Money. I’ve been obsessed with it for years. Not accumulation but the construct. Any currency is a mass hallucination. A store of value which holds its place only so long as there’s collective belief in it. Studying the history of American dollar bills during my study at Vassar. Diving into the “is it art or counterfeit” debate around JSG Boggs. My early years at virtual world Second Life helping to create a virtual currency called Linden Dollars with a floating point exchange rate. Accordingly it shouldn’t come as a surprise that I’ve followed bitcoin for a few years now. The notion of a universal monetary unit tied to something other than a nation state? OMG YES. But I’ll admit that my original beliefs were completely the opposite of how bitcoin has emerged. I expected we’d see something corporate-backed and tied to identity, not distributed and anonymous. And I thought it would come from Google or Facebook.
Jessica Lessin’s The Information had a great article today about Facebook Payments (behind paywall). Reporter Katie Benner notes that unlike earlier grander ideas, Facebook’s strategy now seems to be more about just one-click ordering using an on-file payment method. Big difference from the days of Facebook Credits, a Facebook Platform initiative to allow in-game items, movie rentals and other purchases. When Credits first launched I thought “holy shit, they’re going to do it” with both surprise and admiration, where “it” was the first global shadow currency. That Facebook Credits would be a way to pass value between consumers and businesses -and- person to person. Why?
1. Immediate Utility Different Than The Dollar (First Party Utility)
An alternate currency needs to have bootstrapped/kickstarted market liquidity and validation. Facebook, at the time, had the power to tell all Facebook Platform app developers that they needed to use Credits as their virtual currency. Immediately there was a widespread use case and reason for consumers to hold Credits instead of Dollars. The issuer of the currency was also able to create a market.
2. Broader Third Party Recognition
Once the Games market was set, other on-platform businesses started to experiment with Credits. For example, you could rent movies from Warner Brothers. At the time “F-Commerce” (omg what a horrible name) was trendy and all different types of apps were being used to help merchants set up storefronts within Facebook and on their Facebook Pages.
3. Tied to Identity & Reputation
Because Facebook is a real name space, it was exciting to imagine that Facebook Credits could come with a reputation system. There hasn’t been an interesting transaction-oriented reputation system on the web since eBay built their user ratings, and that never broadened despite fact that eBay User Ratings + Paypal COULD HAVE BEEN HUGE AS A PLATFORM. Within Facebook, or anywhere that you could sign in using Facebook ID (which is still the most robust part of their platform play), you would have a one-click payment system tied to a user history. Huge.
4. Inherently Global
Facebook was also the first global social network at scale. That meant you were going to run into inter-country transactions and a frictionless proxy currency would have had use. Within a single country it would be very hard to replace the local unit of exchange, but across borders, less so.
Why didn’t the Hacker Way push Facebook to be aggressive here. Hacking money? That’s so cool. Unfortunately they turned in another direction. Admittedly they had much on their plate and needed to focus, but I wonder why they don’t take on a few of these 100 Year Hacks…