Diar, a cryptocurrency analytics firm, in a research published on 28th May, has highlighted some potential problems that Facebook’s new cryptocurrency may face. According to the research firm, despite being one of the biggest social media companies in the world with more than two billion active users, the planned GlobalCoin by Facebook may run into some issues regarding the age of its most active users.
Facebook found itself in hot water when one of the biggest scandals about data security broke out following presidential elections of the United States. The social media giant was in deep trouble with governments and lawmakers in the United States as well as the EU. However, since then the company has taken steps to ensure such problems don’t surface again. Despite claims by Facebook, one of the major cash cows in Facebook’s business model is data sharing with companies for targeted advertisement. The move goes completely contrary to the decentralized ideology of crypto and blockchain; so, a decentralized stablecoin by Facebook creates an ironic situation. However, the issue is the least of Facebook’s problem.
Facebook’s Aging Userbase
One of the critical problems that Facebook will face is its aging userbase. The company’s cryptocurrency dubbed as the GlobalCoin will face an uphill battle with the aging users who have little knowledge about cryptocurrencies as indicated by previous data. Diar writes in its report that Facebook is losing its dominance within the teen market, showing only 50% of teen userbase while competitors like YouTube and Snapchat are boasting higher numbers of teen on their platforms. Teens are most likely to be knowledgeable about cryptocurrencies making them the ideal market for the GlobalCoin.
The report further explains that the influx of retirees and people past 35 has increased over the past few years, thus more than 50% of the people using Facebook are most likely to be unaware of cryptocurrencies and their uses in general. For a service that requires some sort of technical knowledge, this may become a real problem. The report highlights the fact that cryptocurrency is a taboo among the aging population and goes on to explain how a successful integration may be possible:
Educating 25% of the world’s population about current cryptocurrency infrastructure that requires private-key management and the glaring reminder of the possible ultimate loss of funds is also unlikely as it would result in the project’s near instant failure.
For any real success, the integration of custody and settlement finality would have to be a seamless operation that users have grown accustomed too – a feature current user-facing blockchain infrastructure fails at for the most part.
Facebook’s Popularity in Low-Income Countries
The aging demographic of Facebook is not the only problem that the platform faces, there is also the problem of its growing popularity with lower income households and the declining share of higher income households. The United States, Facebook’s biggest market, is responsible for only 10% of its users but accounts for most of its business. India and other countries with lower incomes are the ones with most users, thus making the venture a lot less profitable for the company.
Furthermore, 50% of the users that qualify in the teen’s category using the platform are usually from lower-income households; thus, they are less likely to do transactions with the GlobalCoin. The report explains:
Lower-income teens are far more likely than those from higher-income households to say Facebook is the online platform they use most often
What’s the Solution?
Facebook is a company with vast resources and the company can and will utilize these resources to make this project a success. The report hints at a few things that Facebook might have in store to curb the problems arising from the company’s aging user growth and declining popularity in high-income countries. Facebook has already integrated a payment system within its messaging app, WhatsApp, in India, which saw more than $2 billion worth of transactions a month just after a year of its launch. Another measure the company is using in low-income countries is to partner up with remittance focused company Western Union to bring remittance services to its GlobalCoin.
The major steps being taken by Facebook are in the space of crypto education and marketing. The company is expected to market its services more in the sense of a payment option like PayPal and won’t market it as a cryptocurrency per se. The only difference GlobalCoin will have from PayPal is that it will utilize blockchain technology to create a payment system around Facebook’s token instead of traditional currencies.