Facebook’s top-secret blockchain project is moving forward. What is Project Libra?

Facebook has big plans to disrupt the online payments industry. The platform is working on a top-secret stablecoin code-named Project Libra. If successful the project could change the way consumers spend online, compete with Mastercard and Visa for global payments, and provide a massive boost to bitcoin.

What is Project Libra?

An exclusive report by The Wall Street Journal has revealed new details on Facebook’s blockchain project, code-named Libra. The report says Facebook’s digital coin will be a stablecoin, confirming reports from earlier in the year.

Facebook is in investment talks with Visa and Mastercard and several large financial institutions seeking an investment of $1 billion. This investment will be used in a fund to back the value of Facebook’s stablecoin on a 1:1 peg. This will negate the risk of the volatile price swings that are commonplace with crypto assets such as Bitcoin and Ethereum.

The report says Facebook is negotiating with a large number of financial firms and online merchants, who will participate in its stablecoin payments ecosystem. Facebook’s two billion users will be able to send coins to each other, make purchases inside Facebook’s ecosystem, and across the internet.

The stablecoin will be usable across all products and services within the ecosystem including Facebook, Messenger, and Instagram. Following the recent rollout of in-app shopping on Instagram, a native stablecoin would be a further evolution of the shopping experience. By streamlining the process of purchasing items within its app, Instagram will move towards becoming a personalized digital mall. Facebook’s stablecoin would remove a layer of friction and make the purchasing process even easier for merchants and consumers. It’s thought these payments would also reduce the need for credit card and bank fees, benefitting both merchants and consumers.

The report says that Facebook is also considering how it might integrate its stablecoin within the platform’s advertising architecture. Facebook and Instagram users could use the stablecoin to buy products from the platform’s advertisers, which could then use the stablecoin to pay for more advertising, driving further purchases. Another potential use case is to reward users for their activity across the ecosystem. Users could be paid micro amounts for viewing ads, making purchases or interacting with content, similar to loyalty reward points.

Users will be able to use the stablecoin outside the Facebook ecosystem. To achieve this, it is building a custom checkout option that other websites would allow users to easily select as a payment option.

No competitor to bitcoin

As a stablecoin, Facebook’s coin won’t be a direct competitor to bitcoin, which is increasingly seen by speculators as digital gold. In fact, many commentators in the crypto space think Facebook’s coin will be positive for crypto. If even a small amount of Facebook and Instagram’s two billion users become interested in learning more about blockchain, that could provide a serious boost to the industry. Speaking at the Cryptofund Roundtable at SXSW in Austin, Texas in March, Ari Paul of BlockTower Capital said “I think it’s the most bullish thing that could possibly happen for existing public cryptocurrencies. Even if whatever Facebook ultimately delivers with Facebook Coin isn’t a real cryptocurrency, it’s a massive investment in infrastructure and education—both of which get to be borrowed by, say, bitcoin.”

An announcement from Facebook on the release of Project Libra is expected soon.

Facebook’s blockchain timeline

In January 2018, Facebook announced a ban on all cryptocurrency ads. Following the 2017 ICO boom, Facebook responded to the problem of fraud within the ICO sector by effectively banning all cryptocurrency ads for an unspecified time. Last week, Facebook announced that it would now allow ads for “blockchain technology, industry news, education or events related to cryptocurrency.” ICO related ads are still banned, however.

In May 2018, Facebook’s head of Messenger, David Marcus, announced he was leaving Messenger to “set up a small group to explore how to best leverage Blockchain across Facebook.” Marcus has a long background in financial technology. He was president of PayPal for three years and a board member at cryptocurrency exchange Coinbase. In August 2018, Marcus stepped down from his position at Coinbase, stating "I’ve decided it was appropriate for me to resign from the Coinbase board." The move was interpreted as a sign that Facebook was now seriously developing its own crypto asset.

Facebook submitted paperwork to the United States Patent and Trademark Office in June 2018 trademarking the name Libra. The trademark was previously owned by a small crypto tax company, which has now changed its name to Lukka. While the filing was submitted by a limited liability company called JLV, some internet sleuthing reveals the company is located at the same address as Facebook’s official communications department.

In December 2018, a Bloomberg report revealed Facebook was working on using blockchain technology to monetize one of its messaging applications. Citing anonymous sources familiar with the matter, Bloomberg reported Facebook was developing a cryptocurrency for use within WhatsApp. The report suggested the project would be trialed in India to serve the country’s remittances market.

In the meantime, Facebook continued to grow its blockchain department, going on an aggressive hiring spree in late 2018 and early 2019. Facebook’s blockchain team has grown to over 50 members, and there are more than 20 open blockchain positions on the platform’s careers portal. The team is housed in a separate area on the Facebook campus for privacy and security reasons.

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