Can a Facebook cryptocurrency compete with Bitcoin?
By Daniel J. McLaughlin
Facebook could continue its dominance in technology by venturing into the world of cryptocurrency.
The social media giant is reportedly looking to rival Bitcoin with its own digital coin. It has the potential to make digital wallets available for hundreds of millions of users.
However, there are some that are unimpressed, arguing that Bitcoin is still the best - and Facebook wants to deliver the opposite of what the cryptocurrency offers.
Facebook is hoping to succeed where Bitcoin has failed, the New York Times reports. The company, which also owns WhatsApp and Instagram, wants to introduce mainstream consumers to the alternative world of digital coins.
It is working on a digital coin that users of WhatsApp could send to friends and family instantly. Facebook has also reportedly held conversations with cryptocurrency exchanges about selling the digital coin to consumers.
The Times notes that the social media giant has a reach that dwarfs the backers of earlier cryptocurrencies. With over a billion users on Facebook, plus the users from WhatsApp and Instagram, it can "make the digital wallets used for cryptocurrencies available, in an instant, to hundreds of millions of users".
They report: "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."
CCN's Wes Messamore says that this new cryptocurrency from Facebook is "not a blow to Bitcoin", calling it a "Yawncoin".
He argues: "Get your popcorn ready and enjoy the show. Facebook’s attempt to create a cryptocurrency might fall just as flat as Google’s attempt to create a social media platform with Google Plus."
Even with the vast resources and brute scale that Facebook possesses, Messamore does not believe it could "successfully copy something truly special and completely different someone else has made".
He also adds that Facebook cannot succeed where Bitcoin has failed, because the cryptocurrency has not failed. It is the "largest scale deployment of public key cryptography in history".
Messamore concludes that Facebook is attempting to create something opposite to the "open, transparent, trustless, decentralised" ideals of Bitcoin.
Bitcoin is the original and most popular cryptocurrency. It was created in 2009 by an unknown person under the pseudonym Satoshi Nakamoto.
It cuts out the 'middle man' through its decentralised system: no single institution controls the network, no physical cash to be printed and controlled, and there's no interest fees.
There are around 16.7 million Bitcoins currently in circulation. There is, however, an upper limit - only 21 million Bitcoins will ever exist, so that means there are close to 4.3 million Bitcoins that are not in circulation left.
It is estimated that 30 per cent of those "may be lost forever as a result of things like hard drive crashes and misplaced private keys".
The cryptocurrency is mined by "doing a combination if advanced mathematics and record-keeping", CNET explains. When a Bitcoin is sent, the transaction is recorded, along with others made over a certain period of time, in a "block". The block can be recorded by miners in a sort of public ledger known as a "blockchain".
Using a combination of specialised software and increasingly powerful hardware, miners convert these blocks into sequences of code, known as a "hash". A hash required serious and energy-intensive computational power, and thousands of miners compete simultaneously to do it.
When a new hash is generated, it is placed at the end of the blockchain. For the successful miners' troubles, they receive 12.5 bitcoins.
At the time of writing, one Bitcoin is worth £2,887.66.