Best of the Week
Most Popular
1. Crude Oil and Water: How Climate Change is Threatening our Two Most Precious Commodities - Richard_Mills
2.The Potential $54 Trillion Cost Of The Fed's Planned Interest Rate Increases - Dan_Amerman
3.Best Cash ISA Savings for Rising UK Interest Rates and High Inflation - March 2018 - Nadeem_Walayat
4.Fed Interest Hikes, US Dollar, and Gold - Zeal_LLC
5.What Happens Next after February’s Stock Market Selloff - Troy_Bombardia
6.The 'Beast from the East' UK Extreme Snow Weather - Sheffield Day 2 - N_Walayat
7.Currencies Will Be ‘Flushed Down the Toilet’ Triggering a ‘Mad Rush into Gold’ - MoneyMetals
8.Significant Decline In Stocks On The Cards! -Enda_Glynn
9.Land Rover Discovery Sport Extreme Driving "Beast from the East" Snow Weather Test - N_Walayat
10.SILVER Large Specualtors Net Short Position 15 Year Anniversary - Clive_Maund
Last 7 days
Gold Short-term Pull Back in Progress - 20th Mar 18
Stocks Appear to be Under Pressure - 20th Mar 18
Time To Eliminate Your Wall Street Tax? - 20th Mar 18
The Beast from the East Snow, UK Roads Driving Car Accidents - 20th Mar 18
Can Bitcoin Price Rally Continue After Paypal Fake FUD Attack? - 19th Mar 18
2018 Reversal Dates for Gold, Silver and Gold Stocks - 19th Mar 18
This Tech Breakthrough Could Save The Electric Car Market - 19th Mar 18
Stocks Set to Open Lower, Should You Buy? - 19th Mar 18
The Wealth Machine That Rising Interest Rates Create Conflict With The National Debt - 19th Mar 18
Affiliate Marketing Tips and Network Recommendations - 19th Mar 18
Do Stocks Bull Market Tops Need Breadth Divergences? - 19th Mar 18
Doritos Instant £500 Win! Why Super Market Shelves are Empty - 19th Mar 18
Bonds, Inflation & the Market Amigos - 19th Mar 18
US Housing Real Estate Market and Banking Pressures Are Building - 19th Mar 18
Stock Market Bulls Last Stand? - 18th Mar 18
Putin Flip-Flops Like A Drunken Whore On Bitcoin Cryptocurrency Legalization - 18th Mar 18
How to Legally Manipulate Interest Rates - 18th Mar 18
Return of Stock Market Volatility Amidst Political Chaos and Uncertain Economy - 18th Mar 18
Bitcoin Price Trend Forecast, Paypal FUD Fake Cryptocurrency Warning - 17th Mar 18
Strong Earnings Growth is Bullish for Stocks - 17th Mar 18
The War on the Post Office - 17th Mar 18
GDX Gold Mining Stocks Fundamentals - 16th Mar 18
Nationalism, Not the Russians, got Trump Elected - 16th Mar 18
Has Bitcoin Bought It? - 16th Mar 18
Crude Oil Price – Who Wants the Triangle? - 16th Mar 18
PayPal Cease Trading Crypto Currency Bitcoin Warning Email Sophisticated Fake Scam? - 16th Mar 18
EUR/USD – Something Old, Something New and… Something Blue - 16th Mar 18
DasCoin: A 5-Minute Guide to How It Works - 15th Mar 18
Stock Market Downward Pressure Mounting - 15th Mar 18
The Stock Market Trend is Your Friend ’til the Very End - 15th Mar 18
6 Easy Ways to Get What Women Want, for Less! - 15th Mar 18
This Isn’t Your Grandfather’s (1960s) Inflation Scare - 15th Mar 18
Eye Opening Stock Market Index, Volatility, Charts and Predictions - 15th Mar 18
Gold Cup At Cheltenham – Gold Is For Winners, Not For Gamblers - 15th Mar 18
Upcoming Turnaround in Gold - 14th Mar 18
Will the Stock Market Make Another Correction this Year? - 14th Mar 18
4 Ways To Writing An Interesting Education Research Paper - 14th Mar 18
China Toward Sustainable Economic Growth - 14th Mar 18
Stock Market Direction Is No Longer Important - 14th Mar 18
Trade Tariffs Defeat Globalists and Return Prosperity - 14th Mar 18
Stock Market Crash is Underway and Cannot be Stopped! - 14th Mar 18
Are Energy Sector Stocks Bottoming? - 14th Mar 18
Nasdaq Stocks Soars to New Record High After Strong Job Reports - 14th Mar 18

Market Oracle FREE Newsletter

Urgent Stock Market Message

Facebook Nation Unveils its New Currency

Companies / Tech Stocks Jan 31, 2011 - 09:40 AM GMT

By: Patrick_Henningsen


Best Financial Markets Analysis ArticleThe 21st century has certainly witnessed a progression towards a ‘cashless society’, but social networking giant Facebook are taking things a step further, throwing their hat into the ring with the introduction of a new compulsory monetary policy that will initially govern its share of the multi-billion dollar online games industry.

Imagine a virtual world where all goods and services are to be offered, bought and paid for by a new virtual-local form of electron currency. Facebook will be piloting such a scheme for their multimillion dollar online games market. As of July 2011, every social game developer on Facebook will have to offer the social network’s “virtual currency credits”.

