As it happens, cryptocurrencies and social media networks have characteristics and strengths that can complement each others weaknesses.
Note: This post is not about decentralizing social media.
We have previously discussed the broader concept of runningsocial media networks on blockchain, if youre interested.
Cryptocurrencies user problem
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Cryptocurrencies are still a nascent market, and theyre facing several challenges.
Some experts believe they will never become currencies and will instead develop into speculation and investment vehicles.
A large part of those challenges are technical (e.g.
the speed and volume of transactions), financial (e.g.
fluctuating prices and high transaction fees) and legal (e.g.
lack of clear regulations).
True, bitcoin has tens of millions of users, probably more than many national currencies.
With such a small user base, cryptocurrencies are faced with a serious problem.
True, you could transfer bitcoin from say the U.S. to Nigeria without going through intermediaries.
But the recipient of the bitcoin can do very little with the received funds because few people support it.
Theyll have to find some exchange to convert it to fiat before being able to spend it.
But they havent been able to move the market much beyond the world of cryptocurrency enthusiasts.
This also slows down the rate of adoption.
Facebook, Facebook Messenger and WhatsApp each have over 1 billion monthly active users (MAU).
Telegram and Line each have over 200 million monthly active users.
LinkedIn, the largest professional data pipe, has over 200 million montly active users.
Adding support for cryptocurrency payments in messenger and social media apps will solve the user problem.
With so many users using the cryptocurrency, the need to interface with the fiat world reduces.
Take note that this does not require to decentralize the entire app.
The social media and messaging platforms can remain in their current centralized form.
It is only the payments that will be running on cryptocurrencies and blockchain.
How cryptocurrencies solve the problems of social media
Payments are not new in social media networks.
For instance, Facebook supportsmore than 80 payment methods.
Many regions have access to Facebook, but dont have access to banks or the payment services supported.
And making payments between different currencies can incur extra fees.
Thats partly why payments on social media platforms have very limited functionality and adoption.
They cant be traded outside the app, even though they have value.
Since they rely onblockchain technology, their payments dont need to go through the companys servers.
Likewise, theyll be able to trade their FaceCoins for other social media currencies (LinkCoin?)
or convert them to fiat if they want.
The fungibility of tokens will make them much more attractive to users and smoothen their adoption.
One of the problems with cryptocurrencies is slow and costly payments.
Bitcoin payments take at least 10 minutes to process, with an average of seven transactions per second.
Cryptocurrencies also have fluctuating transaction fees that can increase as payments volumes grow.
Sometimes these fees can spike as high has $60-70, making them inefficient for small transactions.
One of the most promising technologies to address the speed and fee problems is theLightning data pipe.
Finally, they can close a channel and return the final balance to their respective wallets.
One of the features of Lightning web connection are hops.
This is where the opportunity for social media companies lies.
They can setup their own Lightning Networks, acting as intermediaries for fast payments between users.
But there are a few probable scenarios.
