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Outlier Ventures Weekly Brief Issue #6|   View Online
 
  contact@outlierventures.io
Facebook Hits The Like Button On Stablecoins
 
Token markets have been excited after a recent Bloomberg coverage mentioned Facebook may be implementing stable coins into Whatsapp. While there has been no official announcements from Facebook yet, there's ample reasons to believe this could be the case. Facebook had set up a blockchain team in May of 2018 with former Paypal President David Marcus at the helm. He had been working on their messenger app since 2014. In markets like India, Facebook has been battling against other behemoths like Google for a share of the regional payments market. The use of a stable coin in these markets could theoretically allow them to circumvent banks or offer considerably more cost-efficient mechanisms of payments settlements. Foreign denominated stable tokens could also be integrated for remittances to large south-east Asian markets. 
 

The most exciting aspect of Facebook or Whatsapp exploring the use of tokens in their product is the sheer scale they currently have. If they are able to crack challenges around user experience and scale, it is likely that the product will be one of the earliest to take tokens to mass markets. While the extent of decentralisation in these products would be considered low, it will be an example of some of the benefits blockchains can offer markets. Whatsapp has close to 200 million users in India alone. The region sees close to $70 billion each year in inward remittance. Using a stable token, could, in theory, make sending money back home for migrant labourers as easy as sending a message. In addition, social selling (through Facebook and WhatsApp groups) often competes directly against P2P marketplaces due to the element of trust that comes from buying from mutual friends. By using a stable token, Facebook will be able to circumvent relying on third parties for settlements and collect payments data en masse. Another matter to note is that while the average value per user in developing markets is as high as $6 (ad revenue) in developed countries, it is a mere $1.22 in many parts of the world. Integrating a payments solution will give the data monopoly a new method of monetising that is not reliant on selling advertisements. With WeChat owning the payments markets in many South East Asian economies and Google seeping into the Indian market, using a global token network to target remittances looks like a strong strategic bet for Facebook.

Chart source : Statistica

 

Experiments involving the use of tokens to solve challenges in remittances and payments are not new. Projects have tinkered with the concept since as early as 2012. However, challenges in on-boarding users, token price volatility, user education and experience and regulations have made it next to impossible to date. Facebook's access to such a large userbase gives it a considerable amount of edge in terms of its ability to attract users to the product. There will be a considerable amount of challenges in each regional markets. To begin with, products like Transferwise have already made wide networks of partner banks in different economies to directly enable debiting money into a recipients bank account in a matter of hours. Facebook will have to tackle regional preferences first. In addition, the cost efficiency offered by a stable token will have to be incrementally higher than what is currently offered by banks and alternative services such as Western Union. A difficult task considering this will be a new business for Facebook. Then comes challenges involving regional regulations. Licensing requirements and the desire to protect regional startup may convince regional regulators to strangle the project. While the concept seems highly interesting on paper, its implementation and scaling will likely  take time. 

Whatever be the case, it is safe to say that if this goes live in 2019, mass adoption will not be one of the biggest concerns for the ecosystem's stakeholders to worry about. 

That’s all from us this year. We wish all our readers a happy holiday and a wonderful New Year!

 
Interesting Reads For The Holiday
 
 
1. Machine Learning App On Ocean + Orbit DB Link

2Brands pay sci-fi writers to predict their future. - Link 

3. Paul Graham on market bubbles -  Link

4. The Spacing Effect -  Link
 
 
 
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The future is not hard to see. You've already seen it. You just didn't realize it, because you dismissed it as a toy.
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