What is Facebook planning for the blockchain?

What is Facebook planning for the blockchain?

After a troubled few months in which its data harvesting and sharing practices have come under scrutiny, it might not be the best time for Facebook to announce an exploration of blockchain technology but that is what the social network has done.

The news was announced as part of a shake-up of Facebook’s leadership team. In addition to reshuffling some execs, CEO Mark Zuckerberg announced the creation of a team focusing on blockchain technology. The team will be run by David Marcus, who previously ran Messenger, Facebook’s standalone messaging app.

In a post on Facebook, Mr Marcus said: “I’m setting up a small group to explore how best to leverage Blockchain across Facebook, starting from scratch.”

Possible blockchain uses
The company hasn’t said any more than that but there are lots of things Facebook could do with blockchain. The most obvious example is to create a digital currency. Facebook used to have one, called Facebook Credits, which launched in 2009 and was shut down three years later. Credits were used to buy virtual goods within the network, but a Facebook cryptocurrency should be secure enough to enable social network members – and there are more than two billion of those – to use it for payments on a range of other websites.

Another possibility is identity verification. Facebook could use blockchain to record its members details so that it could verify that they are who they claim to be, not only on its own network but elsewhere too. Again, this ability to take the information outside of Facebook could be crucial. Facebook already allows its users to login to certain websites with their Facebook credentials, this would simply provide more security to that system.

Finally, it could use the information simply to track certain data flows across its network. Part of the issue with the Cambridge Analytica scandal was about data being shared with organisations that should not have had access to it. Facebook could use the blockchain to allow users greater transparency over who can see their data and what is being done with it.

Facebook puts key personnel on the case
It could be something else; it might come to nothing. However, it’s likely that Facebook is planing something. In January, Mr Zuckerberg said that he was “interested to go deeper and study the positive and negative aspects of these [blockchain] technologies, and how best to use them in our services”.

Five months later, he has moved some key personnel onto the case. Before running Messenger, Mr Marcus was CEO of Paypal and he is on the board of Coinbase, the cryptocurrency exchange. Does that mean the company is looking at payments?

Another question for those watching this space is whether Facebook’s involvement will have a positive or negative effect. On the one hand, the company has a reputation for dabbling in a bit of everything, frequently buying up interesting services such as WhatsApp, Instagram and Oculus, the VR headset. Sometimes those things are effective, sometimes not.

On the other hand, when a business of Facebook’s scale says it sees something in blockchain, the ripple effect of such an announcement can be massive. This is a big splash.

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This post is provided for informational purposes only. None of the information presented here should be considered investment advice. Everyone should always do their own research and due diligence before sending funds to any third party.