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Facebook Is Moving Into Blockchain: How Might This Play Out?


Historically, Facebook has accomplished a great job of staying on the cusp of technological advancement through investing highly in new technologies and smart acquisitions. From WhatsApp to Oculus, Facebook has used its bulging bank balances to stay one step ahead of consumer trends by snapping up tech and talent. And, after last week’s internal announcement that Facebook would be investing heavily in a new blockchain technology research wing, headed by David Marcus, one of the company’s top execs, leader of its Messenger platform and a former CEO of PayPal, it is quite obvious which new emerging technology the company has its sights set on now.

Blockchain technology — and its incorruptible, decentralized digital ledger — could give the accountability and transparency needed to pull Facebook out of its recent data security nightmare, which saw CEO Mark Zuckerberg dragged in front of the United States Congress following the Cambridge Analytica scandal. On the flipside, the decentralized nature of blockchains would make it difficult for Facebook to carry on with its most valuable business model: harvesting user data and targeting users with advertising based on their online behavior.

So, with this scenario in mind, how might Facebook be planning on using the blockchain, and how will this affect the overall development of blockchain technology?

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What is the Plan?

I would argue that there are 3 potential incentives for Facebook in building out its blockchain capabilities:

The first, and most obvious, is that Facebook is aiming to publicly align itself with a technology which is most famous for providing transparency and offering people control of their own data in the aftermath of the Cambridge Analytica scandal. The scandal has left many users questioning Facebook’s management of user privacy data and the platform’s transparency and privacy terms, which blockchain applications could potentially alleviate.

The second is that Facebook wants to continue drawing developers to create applications on its developer platform by capitalizing on the popular trend of coders moving en masse into the crypto space. If Facebook can create a platform where app developers can raise and earn from their apps via tokens on the blockchain, the speed to reward incentive is much higher. Tokens offer developers immediate value at the point of launch, rather than having to wait years for their apps to mature to hit the jackpot.

The third, in light of recent scandals, is that Facebook likely to be monitoring the progress of a number of emerging blockchain-based social media platforms, such as Steemit and YOYOW. However, to date, these competitors are well off being a real threat, with less than 99,000 daily users. As such, the chances are that Facebook is instead looking to the future, to launching a next generation social platform enabled by the blockchain which offers users more control over the use of their data, and the opportunity to be rewarded for sharing their data.

How Is Facebook Most Likely to Use Blockchain Technology?

Security and Data Management

Blockchain technology enables immutable and transparent record keeping which could help Facebook in re-establishing trust and confidence in the way users’ data is stored and used. Through the blockchain, users could show who had been given access to their data, which, in turn, would mean Facebook would have to do a better job of allowing users to set their own data access restrictions and limitations. For instance, users would be able to see exactly what personal data they have stored on Facebook and subsequently decide what data can be made available to the public or for sale to marketers. This would also open the door to users being able to monetize the sale of their own data, via the Facebook platform.

Marketplace and Cryptocurrencies

The creation of Facebook’s own tokens, based on Ethereum or other existing cryptocurrencies, would allow for the exchange of tokens on the Facebook app store and also in newer Facebook initiatives like the Facebook Marketsite.

The blockchain is best used in shared economies, where many parties can cooperate and create a mutual environment of trust. Introducing tokens could allow Facebook apps and marketplaces to become more sophisticated but also more trustworthy. The added transparency of the blockchain, with increased user control of their own data, plus access to more than 2 billion active users, would be enough to bring most developers or brands onboard.

What Are the Roadblocks to Adoption?

The decentralization of a platform which has based its whole business model on the total control of user data would require a truly redesign of the site’s architecture.

However, while the move would be a big task, it shouldn’t, in theory, pose so many performance-based issues. Technically speaking, there is no reason why decentralized databases could not be applied to social media networks. Existing blockchain technology, with some modifications, would be able to support the size of the platform and its traffic.

The bigger impact would be the overall redefinition of Facebook’s platform and architecture, making a system where data access was controlled directly by the blockchain and its decentralized network of users. In short, Facebook would have to give up the reins of its user data and allow it to be controlled by the community as a whole. This change would blow its current advertising and targeting model out of the water.

As such, I think we are unlikely to see Facebook adopt this type of system in the closest future. It is much more likely that there will be limited applications over the coming years, possibly in regards to the app store and payments, whereas a decentralized Facebook 3.0 platform will be released separately when the time is right.

What Will the Long-Term Effects Be?

If Facebook integrates blockchain technology in a meaningful manner, we will undoubtedly see other huge players in the social media space follow suit. The way in which Facebook uses the technology will be important. If Facebook goes down the route of creating its own cryptocurrencies or adopting existing ones, it will go a long way toward legitimizing and promoting the technology to the greater masses, and moving the blockchain and crypto closer to the mainstream worldwide.

Time will tell as to whether Facebook will follow its previous path of acquiring startups like Steemit or whether the core values and structures of the companies will be so different that this will be almost impossible. But, while Facebook has had the resources to buy out competitors in the past, even the largest of businesses cannot purchase a cryptocurrency, such as Ethereum or Litecoin, which no one person owns. That said, we are likely to see Facebook try its hand at some form of decentralized social networking or data management platform in the next coming years.

However, while Facebook has the advantage of billions of users and bulging bank balances on its side, it will still face the same blockchain and cryptocurrency related legal issues as any other American business. It is important to note that, for such a large company, setting up a team of less than 9 people is a small step rather than a huge leap into the world of the blockchain. But it might be enough to show social media users around the world that Mark Zuckerberg and his company have learned from their recent time in the naughty corner and are willing to clean up their act in the future.

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