
Facebook’s New Cryptocurrency Gets Big Backers - kyrra
https://www.wsj.com/articles/facebooks-new-cryptocurrency-gets-big-backers-11560463312?mod=rsswn
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awrence
All stablecoins are Venmo calling themselves decentralized cryptocurrencies.
Venmo is honest and tells you it's managing a USD deposit balance for you and
amending its private centralized ledger accordingly (and sometimes providing a
short term credit service on top). FB et al are lying to you and putting a
disingenuous patina of techno hype and grossly misleading decentralized
implication on their project by calling them cryptocurrencies. Not surprising
but completely uninteresting.

~~~
rahimnathwani
Your first sentence doesn't have to be true. It's possible to create a
stablecoin that's decentralized.

And such a stablecoin exists:
[https://makerdao.com/en/dai/](https://makerdao.com/en/dai/)

It uses collateral, lending and a careful incentive setup to maintain close to
1:1 parity with USD. I haven't looked into the detail, but it seems to have a
decent record (of stability).

~~~
awrence
I contend it's not. There are two main features which proper (decentralized)
cryptocurrencies are supposed to offer.

The first is censorship resistance. And I can assure you that however in the
world you set up something backed by a fiat, its controlling government can
step in and seize your collateral if and when it pleases and then you're
screwed. But you can certainly come up with all sorts of fancy legal speak and
marketing pitches to argue otherwise which makerdao is basically doing.

The second is protection from currency manipulation and stable coins solve
nothing on that front, but let's assume for the sake of argumentation that
people interested in stable coins are aware of that.

~~~
pushtheenvelope
> And I can assure you that however in the world you set up something backed
> by a fiat, its controlling government can step in and seize your collateral
> if and when it pleases and then you're screwed.

hmm -- the collateral in this case is ether. So, unless you feel the US govt
can step in and seize all ether in the world, this statement seems unlikely to
be true.

~~~
gruez
>hmm -- the collateral in this case is ether.

What happens if eth tanks in value? Now you'll have $0.10 of eth backing $1
worth of stablecoin. Also, if it's backed by eth, who has custody? If it's the
controlling entity, they can refuse to redeem your stablecoin for eth.

~~~
berberous
MakerDao has complex mechanics that I probably would fail to explain
accurately, so if you're interested in this, I'd suggest googling. That said:

1\. ETH has tanked in value by basically that large of a drop since DAI has
been in existence, and it's held its peg. Recently, I believe some of the
parameters that control DAI's stability did cause people some concern given
how high they went, but so far, DAI has been remarkably resilient.

2\. I believe the ETH is locked in smart contracts, so nobody has custody
(although it may be vulnerable to bugs). Not 100% sure though.

3\. DAI is moving to a multi-collateral model, so it can be backed by ETH,
BTC, other stable coins that are backed by fiat in various jurisdictions,
other coins that are backed by gold reserves, etc. That seems like it will
make the model much more resistant to the attack that was suggested above --
i.e. that a single government could interfere.

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silversconfused
So this is like the IBM PC then? Horrible, obsolete, flawed, but adopted by
everyone because it was released by a reliable business partner...

I hope they call it FaceBuck.

~~~
Urgo
Their internal name was "GlobalCoin" but looks like it will be called "Libra".
That said I like "FaceBuck" or "ZuckBuck" way better!

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jryan49
Time to privatize our currency! Owned by Facebook! What could be better?

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gist
This really says it all:

>It is still not entirely clear, even to some members of the consortium, how
the coin will work or what their roles will be, people familiar with the
project said. Regulatory hurdles in the U.S. and elsewhere are high.

You have to love when corporations and people are so FOMO they will put money
into something when they don't even know how it will work.

~~~
elorant
Same happened with Theranos. Big backers for a product that no one ever got
their hands on.

~~~
ethbro
I mean, Thenaros showed something to their investors and regulators (lab test
results) but straight up lied about how they were generating them.

So this would be more like... the Palm Foleo?

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ErikAugust
What is “crypto” about it? Anything? Seems like a digital currency minted by
Facebook pegged to USD.

~~~
dmihal
Probably crypto as in you sign transactions with a private key, and submit
them to Facebook's semi-centralized blockchain

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cbisnett
Given the privacy issues and general data hoarding by Facebook, giving them
additional access to purchase history and account balances seems like it’s
going to make the problem worse without much upside.

~~~
qrbLPHiKpiux
WeChat v2.0

~~~
stcredzero
WeChat reduces the iPhone to "The thing we run WeChat on." It acts to
commodify the iPhone. If Facebook is going to become another WeChat, this is
just about the last thing that Apple wants!

~~~
delfinom
Hilariously, Apple is the most likely candidate to ban it and release their
own.

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ihm
They plan to “market it aggressively in developing nations”. Western companies
extracting rent from the global south: this is colonialism by another name.

~~~
ekianjo
Many small countries have issues having stable currencies, in case you have
not noticed.

~~~
ihm
Did the people who live in those countries ask Mark Zuckerberg et al to come
replace their national currencies with one which allows Mark et al to control
how they’re allowed to use their money?

If so then maybe this would be an ok argument, but this is a massive change to
people’s lives that’s being forced upon them without the slightest
consultation, and which will almost certainly be used to control and surveil
them for Facebook’s benefit.

~~~
orf
> but this is a massive change to people’s lives that’s being forced upon them
> without the slightest consultation

I can't tell if this is satire. Who's forcing them to do anything? What even
is your point here: people shouldn't do things in other countries? Who's even
talking about replacing their national currency?

Or, to put how ridiculous that is another way:

> Did the people who live in those countries ask Brian Acton et al to come and
> replace their national post with one which allows Brian et all to control
> who they're allowed to message?

