Bitcoin,  Cryptocurrencies,  Technology

Winklevoss brothers cheer the thing that could destroy Bitcoin

The ‘Facebook coin’ is part of a bigger project that could have dire consequences for the rest of crypto

One could be excused for finding it weird that the Winklevoss twins, long the foes of Mark Zuckerberg, are applauding Zuck’s new, crypto-friendly direction for Facebook. But it’s 2019 so, sure, why not?

In an interview published Sunday with The Telegraph, the Winlevii gave kudos to the guy whom they once claimed stole their big idea, calling it “cool” and “positive” that Facebook is throwing resources at developing some sort of cryptocurrency to be used on its messaging service. [Since The Telegraph is behind a pay wall, check out CoinTelegraph’s piece on it to save a couple of bucks.]

The crypto community has been excited since it learned Facebook assembled a team to work on a crypto-based payment system. They popped champagne corks when New York Times writers Nathaniel Popper and Mike Isaac wrote a piece titled, “Facebook and Telegram Are Hoping to Succeed Where Bitcoin Failed,” but buried in the 22nd paragraph (we counted) was this important point:

“The company is overhauling its messaging infrastructure, which would connect three of its properties — Messenger, WhatsApp and Instagram. That integration, which could take more than a year, would extend the reach of Facebook’s digital currency across the 2.7 billion people who use one of the three apps each month.”

TL;DR: Facebook isn’t merely developing a coin. What’s happening appears to be a massive shift in the social media giant’s entire business and crypto is merely a part of the bigger picture.

Right now, Facebook is a place for your parents and in-laws to rant about Donald Trump or Alexandria Ocasio-Cortez while your high school friends and that guy you met once at a party uses it as a platform spread horrible misinformation about vaccines and pictures of trips to Aruba. And, of course, there are Putin’s operatives using it to steer elections and sow division among average Americans by creating groups parroting the kinds of grievances usually championed by Oberlin undergads and the young adjunct professors teaching them.

That may all change, though no one’s quite sure just how or exactly when. It may be sooner rather than later, given the exit of Chris Cox (not the former congressman and SEC chairman) on Thursday. The chief product officer who spent 13 years at the company—almost since the Ice Age, by Facebook standards—posted a message when he skedaddled that included this paragraph:

“As Mark has outlined, we are turning a new page in our product direction, focused on an encrypted, interoperable, messaging network. It’s a product vision attuned to the subject matter of today: a modern communications platform that balances expression, safety, security, and privacy. This will be a big project and we will need leaders who are excited to see the new direction through.”

Gen Z clickbait site Business Insider quickly called it a “red flag” because, well, Business Insider.

Facebook is pivoting into a new phase. For other crypto, that may not be a good thing. As the Popper/Isaac story notes:

“Like Bitcoin, the new cryptocurrencies would make it easier to move money between countries, particularly in the developing world where it is hard for ordinary people to open bank accounts and buy things online. The current designs being discussed generally do away with the energy-guzzling mining process that Bitcoin relies on.”

If it’s a stablecoin—pegged to, say, the U.S. dollar or a basket of currencies similar to the U.S. Dollar Index—could be a bigger deal than any crypto that has come before it.

Valued at $457 billion as of publication time, Facebook’s market cap is 3.3 times the entire valuation of all the cryptocurrencies in the world combined (6.4 times that of Bitcoin, by the way).

And unlike Bitcoin, where just 1,000 people can own 40 percent of all the coins—and plagued by Tether-based manipulations, wash trading, corrupt exchanges, and other scams that have kept it from mass adoption—Facebook has about 2.5 billion active users, many of whom are in the sort of countries where an alternative, stable, and secure currency can be a matter of life and death.

If Facebook’s pivot succeeds, Bitcoin and the rest of the cryptocurrency complex may well suffer the same fate as MySpace by the very same hands.

[The writer is the spouse of a Facebook employee and owns shares in the company. However, said spouse has refused to supply any information on the company despite repeated pestering.]

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Lawrence Lewitinn, CFA was the founding editor in chief of Modern Consensus. Disclosure: Lewitinn owns no cryptocurrencies in his portfolio.