June 12, 2023
6 min

Facebook vs. the Dollar

Since the financial crisis of 2008, public trust in large legacy financial institutions has been in a downward spiral. The Occupy movements swelled in response, but they failed to coalesce into anything actionable. Those responsible for the economic collapse were never held accountable for their complicity…too big to fail, baby!

Then, Bitcoin happened.

Digital currencies had come and gone without much success in the past, but Bitcoin managed to solve some very difficult issues. Namely something called the double-spend problem. We’re all familiar with the buzzword by now; the innovation built into Bitcoin was called a blockchain. Using a ledger (a log of transactions), Bitcoin’s protocol had devised a mechanism to verify the authenticity of every transaction and to prevent double-spending, which is a problem unique to digital currencies, since digital information can be easily reproduced. The protocol was made open-source, so the public could access the“bank log” of all transactions.

Long story short, Bitcoin miners around the world secure the network and validate transactions from different jurisdictions. They do this by devoting computing power to find what is basically a lottery number in a haystack - a hash. This increases in difficulty over time, requiring more energy. By competing with others to solve for the hash, miners earn bitcoin at an algorithmically determined rate. They then sell it into the market. With only 21 million bitcoin to ever be mined, its scarcity is pre-defined.

Since humans still conceptualize worth and assign value in terms of scarcity, bitcoin could, perhaps, wean us off the money-drug (like a schedule 1 narcotic!) as alternative substances do (like entheogens). It could even start steering us back toward a Star Trek-ian, money-less society of limitless abundance, innovation, and peaceful coexistence! BUT…if distributed ledger technology isn’t handled with extreme care, it can morph into a way for corporations and governments to track and control people’s assets with unprecedented levels of power. A way to restrict access, and coerce behavior.

Fast forward 10 years and a few hundred billion dollars later; the Bitcoin network is more robust than ever. Thousands of other cryptos have entered the ring. Ethereum’s Smart Contracts have exploded onto the scene. Riffs on distributed ledgers and encryption are happening en masse. New proofs and validation methods are being explored. A massive amount of creative energy is being directed into developing long-term sustainable infrastructure and incentives.

Enter JPMorgan Coin! 40+ BoA blockchain patents! Microsoft’s ID2020! And now — Facebook’s very own Libra Currency.

Fresh off a blanket advertising ban on all cryptocurrency-related projects and ICOs in 2018, Facebook has officially released its plan for a global digital reserve currency. Designed altruistically to “empower billions of people”. One of the central tenets of the decentralization movement has been based around providing open-source financial services for the 1.7 billion people who currently have no access to the legacy banking system. In terms of a uniform global payment network, that disenfranchised number goes up by a few billion more if you consider the Western Banking system alone, upon which the Global Reserve Currency (the US Dollar) rests. In their White Paper, Facebook co-opts this tenet, stating their unoriginal desire to “bank the unbanked”.

Facebook has set up shop in Geneva, Switzerland to establish its new financial services arm. With over 2 billion users, they are heavily equipped to disintermediate payment processors like Visa; even banks. The stage is set for disruption. The Libra global reserve currency will be backed by a collection of low-volatility assets, central bank deposits and government securities from around the world. This is likely to pose a direct threat to the stability of the western economic system as we know it, and fast. The 1988 prediction by The Economist magazine appears to be startlingly on schedule; a world currency, erected in 2018, that starts as a “cocktail of national currencies”.

My Libertarian sensibilities are admittedly a little tickled by all of this. I’m ready to grab some popcorn and watch this new power struggle go down. I’m also gravely concerned about the slippery dynamics between totalitarianism and authoritarianism. I remain optimistic, however, that real open-source decentralized solutions will continue to grow in appeal to the world population that is waking up and self-actualizing.

“the truth at any cost lowers all other costs” — Robert David Steele

On one hand — you’ve got the central banks who mismanaged global finance, leveraged and repackaged their way into insurmountable levels of debt, and have all but ensured that governments are beholden to them. On the other hand — there are the massive tech companies like Facebook who mismanaged global data and privacy for billions of people, built their fortunes harvesting and aggregating that data for various third parties, and have yet to be held accountable in any meaningful way. Now they’re using those fortunes to erect global consumer payment systems that integrate with social networks.

As the shady debt-brokering that was the banks’ undoing fades into the annals of the information age, their public reputations remain tarnished for the foreseeable future. Legacy financial services will learn how to play ball with these new behemoths and integrate themselves into the woodwork. The banks’ best bet is to team up, buy in, carve out hefty digital real estate on the back end, and let the still-more-reputable tech giants shoulder the shift to ‘ethical’ public branding. After all, Millennials and Gen Z are the coming-of-age generations keenly aware of and directly affected by the 2008 crisis.

Photo by Anna Vernikov

Without getting deep in the weeds, let’s revisit why decentralization is important. One of the biggest reasons to decentralize something is to distribute the governance equitably. In other words, to make sure that no single entity controls the network, whatever the network may be. This is a good idea in many different situations.

So what is Facebook’s distributed governance model? The Libra Association.

What is the Libra Association? It’s a group of large businesses, multilateral organizations and academic institutions that can buy their voting rights for a minimum of $10 million. That buy-in earns them a validator node on the Facebook Libra network. So far their partners range from Visa, Mastercard, and Paypal, to Spotify, Lyft, and Uber. Many more to come, rest assured. That’s right, these “decentralized” nodes will be virtual acreage belonging to companies that can afford the price tag.

So…we’re democratizing governance by assigning corporate council? Corporations by default are beholden to their own bottom-line, it’s baked into the equation. Their duty is first and foremost self-preservation and increasing shareholder value. They were not meant to be stewards of socioeconomic governance for the masses. They don’t consist of any elected public officials…hmm…for that matter, neither do the banks. How’s that going to fly in this brave new environment? And as platforms like Facebook, Youtube, and Twitter crack down heavily with censorship on free speech, how can they ratify a call to permission-less decentralization with a straight face? This has all the ingredients of a monolithic control system straight out of Orwellia.

It will fly, though. Too many folks are addicted to the convenience that these mega-platforms can roll out. There are a growing number of people who do recognize this and are setting their sights on the real McCoy— DAOs (Decentralized Autonomous Organizations) governed by citizens instead of corporations. True privacy coins, localized initiatives, and genuinely decentralized social networks like Minds and Jordan Peterson’s pending platform ThinkSpot.

These smaller, open-source digital movements won’t replace the mega structures currently being erected. But with enough care and cultivation, they will build something truly sustainable and properly incentivized. When the contradictions of our new techno-finance overlords inevitably lead to another socioeconomic crisis or government showdown, perhaps the shelter that everyone seeks out will already have been built on the sidelines, from the ground up.

Honestly, it is anyone’s guess how this will unfold. There are numerous other geopolitical considerations that are converging to influence and shape probabilities for the next chapter of human history. Suffice to say, I feel that we are in the emerging stages of civilization hard-forking into separate realities. Just like a forked blockchain. Dominant power structures fighting over how to run the evolving protocols on Planet Earth. It remains to be seen how social networks and retail giants will fare against governments and banks, and what roles they will play in either unifying or further polarizing our species.

In the meantime — where’s my popcorn?