Don’t Count Facebook’s Crypto Or JPM Coin Out, They Could Boost Bitcoin
As we are starting to see this year, large corporations and traditional tech companies are starting to show interest in cryptocurrencies, not just blockchain technologies. While Bitcoin (BTC) has continued to struggle, save for its relatively stellar performance over February, JP Morgan and Silicon Valley’s Facebook have announced serious intentions to offer their own digital assets.
Although the two multi-national enterprises seemingly have the best intentions, these offerings are inherently controversial. The ‘cryptocurrencies’ they intend to launch will be centralized, which goes against the raison d’etre that Satoshi Nakamoto touted from day one until his disappearance. Decentralized, immutable and transparent. They might have one of those but honestly, with their past track record on other touchy topics, it’s definitely possible that they don’t have any of those 3 correct.
Yes, that’s right, an argument has been made that centralized digital assets could spark Bitcoin adoption. Ari Paul, the founder of BlockTower Capital, noted that while the so-called “coporatecoins” will operate in an intranet, they aren’t all bad per se.
Paul elaborates that while these assets are inherently “uninteresting” to fervent crypto crusaders, who are enamored with censorship resistance, immutability, security, and peer-to-peer systems, centralized cryptocurrencies will “increase global interest dramatically.”
Laying out a hypothetical scenario, the BlockTower chief investment officer notes that 30 million of Facebookcoin users (10% of Paul’s hypothetical audience of 300 million) could eventually “stumble across Bitcoin,” meaning that the (decentralized) cryptocurrency’s community would double in size, no questions asked. Not only would this bolster adoption, but this influx of users would also increase Bitcoin’s network effects, thus increasing the value of BTC. While this could be true, 10% adoption of BTC is a fairly high ROI. It is better to say that ROI is more like 1 or 2%.
He added that blockchain ecosystems propped up by traditional firms will also provide infrastructure and services that could be used “directly or indirectly” by permissionless cryptocurrencies. Thus, Paul concludes that while some are wary of the threat Facebook and JP Morgan pose to decentralization, their crypto forays could be a net benefit for the broader space. And this is a threat. By allowing large companies like Amazon, Facebook and JPMorgan to take over the space, this is going to push many of the current alt coin projects out of the market.
Tim Draper, a world-renowned venture capitalist that has long been a believer of Bitcoin, also made a similar point in an interview with Fox Business. The American investor noted that JPM Coin is “great news” for the broader crypto space. Although he did admit that the bank-backed coin, which he dubbed a clear “Bitcoin knock off,” is unlikely to do particularly well,” it was made it clear that this news should catalyze more public awareness of the flagship cryptocurrency.