Tech Brew Ride Home - Tue. 06/19 – Is Facebook Now in Crypto... or Just Payments?

Episode Date: June 18, 2019

Facebook announces Libra, Twitch acquires Bebo, are unmanned convenience stores something people even want, Facebook wants more houses in Silicon Valley, and LA real estate is starting to look like Silicon Valley. Sponsors: SVB.com/next Castro Links: Facebook announces Libra cryptocurrency: All you need to know (TechCrunch) FACEBOOK’S CALIBRA IS A SECRET WEAPON FOR MONETIZING ITS NEW CRYPTOCURRENCY (The Verge) Libra White Paper Shows How Facebook Borrowed From Bitcoin and Ethereum (CoinDesk) There’s a Second Token: A Breakdown of Facebook’s Crypto Economy (CoinDesk) Amazon's Twitch acquired social networking platform Bebo for up to $25M to bolster its esports effort (TechCrunch) China's unmanned store boom ends as quickly as it began (Nikkei Asian Review) $1 billion for 20,000 Bay Area homes (Google) Silicon Valley and Los Angeles Real Estate (LA Times) Ad-free Premium Feed! Learn more about your ad choices. Visit megaphone.fm/adchoices

On April 4th, 2023, around 2 in the morning, a man was found stabbed multiple times on a sidewalk in downtown San Francisco. Hey, who did this to you? What happened next turned the story into a political firestorm. Reports have identified the victim as Bob Lee, the founder of Cash App. From Bloomberg Podcasts, this is Foundering, the Killing of Bob Lee, beginning April 16. Welcome to the Tech Meme Ride Home for Tuesday, June 18th, 2019. I'm Brian McCullough today. Facebook announces Libra. Twitch acquires Bebo, our unmanned convenience stores, something people even want. Facebook wants more houses in Silicon Valley, and LA real estate is starting to look a lot like Silicon Valley. Here's what you miss today in the world of tech. Well, it's officially here, kind of, officially here in the sense that the white paper is out. but you won't be able to actually spend it until next year. Facebook this morning took the wraps off of its new cryptocurrency,

and we already know a lot of the details about it, at least if you've been listening to this show regularly. It is, again, called Libra. It has 27 partners right now, ranging from MasterCard to Uber. It should launch sometime next year with 100 partners, Facebook hopes. It is a stable coin backed by a basket of actual currencies and marketable securities. Facebook is distancing itself from the direct management of the currency. Instead, the currency will be run by the Libra Association, a non-profit entity run out of Switzerland,

and Facebook will only get a single vote in its governance of the cryptocurrency along with its partners. Though Facebook's involvement will be run via a new subsidiary called Calibra, quoting from TechCrunch. Facebook is launching a subsidiary company called Calibra that handles its crypto dealings and protects users' privacy by never mingling your Libra payments with your Facebook data so it can't be used for ad targeting. Your real identity won't be tied to your publicly visible transactions. But Facebook slash Calibra and other founding members of the Libra Association will earn interest on the money users cash in that is held in reserve to keep the value of Libra stable, end quote.

Now, Calibra will also be launching a digital wallet for Libra as a standalone iOS and Android app, but also as key functionality inside WhatsApp and Messenger. Quoting from the verge, Libra is the technology that underpins the network, but when it launches, Calibra will likely be how most people interact with the currency until competing wallets arise. In fact, it will likely be the first cryptocurrency wallet

that hundreds of millions of people will have access to by nature of being bundled with Facebook's massive ecosystem. With billions of users potentially interacting with Calibra, it will instantaneously have many hundreds of times. the user base of the world's most popular existing wallets from Coinbase and others, end quote. And Facebook is highlighting the immediate use case for this new cryptocurrency. Basically, the hundreds of millions of unbanked or underbanked humans out there. Quoting Facebook itself. For many people around the world, even basic financial services are still out of reach.

Almost half of the adults in the world don't have an active bank account, and those numbers are worse in developing countries and even worse for women. The cost of that exclusion is high. Approximately 70% of small businesses and developing countries lack access to credit, and $25 billion is lost by migrants every year through remittance fees, end quote. Now, I've been monitoring the reaction to this announcement all day from two different constituencies. First, I was watching CNBC all morning, and it was fascinating the amount of skepticism and head-scratching there was from Wall Street types, although it should be noted that this is Wall Street's default reaction to crypto generally.

But basically, the Wall Street types were asking, is this even crypto at all? Is this actually revolutionary or just a roundabout way for Facebook to finally after many false starts get into payments? But really, after all the bells and whistles, just regular run-of-the-mill payments. Here's Joe Wisenthal talking about how this thing is backed by traditional financial assets and financial institutions. and thus, quote, the problem is once traditional financial institutions are involved, that creates regulator problems in terms of who can obtain and use the coin. After all, regulators won't want drug dealers and money launders acquiring Libra and using it to move money around outside the eyes of law enforcement. The issue is that once you apply traditional regulations to tokens that are

backed by money in the bank, then those tokens start to look a lot like normal fiat money. After all, most money we use today via credit cards, PayPal, Apple Pay, Venmo, etc. is just the digital representation of money that banks promise to ultimately back up. This is the exact same thing, except on a blockchain, end quote. Except is it even blockchain? I saw lots of people ask this question. I'm going to quote Jason Smith, who tweets at I wear hoodie, who highlighted this section of the white paper,

quote, unlike previous blockchains, which view the blockchain as a collection of blocks of transactions, the Libra blockchain is a single data structure that records the history of transactions and states over time, end quote. So does that mean it's just a glorified database? But then the second constituency, a lot of the crypto world's response so far has just been to try to dig into the details of this, to try to grok what exactly we are dealing with. Apparently, Facebook has created, for example, a whole language, for writing commands on its protocol called Move, which is open source, quote, to validate the design of the Libra Protocol, we have built an open source prototype implementation Libra Core in anticipation of a global collaborative effort to advance this new ecosystem,

the white paper states. And friend of the pod, Coin Desk's Brady Dale, looks at all the ways that Facebook has done its homework and basically cherry-picked bits and pieces of other crypto projects to create Libra. Quote, like Bitcoin, there's no real identity. on the blockchain. From the perspective of the blockchain itself, you don't exist. Only public-private key pairs exist. Like Hyperledger, it's permissioned, at least to start. Initially, the consensus structure for Libra will be dozens of organizations that will run nodes on the network, validating transactions. Like Tezos, it comes with on-chain governance. The only entities that can vote at the outset are founding members. Like Ethereum, it makes currency programmable. In a number of

ways, the white paper defines interesting ways in which its users can interact with the core software and data structure. For example, anyone can make a non-voting replica of the blockchain or run various read comments associated with objects such as smart contracts or a set of wallets defined on Libra. Crucially, Libra's designers seem to agree with Ethereum's that running code should have a cost, so all operations require payment of Libra as gas in order to run. Also, like Ethereum, it thinks proof of stake is the future, but it's also not ready yet. Like Binance's coin, it does a lot of burning. Like Coda, users don't need to hold on to the whole transaction history, end quote. Now, I don't have time to get into those last few

details yet, but if you're a crypto enthusiast, safe to say, this is pulling a lot from the latest and greatest crypto ideas. Oh, and one more thing, Facebook actually launched two cryptocurrencies today because in addition to Libra, the project will also have a Libra investment token. And again, that's how the stakeholders, the 100 or so partners that Facebook hopes to have lined up at launch, will make money on this, because remember, Libra itself is not supposed to fluctuate in value. Quoting CoinDesk again, unlike Libra, a currency that will be broadly available to the public, the investment token is a security, according to Facebook.

As such, the token will be sold to a much more exclusive audience, the funding corporate members of the project's governing consortium, known as the Libra Association, and accredited investors. And while Libra will be backed by a basket of fiat currencies and government securities, interest earned on that collateral will go to holders of the investment tokens. As previously reported, ahead of the official announcement, each of the 28 companies that Facebook recruited to run validating nodes as founding members of the consortium invested at least $10 million for the privilege. The investment token is what they received as a financial reward. But that's the company. That reward will only be meaningful if the network takes off, quote,

because the assets in the reserve are low risk and low yield, returns for early investors will only materialize if the network is successful and the reserve grows substantially in size, Facebook said, in one of a series of documents that supplement the long-awaited Libra white paper, end quote. So unless I'm wrong about this, that sounds a lot like how ICOs have worked over the last couple years, except without the expectation of price appreciation, as the reward to early investors. We'll have plenty of time to dig into all of this over the coming months, I'm sure,

but my bottom line initial take could probably be summed up by the Financial Times as James McLeod. A fun mental exercise is to drop the crypto prefix from all the Facebook Libra coverage and then see how you feel about it, e.g., Facebook confirms it will launch a currency called Libra in 2020. The crypto just refers to technology that allows for digital security. It tells you an aspect of how it's built, but not what it does. The news here is that Facebook is launching a currency, end quote. Believe it or not, some other things did happen today.

Let's see how much I can squeeze in. Amazon's Twitch Gaming Streaming Service has acquired social networking platform, Bebo. A source says that the deal was for around $25 million. Quick history lesson, Bebo was an early social networking site of the MySpace era. and was briefly the social networking market leader in places like the UK and Ireland. AOL bought Bebo for $850 million in 2008. Less than two years after that, Bebo was sold on to Criterion Capital for $25 million, and after a subsequent Chapter 11 bankruptcy, the original founders bought Bebo back in 2013 for $1 million.

After a couple of pivots in the intervening years, Bebo dabbled in streaming services for esports players before finally morphing into its current business of organizing tournaments for gaming streamers, essentially creating and managing leagues for esports players. Quoting TechCrunch. That is now linking up neatly with Twitch, which had been developing its own casual esports operation in the form of Twitch rivals. This launched in beta in 2018 and is now widely available wherever Twitch is. The Bebo Tech and its team are now both being put to use on Twitch Rivals to help continue expanding it with more features and more users, end quote.

China has certainly become the early warning system for tech trends over the last five years or so, and so maybe it's worth taking note of the flashing warning signal from China. After a surge of openings in recent years, the unmanned convenience store boom that took off first in China has seemed too cool significantly due to falling sales as the novelty of unmanned stores has worn off. Around 200 or so of the unmanned convenience stores sprung up in China to take advantage of the fact that most people just use their phones in that country for payments. JD.com got involved, Alibaba got involved. Apparently, the stores collectively did as much as $620 million in sales in 2017 alone. but since then, closures and bankruptcies. Why? Well, quoting from the Niki Asian Review.

If a store only carries long-lasting products like drinks and snacks, it looks more like a big vending machine in the eyes of consumers. Although the new concept of unmanned convenience stores attracted shoppers early on, the novelty has worn off, end quote. It also turns out that not only do real food stores with perishable goods sort of need fresher food and vegetables and thus humans to manage them. In China, apparently, businesses make higher margins on those items anyway. But I find the overall point intriguing.

Self-checkout convenience stores might have a natural ceiling. If they're just bigger vending machines, because there's only a certain type of good you can get from them, consumers seem to be asking, what's the point? A couple of real estate stories to end the day with. First, Google has announced that it is committing $1 billion to help build 20,000 homes in the Bay Area over the next 10 years, even repurposing some of the land that Google itself owns, which is currently zoned for office or commercial space, and turning it into residential. Quoting Google itself, this will enable us to support the development of at least 15,000 new homes at all income levels in the Bay Area, including housing options for middle and low-income families. By way of comparison, 3,000 total homes were built in the South Bay in 2018.

We hope this plays a role in addressing the chronic shortage of affordable housing options for long-time, middle, and low-income residents. Second, we'll establish a $250 million investment fund so that we can provide incentives to enable developers to build at least 5,000 affordable housing units across the market, end quote. Now, you could snark on this. Indeed, that's probably my knee-jerk reaction. as you can expect. And The Verge certainly did by titling their post about this. Google pledges $1 billion to ease the Silicon Valley housing crisis it helped create. But hey, that's kind of the point. Credit where credit is due for recognizing stuff and doing something about it, right? Hopefully. So put me on the side of Kim My Cutler, who pointed out that California has a two and a half

to three and a half million home shortage, tweeting, quote, Godspeed, let's hope the cities don't block you that much, end quote. Finally today, the LA Times looks at how the likes of Google, Amazon, and Netflix are reshaping LA's real estate market as they pour hundreds of millions of dollars into campuses for their entertainment units. quote, companies including Google, Amazon, and Netflix have agreed to rent entire buildings before construction has even begun, setting off a scramble in recent years to erect billions of dollars' worth of new offices and production facilities to accommodate them. Content creators, as such businesses are known, have rented more than 4 million square feet of Los Angeles County office space in the last three years, real estate brokerage CBRE said, a bonanza of leases expected to prolong the current positive real estate cycle for landlords.

The explosive growth has lifted economic hotspots. in the region such as Hollywood, Calver City, and Playa Vista, as their biggest players expand and smaller businesses seeking their favor hasten to be near them. Skyscrapers in downtown L.A.'s financial district, Century City, and other time-honored office markets, still holds sway among old-school stalwarts, such as law offices and financial firms, but the big newcomers are planting their flags elsewhere

in unconventional structures that bring to mine cloistered college campuses or gated movie studios, end quote. those other places, those unconventional places, the tech-com entertainment companies want to move to include things like failed shopping malls and shopping centers where they're ripping out the escalators and walls to attract Silicon Valley types who love their cozy tech campuses and hate dumb old things like skyscrapers. See if this quote sounds familiar to you. You can have a commissary, child care, health and wellness facilities, Los Angeles office developer Drew Planting said.

You can create support systems for people so they can lead a pretty normal life while working, often for long hours, end quote. Ah yes, L.A. The Palo altification of your city is nigh. That's all for today. I've been your host, as always, Brian McCullough. My Twitter is at Brian MCC. The podcast subreddit is R-slash ride home. The bottom link in the show notes lets you subscribe to the ad-free feed right inside your podcast app itself. Talk to you tomorrow. When you have a lot of podcasts in your library, it can be a challenge to scan through all of the new episodes and decide what to play next. All too often, the episode you really want to hear can get lost in the stream of new shows. That's why the Castro app, for podcasts, recently introduced Top Picks.

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