Facebook (FB) made waves in the cryptocurrency space on Tuesday when reports surfaced that it is exploring blockchain with a new team run by one of its most visible executives.
With blockchain, a shareable electronic ledger that serves as an immutable record of users’ transactions — financial or otherwise — Facebook is exploring not only one of the hottest trends right now, but one that could have added benefits to users of the social network.
“Facebook has a huge stake in transactions with people and the way we really exchange ideas and goods online,” Omar Akhtar, an industry analyst with Altimeter Group, says. “People are already doing so much on Facebook. They’re selling their businesses, they’re buying goods, they’re paying each other. They’re calling each other. With cryptocurrency, Facebook is getting ahead of the curve. I wouldn’t say they’re going to innovate in the crypto space — they’re going to wait until something is more tangible that they can get into without a ton of risk. But it will be a while before that happens, and we might even see an acquisition or two.”
From Messenger to blockchain
After nearly four years, Messenger chief David Marcus is leaving his post to run the new unit, which will be composed of fewer than 12 employees, according to a Recode report. Marcus is known for growing Messenger from 200 million users to 1.3 billion-plus during his tenure, but he also has extensive experience in the payments space.
“David did a good job with growing Messenger into a platform with a lot of features, like payments and video chat,” said one former PayPal executive. “But David is a payments guy through and through. That’s what excites him the most these days.”
The 45-year-old serial entrepreneur, who joined the board of Coinbase in December, founded the payments startup, Zong, acquired by eBay (EBAY) for a reported $240 million, before running PayPal (PYPL) as president for well over two years. And according to three former PayPal executives, all of whom previously worked with Marcus, the outgoing Messenger chief in recent months has been captivated by the exploding cryptocurrency space.
Dana Stalder, a general partner at Matrix Partners, which invested in Zong in 2010, explains the move to head Facebook’s crypto unit makes sense for Marcus, given his entrepreneurial mindset and background.
“It’s a smart decision for Facebook to move one of its more forward-thinking executives into an emerging technology,” Stalder told Yahoo Finance. “It leverages David’s greatest strengths and keeps him fresh.”
Facebook declined to comment.
Blockchain’s untapped potential for Facebook
Less clear is what Facebook plans to do exactly in the cryptocurrency space. The social network previously dabbled in virtual currency in 2009 with Credits, which could be used to purchase virtual goods inside Facebook games. However, Credits never got the traction it needed. Some users felt uneasy at the time with giving Facebook their money, and many games also rolled out their own virtual currencies. As a result, the social network killed off Credits three years later.
Recode posits blockchain could help with encrypting data, but there are other potential use cases, also.
“I think a lot of it [Facebook’s interest] is about identity, or verified identity,” another former PayPal executive who worked with Marcus, tells Yahoo Finance.
Already, blockchain technology can be used for identity verification in a number of non-financial use cases, such as online identities and account log-ins, passports, even wedding certificates. Allowing Facebook users to one day have their accounts on blockchain could give people more control over who has their personal information and how they access it. It’s a potential boon, given Facebook’s recent controversy surrounding Cambridge Analytica, in which the voting firm made off with the information of up to 87 million Facebook users.
Regardless, the cryptocurrency space just got a lot more interesting.
Marcus’s move comes amid the largest executive shakeup ever in Facebook’s history. Facebook Chief Product Officer Chris Cox, for instance, will now oversee what Facebook is calling its “Family of Apps,” an umbrella of services that include the Facebook app, Messenger, Instagram and WhatsApp.
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JP Mangalindan is the Chief Tech Correspondent for Yahoo Finance covering the intersection of tech and business. Email story tips and musings to [email protected]. Follow him on Twitter or Facebook.
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