Facebook Stablecoin Whitepaper Coming, Coin Usability Still Murky
Facebook will soon release a whitepaper on its stablecoin, which will be based on a basket of fiat currencies.
Facebook (NASDAQ:FB) will finally publish the whitepaper for its highly anticipated stablecoin, Libra, on June 18, TechCrunch reported. The company’s token is designed to be usable across its WhatsApp, Instagram and Messenger platforms.
According to the publication, an outside, independent foundation will manage Libra, which will be based off of a basket of fiat currencies. Stablecoins are intended to reduce volatility and hold “stable” values; they are generally attached to a currency, such as the US dollar.
This is in contrast to the decentralized values of blockchain, where transactions are verified and governed by a network.
Among the intentions of the stablecoin are borderless payments, which are devoid of transaction fees. Libra will be targeted at developing countries with turbulent currencies.
In addition, Facebook plans for its token to be used beyond its apps, which TechCrunch reported will include building ATMs that will allow individuals to exchange currency for Facebook’s tokens. Facebook is also encouraging retailers and merchants to accept its cryptocurrency by offering bonuses if they integrate it to allow individuals to pay for physical items.
The Libra Project, a highly secretive department of Facebook, is responsible for the development of the stablecoin. In 2014, Facebook hired PayPal’s (NASDAQ:PYPL) ex-president David Marcus to run the department.
At a developers conference in April, Facebook CEO Mark Zuckerburg told the audience, “I believe it should be as easy to send money to someone as it is to send a photo.”
In terms of cryptocurrency regulations in the US, the process is still in its infancy. In March, Valerie Szczepanik, the US Securities and Exchange Commission’s (SEC) senior advisor for digital assets, said that the SEC will pay little attention to what each crypto asset is called, and more to their inner workings.
“We’re going to look at the characteristics. What’s the economic reality? What’s happening with the transactions involving the coin? And we’ll give it the label that it deserves under the law,” said Szczepanik.
At this point, the regulation environment surrounding the overarching cryptocurrency market largely remains nefarious. In April, the SEC released guidelines for the issue of security tokens but, according to Fortune, the guidelines provided little clarity on distinguishing between digital tokens and other assets.
The SEC is currently working with FinHub to create a framework to determines if a digital asset qualifies as a security. It will take into account a number of characteristics, such as whether an entity is offering, distributing, marketing, buying, selling, trading, facilitating exchanges or holding or storing digital assets.
With data privacy scandals surrounding Facebook’s privacy violations, Facebook’s stablecoin product is sure to be questioned. As it already stands, stablecoins and crypto transactions face a number of usability problems.
To gain further insight into stablecoin adoption and how these transactions work, the Investing News Network (INN) spoke with David Gold, founder of the Foundation for Interwallet Operability (FIO).
FIO is a consortium of industry participants such as wallets, exchanges and crypto-payment processors that is working towards providing greater usability for blockchain, and in turn stablecoin. It operates behind decentralized values that provide a secure service layer that complements blockchain. It provides transaction context, similar to the real world of invoices and order forms, through FIO addresses, FIO requests and FIO data.
“People want a complete shift in paradigm of how you actually interact with blockchain,” Gold said. In a society largely run by tech giants, the FIO Protocol offers an alternative solution to crypto transactions and stablecoin adoption.
Currently, all blockchain transactions are complex and difficult to execute, Gold told INN. However, when it comes to using blockchain for ecommerce transactions, they become even more difficult.
“Today, if I wanted to use (a) stable(coin) to check out from an ecommerce site, that process is complicated and risky. If that website ever had to refund to me, they have no way of doing it without getting back in touch with me,” said Gold. This is because the website would have to ask the individual for their address.
FIO’s features allow individuals to just give their human-readable FIO address, which is free from visible code and public address details, facilitating blockchain adoption and returns with greater simplicity and security. These addresses are usable across every coin and token.
“The FIO Protocol puts an end to vague addresses by replacing them with human-readable aliases across different services and blockchains — a huge step toward mass adoption,” George Kimionis, founder and CEO at Coinomi, said in a press release.
Typically, when a crypto transaction is sent, there is no confirmation that it has actually been received. FIO addresses solve this problem directly. The FIO Protocol sends the information relating to the transaction, including the confirmation, adding an extra layer to the actual blockchain transaction. This essentially removes the user’s need to use a line of code or encryption key during a crypto transaction.
FIO enables ecommerce businesses to send refunds, a process that is currently cumbersome. “It creates the ability for error-free ecommerce transactions that are easy (and) not complicated (because) with FIO refunds … the site that you pay actually has your FIO address, and with your FIO address they can actually refund,” Gold further noted.
There is also a growing risk of man-in-the-middle attacks, in which hackers can ultimately intervene between a crypto transaction and steal the coin or token.
“From the standpoint of blockchain and decentralized value in ecommerce, stablecoins are very important to achieving (blockchain adoption),” Gold said. “But even with stability, they will never achieve that if it’s hard to do.”
FIO’s members currently include crypto exchange ShapeShift, bitcoin wallet app Mycelium, hardware wallet KeepKey and Trust Wallet, among others.
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Securities Disclosure: I, Dorothy Neufeld, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.