In the technology sector, there’s a concept called “platform risk,” the danger that another company, or a newer, trendier technological innovation, could kneecap your business by wooing or coercing your users away.
If you want to understand what Zuckerberg might see in Libra, consider Facebook’s $2 billion 2014 acquisition of Oculus, says Hunter Horsley, a former Facebook product manager who runs Bitwise, a cryptocurrency investing startup.
At the time, neither Oculus nor VR was anywhere near mainstream (they still aren’t). But the possibility that they could take off posed an existential threat to Facebook; if the world started chatting and “liking” via VR, Facebook’s dominance would evaporate. Why not own the leader of a platform that could become the Next Big Thing? “Companies historically always die by not adapting to new paradigms quickly enough,” Horsley says.
For Facebook’s executive team, cryptocurrencies and blockchains—the database innovation upon which those currencies are based—became unignorable in 2017, when the prices of Bitcoin and other currencies began an improbable, months-long climb. The company’s leaders realized that cryptocurrency, or something like it, could help it break into financial services, an area in which it has struggled to gain traction.
Everyone at Facebook had seen how China’s digital upstarts—Tencent’s WeChat Pay and Alibaba spinout Alipay—had bypassed the traditional banking system and become behemoths, weaving themselves tightly into people’s daily lives. (In 2018, Chinese mobile payments hit $38 trillion in transactions.) Maybe by tapping into the crypto-zeitgeist, Facebook could achieve something similar.
Through 2017, Morgan Beller, then a junior corporate-development employee at Facebook, researched and met with blockchain startups. She penned a memo that helped persuade higher-ups that Facebook had a unique opportunity to take a leading position in the industry—and that if they slept on it, they could be disrupted. Beller ultimately won over Marcus, one of Zuckerberg’s top deputies and one of Bitcoin’s earliest acolytes in Silicon Valley.
Zuckerberg and Marcus sat down to chat in depth about cryptocurrency around the year-end holidays in 2017. Marcus says they shared frustrations about the incumbent financial system: International payments are an expensive hassle. Settlements can take days to clear. Different systems don’t interoperate. And the poorer you are, the more you pay.
A blockchain-inspired approach might allow Facebook to cut out pesky middlemen, avoiding the fees associated with payment card–issuing banks and money transmitters by routing around them. Facebook could succeed where PayPal, Marcus’s old employer, had capitulated: realizing the libertarian dream of a pure, borderless Internet money, rather than a market-by-market approach in which costs and delays persisted.
By May 2018, Marcus was leading a blockchain team full-time. Zuckerberg, in turn, committed to studying privacy, decentralized systems, and cryptography—foundational principles of blockchain tech and cryptocurrencies—as his 2018 New Year’s resolution.
A little over a year later, in March 2019, Zuckerberg published a privacy-themed manifesto in which he described his decision to adopt strong encryption across many of Facebook’s services, including WhatsApp, Messenger, and Instagram.
Public reaction to the manifesto focused on the implications for consumers. But blockchain experts saw something else: One of tech’s most powerful leaders was gravitating toward their platform. Jeremy Allaire, CEO of Circle, a cryptocurrency startup, says that Zuckerberg was recognizing that blockchain tech “is not just this digital currency thing. It’s this building-block infrastructure for how information is exchanged.” It was, in other words, a platform where Facebook couldn’t afford not to play. fortune.com