YGC Managing Partner: Facebook may threaten the position of Bitcoin King

Facebook is significant in driving the popularity of the blockchain.

A recent cover article on Facebook by the famous American technology media Wired magazine has brought the world's largest social media company to the forefront. The magazine interviewed more than 50 current and former Facebook employees and sifted through the story behind Facebook's recent two years of crisis. According to the article, Facebook originally said that if people provide better sharing tools, the world will become better, but in fact, this company has also made the world more closed and dissatisfied, and it is abusing users. privacy.

Perhaps blockchain technology is an option to save the company. However, the development direction of the company's blockchain field is unclear.

Fortunately, there are experts who understand the blockchain and understand Facebook.

Liu Wei , managing partner of Yeoman's Growth Capital (YGC) , the world's first private equity investment fund in the blockchain sector, was responsible for growth strategy at Facebook. Based on his own experiences and his knowledge of Facebook, Liu Wei shared his possible direction of the company: he believes that Facebook may threaten the status of the Bitcoin king and promote the popularity of the blockchain.

Liu Wei’s analysis is worth listening to. YGC is a $200 million new blockchain investment fund launched by David Johnston, an early blockbuster explorer at the end of last year, and David Johnston is one of the earliest investors in the blockchain world. He has been investing since 2012. Encrypted assets and created a family office in 2016, investing in more than 40 projects. Liu Wei went to the family office of David Johnston to take charge of the investment in the blockchain project. Recently, YGC has just established the first overseas office outside of the United States in Hong Kong.

Written by: Liu Wei, Managing Partner, Yeoman's Growth Capital

Liu Wei, Managing Partner, Yeoman's Growth Capital

Recently, more and more journalists and other investors and partners have asked me what Facebook is doing in the blockchain field. Most people don't have a deep understanding of these issues. This is understandable. I personally know more about being an insider.

I am willing to share some thoughts about the past 12 months or so. I will explain objective facts in the article, not some wild guesses.

Let me briefly talk about some core ideas.

  • Facebook will implement blockchain business and payment applications because Facebook needs to increase revenue channels because its core business (98% from advertising revenue) has been affected by regulation;
  • Facebook uses the blockchain to achieve the goal of revenue open source , because in the blockchain, Facebook gives up control of social media, and does not need to assume responsibility for controlling social media;
  • Facebook will threaten the status of some weaker currencies , because the company's newly issued digital currency will be more stable than most government-issued French currency exchange rates, and will be widely used by merchants and consumers around the world. Of course, if Facebook's digital currency exchange rate fluctuates too much, it will hurt consumers, which is a consequence that Facebook can't afford;
  • Bitcoin has threatened the status of some weaker currencies . We have seen that in some high-inflation countries, such as Venezuela and Argentina, people use Bitcoin to store wealth. A considerable part of the demand for bitcoin comes from these high inflation countries;
  • Facebook will therefore impact Bitcoin's position as a king in the field of cryptocurrencies , while accelerating the popularity and application of blockchain.

If you live in a high-inflation country, you may choose to buy Bitcoin for $19,000, but then suffer a 80% devaluation and you can't use it to buy food or pay rent. Or, you can choose Facebook digital tokens that are supported by the most stable currencies in 4-5 countries and can be consumed by 7 million merchants worldwide.

Which one do you choose?

Consumption power creates savings.

Facebook's strengths and weaknesses

Let's talk about some of the things that Facebook doesn't really understand about Facebook:

  • Facebook has a global classifieds market that exceeds mobile apps like Craigslist or Letgo;
  • The Facebook platform houses 6 million merchants worldwide;
  • Facebook is the world's leading real-time application with the lowest usage rate for payment and e-commerce. All instant messaging applications in Asia have been bundled with e-commerce functions five years ago.

  • Facebook is now trying to launch the "buy" feature in its photo sharing app Instagram;
  • Facebook revenue is heavily dependent on advertising, with 98% of revenue coming from advertising.

Recent voices of increasing privacy violations and calls for increased regulation of data and advertising have made Facebook's reliance on advertising profitability a serious threat.

