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The Ledger: Facebook’s Self-Interested Crypto Reversal

Earlier this year, I warned you about Big Tech’s crypto conspiracy—a movement by today’s Internet giants to strangle the virtual currency industry in its nascency. At the time, behemoths like Google, Facebook, Twitter, and others were banning cryptocurrency-related advertising across their platforms. As I wrote then, “Whether Big Tech is conscious of the biases it possesses or not, there’s no denying the incumbents have an interest in smothering a would-be usurper in its crib.”

Now five months after becoming the first major player to squelch all crypto ads on its network, Facebook says it will begin to ease the moratorium. It’s about time.

When Facebook issued its initial injunction on January 30th, the company intimated it had enacted a temporary ban. “We will revisit this policy and how we enforce it as our signals improve,” said Rob Leathern, a Facebook product management director, in a blog post. Facebook claimed the supposed moral high ground, stating its draconian measure was designed to protect users from “financial products and services that are frequently associated with misleading or deceptive promotional practices.” (Pray tell, where was that conscience when the company accepted divisive, Russia-made political ads during the 2016 election?)

Leathern said in an update this week that Facebook has been able to “refine” its policies and create a path to publicity for “pre-approved advertisers….But we’ll listen to feedback, look at how well this policy works and continue to study this technology so that, if necessary, we can revise it over time.”

This all sounds very reasonable, sure. And yet—let’s look at what’s been going on inside Facebook in the meantime. The company has reshuffled its leadership, reassigning David Marcus, once head of messaging products, to helm a mysterious blockchain team. (The ex-president of PayPal is a director on the board of Coinbase, the biggest U.S. Bitcoin exchange, mind you.) Recent reports have even suggested that Facebook is exploring minting its own cryptocurrency. Hmm.

There’s no disputing that the fledgling crypto industry is filled with hucksters, con artists, and get-rich-quick scammers. But as David Pakman, an investor at the venture capital firm Venrock, told Fortune on a past episode of Balancing The Ledger, it seems “just a little bit too convenient for my taste” that Facebook, a massively centralized corporation, should put the kibosh on the one budding segment of the economy that might pose a legitimate threat to its supremacy. And now that Facebook is reportedly preparing an entree into the market, the company has, again quite conveniently, reversed its position.

Facebook’s drastic ban may very well have stemmed from a sincere attempt to combat fraud, but it would be naive to disregard how the company has benefited from its over-broad forbiddance. I’m inclined to side with Ted Livingston, CEO of the crypto-pivoted chat app Kik, who has often griped about Facebook’s proclivity to “copy and crush” upstart rivals. (Exhibit A: Snapchat, whose daily active user count has stagnated even as the value of Facebook’s Instagram has skyrocketed.) Facebook’s approach to crypto seems to be just another example of its ruthless business tactics.

Let us remember that Facebook’s ad ban came weeks after Facebook CEO Mark Zuckerberg said he planned to “go deeper and study” cryptocurrency as part of his New Year’s resolution. Clearly, the company and its leadership have been thinking about crypto for some time, even as it pulled the rug out from underneath tender-footed opponents.

In an op-ed published by the Wall Street Journal this week, Mark Epstein, an antitrust attorney, argues that these were “dubious bans,” and he notes that the U.S. Supreme Court ruled in the ’50s that businesses cannot refuse to run ads to harm competitors. While the circumstances differ, today’s debacle echoes that earlier case; tech titans have used their privileged position to deny exposure to rivals. Poetically, this demonstrates the most compelling argument for decentralized, cryptocurrency-based platforms to exist in the first place.

Indeed, it would seem that Facebook, failing to secure a head-start in the crypto race, manufactured a healthy lead by kneecapping the competition, Tonya Harding-style.

GONE FISHIN’

Heads up, folks: This newsletter is going dark next Saturday as we extend our July 4th vacation through the weekend. When you don’t receive a Ledger dispatch, don’t be alarmed! Your beloved columnists are taking a break. We hope you enjoy the time off, too.

By the way, do you prefer to receive this newsletter on Saturday, rather than Friday? Let us know. Send feedback and tips to ledger@fortune.com, find us on Twitter @FortuneLedger or email/DM me directly at the contact info below.

