tech-billionaire Zuckerberg a man you would want to be in control of overseeing, regulating and keeping track of debts and credits in some private ledger?
Is Facebook a company that could be trusted to keep data related to your financial transactions and your financial profile private and untouchable?
Or would that enormous universe of financial data come to represent another information stream that Facebook could access, manipulate, profit from and use to exert ever-increasing levels of control online and in society at large all over the globe?
I don’t know. Nobody does. And I don’t want to cast aspersions….
But, in all honesty, I wouldn’t be enthusiastic about putting Facebook to the test and finding out. And I wouldn’t be confident that things would go well….
Whilst I am completely open to and enthusiastic about exploring the potential of cryptocurrencies and private ledgers run by blockchain technology on multiple computers that sit outside government and central bank control, I am not sure that Facebook or any other mammoth run-for-profit corporation is a particularly credible or desirable alternative to the current status quo….
Given the choice between the current and established set-up and a new set-up dominated by Zuckerberg and his controversy-ridden Facebook brand, I would probably choose to stick rather than twist….
Better the devil you know in some circumstances….
That’s the truth of it as we see it….
All the best,