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The Network Effects of a Currency Revolution

Facebook is the trigger for a currency revolution that’s long overdue — like it, or not


In the next few years, we may be seeing a transformation in the way we use currency. Recently, Facebook CEO Mark Zuckerberg proposed to lead a group of tech companies in creating a new currency know as ‘Libra’. Zuckerberg explained that the current public system of currency, banks, agencies, and financial regulators are costly and inefficient and by introducing this new private money network system, we can have a much more efficient way of transferring money that is “as easy and secure as sending a text message”. The article also discusses some of the powerful network effects from the introduction of this new technology. As people and companies start adopting this new technology, this will quickly spread to new people and areas. The more people that use this new technology, the higher the network benefits there will be as well, which has great potential in eliminating the high costs of transferring money including banking fees, foreign exchange costs, telecommunications costs, and interchange fees. Additionally, Zuckerberg claimed that that China has already been beginning to move towards similar currency systems and that if the US doesn’t make this movement as well, we will be further behind in the trend of adopting network technologies.



This topic relates to some of the concepts that we have covered in class. First the idea that the widespread use of this new currency network will have direct network benefits to everyone using them. The more people that use this new technology, the easier it will be to transfer money using Libra and the lower the transfer costs of money for everyone using it. Next, the quick spread of this technology relates to network cascades. As people start adopting this new technology, they will affect the people around them to switch to this new currency. Similarly, we can extend this model to much larger groups. If China adopts a similar system of currency, the US will be pressured to make this change as well.


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December 2019