It’s now official. Facebook will launch a global, digitally-native cryptocurrency in mid-2020. In a white paper published by the social-media giant earlier this week, Facebook introduces its future digital currency, Libra, as an easy-to-use replacement for cash, which it claims will grant access to financial services for people across the globe (particularly to the 1.7 billion ones who do not have a bank account). Yet, alongside promise and entrepreneurial zeal, the impending interference of the company in the world banking system evokes a great deal of doubt and concern.
You gotta give it to Facebook. Venturing to develop a monetary system that will replace cash is a massive undertaking, particularly since it involves exploring largely uncharted territory. With cryptocurrencies such as Bitcoin failing to gain the trust of the masses and others like Q simply disappearing into the ether, it would take an enormous amount of creativity, financial acumen, and technological ingenuity to formulate a system that would seem appealing for investors to back and people to contemplate as legitimate. And that’s precisely what Facebook has managed to do, long before the actual launching of its product.
Libra is being developed as a blockchain-powered cryptocurrency. Unlike other digitally-native currencies, however, Libra will be fully-backed by a reserve of real assets, which will be locally regulated in each country. Each Libra issued will be backed by a currency or asset stored in the Libra Reserve in order to ensure the cryptocurrency’s stability and guarantee its intrinsic value. Facebook announced that Libra could be exchanged by anyone who has an iPhone and an Android at rates approximately ten-times lower than it costs to wire money electronically or internationally through the regular banking system. The company predicts that this will enable people in developing countries to obtain financial security and access services that currently are not available to them.
While the initial intent for Libra is to serve primarily as a money transferring tool, Facebook’s ultimate goal is to turn it into a mainstream currency, used to make every-day purchases and even serve as a loan and credit system.
Libra’s most unique characteristic, however, is the decentralisation of its governing body. Although Facebook is the one developing the currency, the company claims it has no intention to control it. To that end, it established the independent nonprofit Libra Association, presently comprised of 27 partners entrusted with monitoring the development and management of Libra. Among the members are major financial and technological corporations and service providers, including Mastercard, Visa, eBay, PayPal, Spotify, Uber, and Lyft, as well as nonprofit organizations, such as Mercy Corps.
So how does Facebook fit into this global financial ecosystem? The answer is simple: through its subsidiary—Calibra, a Switzerland-based company tasked with developing, launching, and bringing Libra to the masses. Calibra intends to do so by developing a digital wallet designated to send, receive, and use the Libra currency. Calibra will be implanted into Facebook-owed platforms such as Messenger and WhatsApp, and eventually launch a standalone Calibra app. Calibra (AKA Facebook) will, at least initially, possess one seat on the Libra Association board panel.
While Calibra will be the world’s first introduction to Libra, the company stated it will welcome any competition by another group seeking to establish a platform to exchange in Libra, and avoid any aspirations to monopolise the cryptocurrencies. In an interview for The Verge, Calibra Vice President of Product Kevin Weil stated, “Calibra can only be successful when the Libra ecosystem is successful.”
As great as this utopian virtual ecosystem appears, it also raises several red flags. One of the greatest risks about the Calibra enterprise is fraud and identity theft. And while Facebook vows to install the strictest technologies to ensure the safety of both users and the financial system as a whole, it remains to be seen whether it can keep this promise. This could particularly be an issue in countries where government-issued identification is unavailable or easy to forge.
In the U.S., numerous lawmakers and politicians have expressed grave concerns about the prospect of allowing a company notorious for data leaks and mismanagement to spearhead a global market revolution. The Senate Banking Committee has therefore announced this week that it will hold a hearing to examine Facebook’s cryptocurrency proposal on July 16.
Yet the most troubling aspect about the whole Libra/Calibra initiative is that we still don’t know how Facebook stands to gain from it. Currently, the company has only one vote on the multi-member board, and has declared in its white paper that data from Calibra will not be shared with other Facebook apps or platforms for ad-targeting purposes. It also stated that the very minimal fees Calibra will charge per-transfer will only be used to maintain the network’s security system. And so, we know there is money to be made—otherwise why would leviathans such as Visa and Mastercard be down to join the party—we just don’t know where exactly it will be coming from.
