Saturday, 04 July 2020

Why Facebook is investing in a blockchain team

Gaurang Torvekar, co-founder and chief executive of Indorse, a blockchain powered professional network, explains why the major social media companies are now investing in blockchain technologies.
Facebook is reportedly creating a new team which will work on exploring the potential applications of blockchain technology.

According to several news sources, the head of the company’s Messenger app, David Markus, is now going to head a “new internal team at Facebook dedicated to exploring blockchain technology”. Along with him, several Instagram executives will also be joining this team.

While this is an unanticipated development, it shouldn’t come as a surprise to the community, considering several banks have been actively exploring blockchain technology over the last few years.

In order to understand why Facebook is using blockchain, it’s important to understand what exactly is “blockchain”.

In short, blockchain is the underlying technology underpinning several cryptocurrencies like Bitcoin and Ethereum, which are being used by millions of people right now and have market capitalisations in billions of dollars.

Blockchain can be seen as a distributed ledger, wherein several peers in the network need to come to a consensus before including successive transactions in the ledger.

The scalability challenge

When blockchain technology started gaining mass adoption a few years ago, the entire premise centered on its ability to take away the power from centralised systems and institutions and give it back to users in a decentralised manner.

While there has been a lot of hype surrounding the technology in preceding years, it hasn’t been able to keep up with the hype due to some major problems related to scalability.

The fact that major companies like Facebook have started looking in the technology, begs the question — why?

One of the main reasons and speculations in the community is that Facebook wants to fix its image after the recent Cambridge Analytica scandal where a lot of users’ data was leaked and used in a malicious manner.

Apart from that, the concept of crowdfunding through ICOs, or Initial Coin Offerings, has taken the world by storm.

Handing power back to the people

There are several companies like Steem, Lunyr, as well as Indorse, which are working to create social network applications powered by blockchain technology, in order to give the power back to people.

These applications not only let users control their data, but also give them an opportunity to monetise it.

This could have been one of the reasons Facebook is looking into the technology.

While this move by Facebook will certainly add more validity to the technology and might even lend it more credibility in the mainstream market, Facebook might not be creating its own cryptocurrency just yet.

In January of this year, Facebook banned ad accounts of several cryptocurrency companies and ICOs.

How exactly is Facebook using blockchain?

It is highly likely that they might use it for encrypted data storage and maybe even for revamping their advertising modules and systems.

This idea stems from the fact that David Markus, who is heading Facebook’s blockchain team, has a background in payments through his previous experience at Paypal and advertising as well.

He is also on the board of Coinbase, which is one of the world’s biggest cryptocurrency exchanges.

It is not entirely obvious at this point of time how Facebook might actually be using blockchain technology, and its plans for the future remains to be seen, but one thing is for certain: Facebook doesn’t want to miss out on the growing hype and the community adoption of the blockchain.

They can definitely see huge potential and opportunity for this in the future and wouldn’t want to be left out, especially if one of the blockchain-based social networks becomes big and tries to dethrone Facebook from its current position as one of the market leaders.

It might also be the case that Facebook just uses blockchain for one of its apps or verticals like the Messenger app, similar to how Kik and Telegram are planning to use it.

Having said that, it is unlikely that Facebook will go down the same route as these two companies and do its own ICO.

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