Because of the negative events of the "coin circle", many technology giants registered with suspected digital currency trademarks have denied the issue of money, and only Facebook "winds the crime". This is the world's first "testing water" for digital money, and a "big adventure" for Facebook's transformation.
1. Global Coin of 2.7 billion potential users
Just as Chinese e-commerce was in full swing for 618, Facebook on the other side of the ocean released a white paper on digital currency Libra. This is a white paper that is not surprising. As early as June last year, Zuckerberg and his core staff, who were still plagued by the “data leak scandal”, have roughly defined the new strategy of encrypting digital currency as a breakthrough. And a team of 150 people has begun to advance substantially.
The white paper shows that Facebook expects to release Libra in the first half of 2020 and set up a new company, Calibra, to be responsible for related services. It's a “global monetary and financial infrastructure that benefits billions of people,” and Libra was created to create “a new decentralized blockchain, a low-volatility cryptocurrency and a Smart contract platform.” At the same time, Facebook will also create a new e-wallet that can be used on Facebook Messenger, Instagram, WhatsApp, as well as stand-alone iOS and Android apps. From the user experience, this is more like the digital currency version of "Alipay + WeChat payment."
But unlike other common digital currencies, Libra is more like a product based on a coalition chain (only for members of a particular group and limited third parties, which internally specify multiple pre-selected nodes as bookkeepers), and its nature is stable. The currency, that is, the fluctuation of the currency price is not large, and the possibility of people's speculation is greatly reduced.
The reason why “stable coins” are stable is that there is a corresponding reserve of legal currency behind each coin to prevent its price fluctuations. The dollar price has been linked to gold for a long time, and the Q coin has a constant value because it is converted to a 1:1 ratio. In the currency circle, the USDT issued by Tether is a “stable currency” that is strongly linked to the single currency of the US dollar.
However, Libra's situation is more complicated than the "currency" mentioned above. The first is that the anchor currency is not single. Users with Libra can exchange their own Libra for local currency according to the exchange rate. In other words, Libra is not “linked” to a single currency. “As the value of the underlying asset fluctuates, the Libra value, which is denominated in any local currency, may also fluctuate.” Second, the form of the reserve currency is not just the bank. Deposits also include short-term government bonds.
But compared to the innumerable air currency, Libra is the obvious "regular army." From the participation camp, Mastercard, PayPal, Visa in the payment industry, Booking, Lyft, Uber in the travel industry, eBay, Farfetch in the electric business, and of course, Spotify and Facebook in the social field of entertainment are all important participants of Libra. By. According to the white paper, Facebook hopes to recruit 100 cooperative alliance nodes in the first half of 2020 for joint management. In other words, Libra is likely to be used in these applications, just as Alipay can be used outside of the Ali ecosystem.
Second, Facebook is the currency, who is the real beneficiary?
At least from the current point of view, those who are good at "touching porcelain" in the currency circle have not missed this opportunity. Behind the promotion of "giant admission", the price of bitcoin and other digital currencies is also rising, and some analysts said that bitcoin will rise above the $10,000 mark at the end of June this year.
For Facebook, this is also a good opportunity to “unlock” new sources of income. Social products have inherent cyclicality, and the profit model of relying solely on advertising is not sustainable. The birth of Libra not only increased the user stickiness of Facebook social products, but also contributed to the growth of its advertising revenue, and also enabled Facebook to expand a "cash cow" business unit.
Because of the early release of the "coin", SunTrust, a Wall Street institution, gave Facebook a "buy" rating with a target price of $215. According to the research report: "(Digital currency project) is a major initiative of Facebook. It is possible to place the company outside of advertising, including business and financial services, making the company one of the major players in the digital currency development center. Although digital currency has existed for many years, no other company can bring a combination of user size, brand support and balance sheet. In our view, Facebook has these capabilities."
At the same time, stock market feedback is not bad. On the 17th before the white paper was released, Facebook shares rose 4.24% to 189 dollars, and then broke through 194 dollars on the 18th. Before the deadline for publication, Facebook closed slightly down to $188.47.
And returning to the revenue generated by the business itself, with China's mobile payment market to make a simple comparison, in 2018, China's third-party payment mobile payment users in the scale of 1 billion, and the market transaction size reached 171 trillion (about 25 trillion US dollars). After several years of operation, Libra, with 2.6 billion users, has a transaction size of 50 trillion US dollars. It is not a problem. With a handling fee of two-thousandths of a percent, Facebook’s revenue potential in the payment field can reach hundreds of billions of dollars. It is Facebook’s total revenue of $55.84 billion in 2018.
The market's report to investors also showed that Facebook's cryptocurrency plan will bring in $3 billion to $19 billion in additional revenue by 2021.
For 100 node participants, although they need to pay a $10 million "franchise fee", they exchanged a "flow ticket" with 2.6 billion potential users, which is obviously a cost-effective business, not to mention this. The cost is not worth mentioning in the face of the huge profits of these participants.
For users, lower-cost cross-border payment fees and more convenient payment methods are the reasons for their use of Libra, although the question of user transaction data leakage may still be in the minds of people.
Third, Facebook's next ambition
This is not the first time Zuckerberg has tried to enter the payment field.
As early as 2011, Facebook began to get involved in digital currency and created Facebook Credits. Like the Apple App Store, Facebook will take 30% of the amount of each transaction as a commission, but the project is only used in the Facebook domain, and announced that it will give up after only 2 years of operation, and “passed the WeChat payment just established”. ". Subsequently, Facebook also tried Gifts and Messenger Payments, but the operation and promotion of “small play” made these applications fail to escape the fate of death.
This Facebook issue is not an isolated incident. Since 2018, despite the declining currency, all major institutions have taken a fancy to the opportunity of the blockchain and began to prepare for it and seize the opportunities in their respective fields. In February, JPMorgan Chase released the digital currency Morgancoin for inter-agency clearing; in March, IBM announced the cross-border payment blockchain World Wire; in June, Visa announced B2B Connect, a cross-border payment blockchain network.
But these companies either provide technology or are only small-scale inter-agency transactions, and Libra's C-side influence is not the same. This time, Xiaozha "want to play a big ticket."
Although Libra's prospects are still unknown, it is more than just a product that Facebook has entered the field of financial technology. There are already many mature businesses in the field of financial technology that have been proven to be positive cash flow, but Libra is clearly different from them. Its “global currency” and “financial infrastructure” are positioned internally for Libra’s “Global Coin”. Explain that Facebook wants to be the ambition of the global Internet financial center.
The smuggling of blockchain technology, linked to a basket of currencies, high-frequency cross-border transactions, a large number of users and lower trading thresholds, has made Libra a "world currency" element.
To wear the crown, it must bear the brunt. Libra's application will bring huge income to Facebook, but its global currency positioning will make it have to bear more expenses.
Taking WeChat payment as an example, WeChat with a total number of 1.112 billion users will generate up to 500 million red envelope transactions per day. These are “empty left-handed right-handed accounts in the account system” and cannot bring any income to Tencent. Pay the biggest cost pressure. In 2016, when WeChat paid to announce the withdrawal of fees, Ma Huateng once said that “the monthly subsidy was 300 million yuan”. Similarly, Libra deals face similar problems and costs are much higher than WeChat.
Applying to Libra, cash withdrawal is one of Libra's important revenue sources, because if users pay through Libra transfer, then obviously the free bank transfer business will be the first choice. However, if the user withdraws too much, the entire ecosystem built by Libra will cease to exist, which is Libra's development paradox in the cash withdrawal business. On the other hand, in the handling fee of the third-party payment, there are not a few companies in the 100 node managers, and the handling rate is further lowered.
Similarly, the collapse of public power is also a problem that Facebook has to consider. If the Cambridge analysis event is the first time that Facebook's business model is facing the suppression of public power, then the threat of Facebook may be even greater when the digital currency Libra is available. The strong dollar, the already-aligned euro, and the impenetrable renminbi market, Facebook is difficult to enter in a short period of time, but some countries with small or poor stability may be Libra's main market. For example, the Venezuelan government, which is unstable in the political situation, vigorously promotes blockchains and digital currencies for the launch of “oil coins”, while the public does not buy oil coins, but instead buys bitcoin to hedge.
In addition, the issue of tax ownership after the profit, the transaction speed of the public chain and technical issues are also the biggest problems that are difficult to solve at present. The 12-page white paper is still unresolved and depends on the performance of Facebook's digital currency team for the next 12 months.
Text | Sohu Technology Yin Lina