Facebook needs to open up new revenue channels to survive. All income models outside the free value-added advertising model require payment and business.

Use blockchain to meet Facebook's business needs

Now that we have learned that Facebook needs to start a business, there are about three rational choices in front of them.

  • Choose one, Facebook creates a completely decentralized, unlicensed electronic currency, and the exchange rate is linked to cryptocurrencies such as Bitcoin. Facebook integrates the currency into all of its platforms;
  • Option 2, Facebook lets individuals recharge on the Facebook platform, and Facebook holds the money like a bank, creating a “digital currency” that supports all transactions on the platform. This digital currency will be used for all Facebook-related apps as well as the Facebook platform itself;
  • Option 3, Facebook will create a stable currency linked to a basket of French currency (US dollar, euro, British pound, Japanese yen) at a 1:1 exchange rate. Regardless of the amount of cash reserves they need to have to issue stable coins. Let everyone participate in the transaction and charge for the transaction. Facebook lets all apps choose whether to integrate this digital currency, and their own platform will of course integrate this currency.

The choice of one obviously cannot be successful. The intention is to create an unregulated, volatile exchange rate currency that would jeopardize Facebook's current market value of $500 billion and will be further closely regulated by governments around the world.

Choice 2 cannot be successful. Facebook has been considered too central and needs to be further closely regulated. If Facebook enters the banking arena, they will not only know people's identity information, leisure and entertainment habits, but also know how much people spend and spend money. For a company that controls people's data to make money, it is difficult for regulators around the world to tolerate this situation.

Choosing three is the last viable option and can really bring benefits to Facebook's business. Once this project is successful, it will allow Facebook to diversify its revenue channels.

Facebook will share transaction costs with other merchants and users to achieve "decentralization" , because this approach also achieves the purpose of sharing the transaction responsibility of Facebook, do not care about the income level. The benefits of this approach are far greater than the income, and they can charge on this basis.

With the blockchain, Facebook can achieve e-commerce

  • 6 million small businesses can directly accept payments from any Facebook user. When realizing instant chat like WeChat, you can also collect money like the micro-credit QR code;
  • All P2P campaigns can be hosted by a third party that is bought and sold by Facebook and paid through Facebook;
  • Facebook games finally have seamless micro-payment channels, buying virtual goods and equipment, etc.
  • Facebook can use the seamless payment system to sell merchandise directly on Facebook and Instagram without having to go through the VISA and MasterCard credit card systems;
  • Most importantly, Facebook is finally able to get rid of the shackles of 98% of revenue-dependent advertising revenue and diversify its business.

Follow the footsteps of WeChat

Imagine an American going to Argentina, or other countries that only use cash, without having to exchange foreign currency or get cash, just walk into the nearest small business, order a local specialty coffee, and use the instant messaging app WhatsApp to scan the 2D Code payment. WhatsApp automatically deducts the US dollar from the bank's cash account and instantly pays it to the merchant's account.

This era is coming. This is a common occurrence in the streets of China. I recently bought watermelon in the QR code payment in Chongqing. There is no longer a 20% foreign transaction fee. You don't have to have a coin in your pocket.

With Facebook and its mobile apps, you can trade electronically anytime, anywhere in the world.

Why is this good news for the blockchain field?

Facebook will create the world's most used blockchain digital currency because:

  • Blockchain technology allows Facebook to give up some control over the platform, thereby reducing some of the responsibility for transaction management;
  • This will have a huge network effect, as most of them are bilateral markets. The blockchain protocol/network requires volume/usage to maintain, while Facebook can contribute enough volume and usage;
  • The size of the P2P transaction is not large enough to achieve the clustering effect. We can't pay for daily needs in digital currency, such as food, rent, etc.
  • The next wave of blockchain trading will come from transactions between consumers and businesses, and more ideally, business-to-business transactions.

Facebook will enable global merchants to conduct e-commerce transactions on their platforms and will make the use of blockchain/digital currency a reality.