2022 Grey Swan #3: Crypto Kills Facebook
- By Bilal Hafeez
- 3 min read
Grey Swans are those low-probability, high-impact events that few expect, and 2021 has felt full of them. We therefore continue our tradition of picking Grey Swans for the upcoming year. If you’re new to this tradition of ours, then please click here to learn more.
Crypto, blockchain, decentralisation, web 3.0, metaverse… The buzzwords are flying around, and Facebook has been keen to embrace them. Mark Zuckerberg first mentioned the metaverse in June 2021 and then rebranded Facebook as Meta on 28 October. According to Zuckerberg, the metaverse is:
‘An embodied internet where you’re in the experience, not just looking at it…you will be able to teleport instantly as a hologram to be at the office without a commute, at a concert with friends, or in your parents’ living room to catch up…’
‘It will be built by creators and developers making new experiences and digital items that are interoperable and unlock a massively larger creative economy than the one constrained by today’s platforms and their policies’
What he failed to mention was one of the constraints has been centralised platforms like Facebook. Creators post their content for free to platforms like Facebook. The creators get likes, while Facebook gets dollars from users seeing ads when they view the creators’ content.
Crypto markets turn this model on its head. At its heart, crypto technology is decentralised and trusted at the same time. Crucially, it has evolved to create platforms that are programmable with crypto markets like Ethereum. This allows property rights to be assigned to digital assets, whether pictures, music, or written content like a social media post. Non-fungible tokens (NFTs) in digital art are one popular expression of this, but the model is likely to become much more widespread.
This directly challenges centralised platforms of digital assets like Facebook, which essentially claim the property rights of all assets (like posts) on their platforms and then monetise them. This stage of development for the web or web 3.0 will likely see creators retaining ownership of their output and any monetary reward from their fans being directed back to them. All of this is possible by the blockchain keeping a record of who owns the asset and who has used it.
The user experience of apps based on crypto platforms is improving dramatically. Consequently, Facebook could soon see creators abandon them, and consumers will follow. It is no wonder the Macro Hive Index of Crypto Platforms, which includes protocols from Ethereum to Avalanche, has surged in recent months, while Facebook/Meta has stumbled (Chart 1). The market cap of six-year old Ethereum now stands at $480 billion compared to seventeen-year old Facebook/Meta Platform’s market cap of $850 billion.
2022 could, then, be the year when crypto-based platforms take the crown from traditional platforms like Facebook.
Bilal Hafeez is the CEO and Editor of Macro Hive. He spent over twenty years doing research at big banks – JPMorgan, Deutsche Bank, and Nomura, where he had various “Global Head” roles and did FX, rates and cross-markets research.
(The commentary contained in the above article does not constitute an offer or a solicitation, or a recommendation to implement or liquidate an investment or to carry out any other transaction. It should not be used as a basis for any investment decision or other decision. Any investment decision should be based on appropriate professional advice specific to your needs.)