Facebook Has Met with at Least Three More Crypto Startups
Citing unnamed sources, the publication said Facebook has been eyeing several blockchain startups with a view of making acquisitions. Some of these firms include Algorand, Basis and Keybase.
Around two months the social media giant reportedly held discussions with stablecoin startup Basis. This was after Basis had signaled that it was shutting down in mid-December over regulation concerns. However, nothing materialized from the discussion.
Facebook’s Plans to Develop a USD-Pegged Cryptocurrency
Interestingly, the discussions held with Basis coincided with Facebook’s plans to develop a stablecoin based on the U.S. dollar.
At the time, the social media giant was said to be developing the stablecoin for use in payments on WhatsApp. Specifically, Facebook was planning to roll out the money transfer service in India where WhatsApp has over 200 million users. India is one of the leading recipients of remittances globally with $69 billion sent to the country in 2017.
Basis’ Approach to Maintaining Peg Might Have Turned Facebook Off
While acquiring Basis would have allowed Facebook to get its hands on a stablecoin that was already being developed, the social media giant might have hesitated due to regulatory concerns. Notably, Basis — which had already raised about $133 million in funding — was apparently nixed because of U.S. market regulators. Unlike other stablecoins such as Tether, Basis was intended to use algorithms to maintain the 1:1 peg to the USD:
“Basis is designed to keep prices stable by algorithmically adjusting supply When demand is rising, the blockchain will create more Basis. The expanded supply is designed to bring the Basis price back down. When demand is falling, the blockchain will buy back Basis. The contracted supply is designed to restore Basis price.”
Though innovative, the approach may have posed auditing and monitoring challenges for regulators.
Facebook Only Plans to ‘Friend’ Crypto Startups who Can Scale to its Billions of Users
With regards to Keybase, Facebook is alleged to have considered acquiring the firm early last year. Again, nothing materialized at the time. Facebook’s talks with Algorand also fell through.
With Facebook boasting of billions of users, one of the key considerations the social media giant was making while “window shopping” was scalability. Specifically, Facebook only showed interest in blockchain networks that could accommodate its large number of users.
This was with the goal of avoiding a situation that Bitcoin and Ethereum found themselves in after user numbers surged. These blockchain networks encountered slow processing times and high transaction fees after a sporadic rise in user numbers.
Of all the reported blockchain firms that Facebook courted, only Chainspace and Algorand fit that bill.
Featured Image from Anthony Quintano/Wikimedia Commons