~~~
ihm
Looks like you live in Portugal. Do you feel like no one is forcing you to use
the euro?

> Who's even talking about replacing their national currency?

I’ve heard from people close to the project that this is Facebook’s explicit
long term strategy. What else would their end game be here?

~~~
ekianjo
> I’ve heard from people close to the project

Oh, these anonymous sources which are proven to be highly reliable like...
never?

> replace national currencies

They can have a strategy but that does not mean they are able to execute on
it. Plus, by the time they get to a point where they endanger a local currency
they would probably get a national ban in such countries. I mean what would
you expect anything else?

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gervase
I think people are missing the big picture here. This isn't a replacement for
Apple Pay, Alipay, or PayPal - it's something new, driven by the sheer scale
of Facebook's userbase. The cryptocurrency aspect is a smokescreen for the
actual impact.

In fact, I predict that national governments are going to have to get on board
with electronic currencies if they don't want to unwittingly transfer control
over their own economies from their national treasuries to a private company.

Indications are that this won't be pegged to USD, but rather to a basket of
international currencies. Since there are so many ways to combine a basket of
currencies into a single value, this gives Facebook plenty of leeway as to how
to price this currency.

Essentially, this is the equivalent of the virtual Facebook nation-state
establishing their own federal reserve. More importantly, _they 've already
got buy-in from the major non-governmental players_. This will essentially
create, all at once, a settlement layer that not only bypasses any individual
national government, but also the established banking channels like SWIFT.

The US dollar is the predominant international reserve currency at the moment,
and the US government leverages that as a pretty big club via SWIFT
injunctions.

If there is an alternative that is ostensibly neutral from a governance
perspective, and publicly auditable to prevent arbitrary adjustments/freezes,
I could see that being very attractive to countries with a less-than-friendly
relationship with the US. We already see rumblings to this effect in US-
unfriendly countries: [http://fortune.com/2018/07/26/iran-sanctions-
cryptocurrency/](http://fortune.com/2018/07/26/iran-sanctions-cryptocurrency/)

Of course, since Facebook is based in the US, it also provides the US
government with a nice, local target for legal leverage. But it would also be
very easy for Facebook to spin off this as a subsidiary and place it somewhere
out of reach, like Switzerland. Perhaps they could call it something like
Libra Networks? Wait, that sounds familiar...
[https://www.reuters.com/article/us-facebook-switzerland-
paym...](https://www.reuters.com/article/us-facebook-switzerland-
payments/facebook-forms-swiss-fintech-firm-with-payments-focus-idUSKCN1SN1ZT)

It would be very difficult to outlaw transactions in a currency when those
transactions can be initiated and validated on a blockchain directly by the
participants. You'd have to play the whack-a-mole game with access to the
chain itself, because with direct validation, you're essentially trying to
outlaw barter. Look at the efficacy of the cryptocurrency ban in Venezuela as
an example.

Facebook is currently doing an end-run to create the first supranational
currency, and it's billion+ users combined with the technological agility
(specifically, the lack thereof) of national governments means that they
actually have some chance to succeed.

~~~
JMTQp8lwXL
> Essentially, this is the equivalent of the virtual Facebook nation-state
> establishing their own federal reserve.

That leaves me really at unease. The Federal Reserve has plenty of its own
problems, but it has a history of providing US currency stability.

I doubt an individual foregoing usage of this coin will make much difference
in its adoption. Maybe the stability of the US Dollar will still reign
superior to this? Paper dollars have their own transaction costs, but come
with a lot of nice "enterprise" features I'd like to see in a currency.

------
jamesviggy
Reminder: A fiat-pegged "stable-coin" is only as stable as the fiat underlying
it. The underlying fiat of Facebook's "cryptocurrency" has many disadvantages
compared to Bitcoin.

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neonate
[http://archive.is/roYY9](http://archive.is/roYY9)

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WheelsAtLarge
I vote for the coin to be called, "The Zuck."

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momentmaker
They might be using ChainLink as the oracle for sourcing price data feed.

~~~
CryptoPunk
What's the basis for that speculation?

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lowdose
Zuckerberg et al Snapchat a WeChat?

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Fjolsvith
Coming soon, mining in Messenger.

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chubbyrabbit
Not related to the article but recently it's hard to get an objective view on
any Facebook's news in HN comments due to the overall attitude towards the
company.

~~~
CondensedBrain
What would an objective view look like?

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Mc_Big_G
I sincerely hope this fails in the worst way possible, but it will be wildly
successful of course.

~~~
WheelsAtLarge
Facebook will make this work simply because of the number of users and its
world reach. It will be successful even if it only becomes a medium of sending
money between countries but there are so many ways to expand it and earn a
small commission for Facebook so it won't stop at just money transfers.

I predict that Amazon will have to release its own currency to guard against
Facebook becoming a middle man for e-commerce and becoming a threat to its
business. It's only a matter of time.

~~~
skinnymuch
HN and other online places are guilty for calling all sorts of investments
ludicrous. But Instagram along with Priceline buying Booking.com, Naspers
buyjg 1/3 of Tencent, and to a smaller degree Yahoo (though they stupidly sold
a lot of the stake far too early) and SoftBank investments into Alibaba are
the best tech investments possibly of all time. And some of the best
investments overall too.