As the scandal surrounding Facebook churns, and calls to break up the company intensify, the social media network volunteers to introduce a brand-new global market, which it will supposedly not dominate, for no other purpose than to facilitate the transfer of money and welcome the world’s most underprivileged into this virtual financial oasis. In a world where Zuckerberg is, ultimately, only about Zuckerberg, one must ask: where is the catch?
Over the past year, more than five million people have realised that they can be cashing in from the very simple and somewhat inevitable act of walking (or running for those who like to do that too). Why just exercise when you can exercise and earn digital money at the same time? These were likely the thoughts of the makers of Sweatcoin, an app launched in 2015 that converts users’ footsteps into a hard earned digital currency called sweatcoins (SWC), which can then be used to purchase an array of products through the app.
The invention of Sweatcoin and its rise in popularity doesn’t exactly come as a shocking surprise. People love the gamification of sport activities and even more so the ability to not only count calories burnt but also coins earned. In the sleek purple and warm red hues of Sweatcoin, 1,000 real world steps are worth 0.95 SWC. A quick look through the website allows potential users to see some of the perks Sweatcoin offers, including an iPhone 8 for 20,000 SWC, a Vivobarefoot £50 voucher for 75 SWC or a Borneo expedition for 50,000 SWC.
From Initiative Q to countless other cryptocurrencies specialising in certain fields, Sweatcoin’s basis of turning steps into digital money isn’t particularly new. But what is interesting here is that in order to be able to truly access the perks of Sweatcoin (iPhone, holiday, etc), users need to pay for subscriptions that allow them to earn more than a capped level of sweatcoins per day. And to pay for these subscriptions, users pay with sweatcoins—not real world cash. For example, a mere five SWC per month grants users the level of Shaker, allowing them to earn up to 10 sweatcoins per day. The next membership level is Quaker, costing 20 SWC per month and permitting up to 15 SWC a day. Finally, the Breaker membership costs 30 SWC per month and allows for up to 20 SWC per day. Needless to say, earning sweatcoins isn’t as simple as following the Fitbit and iPhone mantra of 10,000 steps a day.
Unlike many other cryptocurrencies, whose premise lays in their ability to eventually convert their digital value into real world economic value, Sweatcoin asks its members to pay with sweatcoin and thus spurring the trade and use of the coin internally instead of trading the coin with money. Earlier this year Co-Founder Oldeg Fomenko said in an interview with TechCrunch that his wider vision for Sweatcoin is to move into and develop an “open-source blockchain DLT technology that will allow Sweatcoin to be traded like any other major crypto—or fiat currency.”
Sweatcoin has dug its foundation into a terrain made up of a growing obsession with cryptocurrencies as well as health and wellness tracking. It has also created its own digital economy where insurers and employers can prompt their customers and employees to exercise while creating a sensation of value. Cash value. As Co-Founder Anton Derlyatka says, Sweatcoin’s “first premise is that physical movement has economic value”. The real worry here is that while cashing out on something we should anyway be doing is appealing, before we know it the app could have a twisted treadwheel where users are forced more than prompted to continue their earning race. As New York Times writer Natasha Singer describes her experience of Sweatcoin, “The first time I swiped the app off, a notice popped up on my phone: ‘You killed me! Do not force quit me if you want to generate sweatcoins.’”
As much as the idea of earning while you walk or run is intriguing (and tempting), Sweatcoin has a sense of impossibility to it. It has been widely reported that the main downfall of the app is that it does not count indoor activity as it combined GPS tracking for fraud protection and thus dismisses treadmills, Zoomba, yoga or whatever else you might be into. Ultimately the coins are cumbersome to accrued and the prizes are expensive, in SWC terms of course. And at a closer look, what seems like an initiative to get people moving a little more now resembles a hectic rat race towards iPhones and package holidays which are just a few steps out of reach.
