After Facebook, Walmart is now launching a USD-backed stablecoin, according to a recent patent filing. The ‘Walmart Coin’ project is allegedly the company’s second shot at operating as a bank, following on from an earlier attempt to function as an ILC (Industrial Loan Company) that was thwarted by the regulators.
Unlike Facebook’s Libra, Walmart coin can be used to earn interest on savings deposits. The growing interest among centralized entities to leverage their large swathes of user bases and create network coins to incentivize the ecosystem participants can be viewed as a positive sign for the broader adoption of cryptocurrencies. Walmart has a customer base of 265 million customers spanning across 20+ countries visiting its outlets on a weekly basis. If Walmart manages to pull this off, which we think is going to be really hard given strong criticisms against similar project Libra, Walmart has the potential to almost double the number of cryptocurrency users in the world, a figure that stands at 30M currently.
Network coins are here to stay. The launch of Libra is an important milestone in the life cycle of cryptocurrencies. With Libra, Facebook has unleashed a completely new type of currency, something that should ideally be called a ‘network coin’ – because it truly unleashes the power of a network, setting off a virtuous cycle of value capture and creation driven by transactions within the network and beyond. The Libra chief David Marcus recently appeared in front of US regulators and argued that it was not Libra’s aim to rival global monetary policy. However, that is just one of the consequences that Libra will have, at scale. Regulators, policy makers, bankers and politicians have a truly different fight on their hands, this time around; One that dwarfs in scale the whole crypto kerfuffle that they have been engaged in so far.
An alternative perspective – unleashing the power of the network
What is it that Libra can potentially do, or has already achieved to a large extent? – With Libra, Facebook has shown how easy it is for large multinational corporations to unlock the power of their network. A well-functioning network, especially a B2C focused network like Facebook, is like a biome or a hive – a thriving, seething mass of transactions and interactions that add value to each other, and therefore to the overall network. Successful networks scale exponentially through virality as Metcalfe’s law elaborates elegantly, so much so that virality is almost a synonym for network effects. Facebook was a critical milestone in the transition from Web 1.0 to Web 2.0; the web finally moved from being a fairly static collection of links and images into something that had the user and their experience front and centre. Facebook was thus perhaps the first real example of network effects at scale (arguably Napster was the first but clearly not at the scale of Facebook), and this happened because people had an incentive to interact more and more with each other; the more people used facebook, the more people wanted to use facebook, and more and more people ended up being on facebook.
Interactions over the platform ( and later on, transactions) were the currency of the network. Libra is just the first attempt at attributing a value to that currency at a granular/per unit level, and at crystallizing and capturing, and simultaneously enhancing that value, by driving even more interactions. It is the power of the network minted onto a coin by the entity that owns the network, much like a sovereign has the ability to mint coins in its realm. It just so happens that in this case, the ‘realm’ spans almost a third of humanity, cutting across wide swathes of the globe, accessible to anyone with a smartphone and an internet connection.
Parts of today’s piece originally appeared in one of our posts on LinkedIn. You can visit the full version here.