According to a recent news release from Marketing Week, “Over the next five months developers will have to implement credits as a payment method within their games”. The games industry already accounts for 70% of the virtual goods transactions on the site.

According to Facebook, the social networking corporation are not insisting that their new online currency will be the only payment method available to users, and in exchange for their cooperation game developers will offered incentives if they use Facebook dollars exclusively. Compensation for compliance will apparently include early access to product features and premium promotion on their site, including promotion on the games dashboard and of course, premium ‘smart’ ad targeting.

What appears on the surface to be a simple online marketing tool to help consolidate a niche market share on the world’s largest social network, has in fact much more far and reaching consequences for hundreds of millions of users.  What Facebook have effectively achieved here is nothing short of a huge “game changer” in terms of envisioning a world without cash.

Foreshadowing of things to come

In 2011, it is a social reality that most people you know are, in one way or another, citizens of the Facebook Nation. The corporation’s success in capturing a near global monopoly of membership to their online platform has now given it the ability to dictate an economic mandate to both producers and consumers, in effect, controlling both the upper and lower loops of their virtual economy. This is an incredible position of power, but one which should come as no surprise to any economic student of monopolies. A severe lack of choice in the world of online communities has unwittingly(or not) positioned Facebook in the rolls of banker, retailer and governor.  It is certainly a trend worth noting at this stage, and one which may one day have real consequences for its members and their various cyber passions.

By issuing its own form of “virtual currency credits”, it is essentially creating its own money supply that may one day be the defacto currency for all transactions for goods and services that fall within the borders of the social network. This puts Facebook into a position of exception economic leverage. With any new form of ‘national’ currency- in this case, it’s the Facebook National currency, also comes the possibility of fluctuation in currency exchange rates. With this centralisation of power also comes the ability and means to control and even inflate the value of its currency in terms of supply and demand. This can also reflect itself in the value of all goods and services whereby the paying online community would have no choice but to comply to any new user monetary policy decrees or changes in value imposed on producers and users. One only has to look at their recent announcement to realise that this is indeed already the case.

A Brave New World: the cashless society

As the virtual community and virtual economy begin to replace the real ones, trends forecasters and futurists can begin to imagine a world where morning newspapers are replaced by online news, local markets are replaced by online supermarkets, community fundraising events are replaced by web fundraisers, fun fairs are replaced with online games and greasy spoon cafés are replaced by internet cafés. In case you haven’t been paying attention, in so many ways- that day has already arrived. Welcome to the virtual world. As we spend more and more of our time interfacing with this new world, we will invariably be performing many more monetary transaction there too.

Aside from the obvious differences in a cashless society- a world where  no notes and coins are ever physically held by the owner, there are also a number of other not so nice realities which citizens will be forced to accept. Chief among these are legitimate concerns that a cashless society would make “retailer resistance” aka choosing independent shops, buying direct or supporting local markets over mega supermarkets and national retail chain stores… nearly impossible. In addition to retailer resistance, cash ensures some level of anonymity on the part of its owner. Not so in cashless world, as electronic currency and transactions are and will always be recorded, track, analysed and in some cases- suspended.

With the introduction of a cashless society, citizens are also likely to lose their identities associated with national currencies like American Dollars, or British Sterling. But as they lose one identity, they will most certainly gain another. In this way, Facebook has taken the lead in supplying a monetary identity to its client citizens in the form of its ‘virtual currency credits’.

Perhaps one day we may also see ‘Apple Credits’ or ‘Nokia Kroner’ as mobile device transactions creep further and further into our economic routine. Either way you slice it, it is an incredible amount of power and influence which an elite clique of corporations now have over large sections of the global population.

As we have seen with the online games developers and their customers, resisting the Facebook marketplace is no longer an option, as it has already defined policy within the boundaries of its massive virtual community- even mandating what form of money can be used within the Facebook Nation. The decree is simple and clear, “if you are not in, you are out.”

By Patrick Henningsen

21st Century Wire

© 2011 Copyright Patrick Henningsen - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

© 2005-2018 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


peter tschipper
04 Feb 11, 12:51
another fiat currency

I don't mean to devalue what facebook has done for social networking or for how it is helping in the in egypt today

but i don't think creating a new currency, backed by nothing more than a digital number on a server, is going to help the world. We have enough problems with the worthless paper that's out there right now.

How about if facebook did something really great and created a currency backed by gold?

Shelby Moore
04 Feb 11, 13:46
Facebook currency

The currency has to be created. If it does not represent an exchange between tangible money, then it means who ever created it, is like a central bank, stealing that value and causing inflation as it spends it into the the ecosystem.

So in essence what Facebook has done is admit that their business model is an economic failure:

Now they will take down all the game developers with them, because their system could not sustain economic viability with a free market of game developers charging how they wished.

One thing is a virtual currency is a way for people in the developing world to earn income on Facebook and avoid the issues of money transfer and transactional costs. But the problem is that if Facebook doesn't back this currency with gold or silver, this it will just be stealing value via inflation and ripping off the entire ecosystem, eventually bringing the whole thing down.

The genesis of Facebook's demise will be decentralized social network. It is coming. The Napster or Gnutella version of Facebook is coming. I should know. Hint.

07 Feb 11, 05:29

Shelby: we get the hint, and I'm sure you can come up with

dynamite software. The issue is getting 200 million people

to migrate to a new platform. It will require more than

the snapping of fingers.

Mr Henningson: the numerous typos in your article are most

distracting. Couldn't you spare some minute for proofreading?

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules