Meta is at it again. The company formerly known as Facebook now wants to issue “Zuck Bucks”, a virtual currency to be used on its platform, alongside “social tokens” and “creator coins.” These would be rewards for users who were active on the platform, like contributing to Facebook groups, the Financial Times revealed earlier this month. 

The Zuck Bucks moniker is just an internal codename used by staffers, but the new push comes as Meta is still extricating itself from the smoking rubble of its failed Diem project, envisioned as a global cryptocurrency that would run on a blockchain launched by Facebook. 

Meta’s latest metaverse play is important – but not because of the project itself. A version of centralized, in-game currency might be a hit or not. But the very fact that Meta is experimenting with concepts like “social tokens” and “creator coins” could itself move the needle on those ideas. 

After all, it happened once before: when Facebook’s ill-fated Libra project wound up creating a groundswell of interest in stablecoins and central bank digital currencies. 

Facebook’s first attempt at a currency: Facebook Credits

Before we get into Libra and its unintended consequences, it’s worth remembering that this isn’t Facebook’s first rodeo with an in-app currency. 

When Facebook was just a wannabe tech behemoth, it made money mainly through ads, but also through a payments business, using a product called Facebook Credits. 

Facebook Credits was the on-platform currency of Facebook. If developers who hosted their applications on Facebook wanted to charge their users, they had to do so in Facebook Credits. They got 70 cents on the dollar and Facebook got the rest. 

Facebook Credits fueled the rise of Zynga, a startup games studio that had a hit on its hands, a new type of game called Farmville. Anyone could install and play Farmville on Facebook. But they could get further in the game if they paid for upgrades using Facebook Credits. 

This was an entirely new model in gaming, and it presaged the “free to play” model of mobile gaming, where players could shell out for more and more boosts and upgrades to progress through the game more quickly. 

The combination of Farmville’s “free to play” model created a tidal wave of cash. In 2010, a year after Facebook Credits was being tested with Farmville, the game was generating $500 million in revenue, with a third of that going to Facebook thanks to the Credits. 

For a moment, the payments industry worried that Facebook would eat its lunch. In theory, it could use Facebook Credits not just for games, but all the applications built on Facebook, and maybe even things outside Facebook with the help of its Facebook Connect system. 

“If they can get 50 million registered credit cards, why wouldn’t they use them to pay for your newspaper subscription?” Alex Rampell, who ran a company called TrialPay, told the New York Times in 2010. Rampell is now a general partner at Andreessen Horowitz specializing in payments. 

But Credits’ day in the sun would turn out to be brief. The feature was responsible for 12% of Facebook’s revenue when it went public in 2012, but it would be shut down the next year. 

Facebook’s rationale was that pricing things in local currencies made more sense. But the Credits shutdown also coincided with new guidance from the financial crimes regulator, FinCEN, around virtual currencies, including bitcoin, that year. It seemed Facebook didn’t have the appetite for a regulated financial services business. 

How Libra spurred on digital currencies

Six years later, Facebook would try again in payments, but with an even more ambitious idea: a stablecoin called Libra, which would operate on its own blockchain. 

By this time, Facebook’s blockchain skunkworks had grown from a solo operation under the purview of wunderkind investor Morgan Beller to a full-blown project led by former PayPal honcho David Marcus. 

Libra did a flashy unveiling, including heavyweight partners who bought into its vision like Mastercard, Spotify, Uber, Coinbase, Mercy Corps and more. Facebook was getting serious about virtual money. But, ultimately, after pushback from regulators around the globe, the project was wound down before a currency was ever launched and its assets were sold off to a California bank.  

Libra’s many pivots and regulatory acrobatics to try to stay afloat are by now well documented. But even as it crashed and burned, Facebook’s efforts at crypto dominance left a lasting legacy: focusing the minds of central bankers and crypto engineers on the power of a global stablecoin. 

Chief among the institutions spooked by Libra’s emergence was the China’s central bank. It was already wrestling with a shadow-banking industry through virtual currencies on platforms like AliPay. And it looked like Facebook was about to create a new payment system entirely out of its control. 

So, China decided to get in on Facebook’s game, launching its own digital currency in 2020. The head of the Chinese central bank’s digital currency unit said Libra was a key reason why it decided to launch the digital yuan, as a hedge to the unrestricted reach of a corporate currency. 

The advent of a digital yuan set off a race among central banks to build their own digital currencies. At first it was small states, like the Bahamas with its ‘Sand Dollar’ project. But today, the U.S. Federal Reserve, the Bank of England, and a consortium of Japanese corporations are all working on digital dollars, pounds sterling and yen. Libra may be gone, but the CBDC race keeps heating up. 

Zuck Bucks' potential side effects

While Meta’s next payments play promises to be centralized, ironically it could now generate knock-on effects in the crypto world.

So far, concepts like “social tokens” and “creator coins” have been incubated and tested by crypto projects like Roll, BitClout and others. But the relatively small reach of these projects has limited their usefulness and growth. Meta could change all that. 

If the platform’s billions of users are exposed to concepts from crypto-land, the legacy of this latest iteration of Zuck Bucks could be a flow of users from centralized Meta platforms to decentralized crypto versions. 

If this movement from Facebook to decentralized crypto projects does occur, it would be the opposite of Libra, where a blockchain project triggered a race among central banks leading to the possibility of more centralized digital tokens. It would be an ironic reversal – and perhaps one that crypto natives would celebrate.

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