Robert Hackett
@rhhackett
robert.hackett@fortune.com

THE LEDGER’S LATEST

To Catch a Bitcoin Thief, Call These Detectives by Jeff John Roberts

Some Cryptocurrency Investors Are Giving Up on Bitcoin—and Cashing Out of Coinbase by Jen Wieczner

Why the Structure of Andreessen Horowitz’s New $300 Million Crypto Fund Matters by Polina Marinova

Authorities Seize $5.2 Million in Cryptocurrency Following Europe’s Largest LSD Bust by Chris Morris

Worried About Your Data Privacy? Blockchain Could Help by Shawn Owen

How Should We Regulate Blockchain? It Depends on Which Country You Ask by Zhuling Chen

DECENTRALIZED NEWS

To the moon… Coinbase CEO starts a charity to “give crypto”—and it’s hiring. New York Times profiles blockchain leaders. A list of reasons to HODL Bitcoin. R3 to get crypto tokens. Andreessen Horowitz’s first female general partner is a crypto expert. LINE to debut crypto exchange. Wall Street is readyBlockchain VR.

.…Rekt: Prices hit new lows. ICOs slowly die. Woz calls a bubble, as does Alibaba’s Jack Ma, as does this Australian central banker. WTF is the World Cup of blockchain, and why? Cryptojacking is still hot. You can unmask Zcash customers under certain circumstances. Bitcoin alert system scrapped. Block.one CTO says trust in EOS blockchain governance was damaged.

BALANCING THE LEDGER

☝Click to view.

Kyle Samani is a managing partner at Multicoin Capital, a multimillion-dollar crypto fund that invests in blockchain projects and takes out long and short positions on various virtual coins. He dropped by Balancing the Ledger to share some regrets about the launch of the EOS blockchain, as well as to reveal which crypto tokens he bets will soar, and which will crash.

BUBBLE-O-METER

Bryce “Zooko” Wilcox, CEO of the Zcash Company, disclosed his eye-popping salary this week at a conference for his namesake, privacy-oriented cryptocurrency, Zcash. At the present rate, his compensation amounts to 2,033 Zcash tokens—or more than $300,000—per month.

Zcash issuance per month (where 1 ZEC token = ~$168):

  • Miners: 80%, or 175,000 tokens ($29,400,000)
  • Zcash Foundation: 3%, or 6,563 tokens ($1,100,000)
  • Zcash Company: 2.8%, or 6,125 tokens ($1,030,000)
  • Zooko Wilcox: 0.9%, or 2,033 tokens ($342,000)

As Jackson Palmer, creator of the joke cryptocurrency “Dogecoin,” mused in a tweet: “I really did this whole ‘starting a cryptocurrency’ thing wrong, didn’t I? 🤔

MEMES AND MUMBLES

‘X’ marks the spot. You know those intrepid nerds who trawl the beach with metal detectors? The below hunt is sure to keep them busy for hours. (HT Alex Konrad at Forbes, who deserves a day at the beach during which his work does not tagalong.)

Get digging, I guess.

FOMO NO MO’

Don’t miss out: Mike Maples, Jr., a venture capitalist and partner at Floodgate Capital, penned an economic forecast for blockchain tech in an insightful Medium post. The essay is replete with a wide variety of arcane historical references, such as the English practice of maintaining a “Commons,” JP Morgan’s role in the development of the railroad, the advent of the stock market and corporate governance, the the depletion of Canadian cod fisheries, and the Nobel Prize-winning work of the economist Elinor Ostrom. Maples argues that “21st Century JP Morgans, Rockefellers, and Carnegies” will lead us to a new age of abundance, improving the world’s general standard of living through blockchain-based businesses.

Without a governance markets for a Commons, you will see a tragedy of the commons or the rule of the mob when you try to scale. But if you have scalable decentralized governance at the core, you now have a new platform to fuel new businesses that create massive abundance in ways never before possible.

Just like a stock market was a financial platform for creating the scalable corporation, blockchains can be governance platforms for enabling the scalable commons.

We hope you enjoyed this edition of The Ledger. Find past editions here, and sign up for other Fortune newsletters here. Question, suggestion, or feedback? Drop us a line.