In late August, messaging giant LINE launched its own proprietary blockchain, the LINK chain, and its own cryptocurrency, the LINK token. While LINE is the first about traded aggregation to have launched its own blockchain mainnet, it isn’t the first social media arrangement to embrace cryptocurrencies. In this regard, it is abutting the ranks of Kik, Kakao, Telegram, and (possibly) Facebook.

All these companies have shown absorption in adding cryptocurrency abutment on their networks, and some of them have already taken major steps. This all begs the question: At a time where cryptocurrencies are facing a major slump and there’s a lot of abrogating affect about ICO scams, why would accustomed companies endorse cryptocurrencies?

As it happens, cryptocurrencies and social media networks have characteristics and strengths that can accompaniment each other’s weaknesses. To be fair, not anybody is doing it correctly, but the accepted idea of having cryptocurrencies on social media is a able one.

Note: This post is not about decentralizing social media. We have ahead discussed the broader abstraction of running social media networks on blockchain, if you’re interested.

Cryptocurrencies’ user problem

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Ten years after the apparatus of bitcoin, we have more than 1,000 cryptocurrencies, but none of them have become a boilerplate method of payment. Cryptocurrencies are still a beginning market, and they’re facing several challenges. Some experts accept they will never become currencies and will instead advance into belief and advance vehicles.

A large part of those challenges are abstruse (e.g. the speed and volume of transactions), banking (e.g. clashing prices and high transaction fees) and legal (e.g. lack of clear regulations).

But one of the better hurdles that bitcoin and other agenda currencies face is that not enough people are using them and not enough merchants, retailers and casework abutment them.

True, bitcoin has tens of millions of users, apparently more than many civic currencies. But let’s not forget that bitcoin was declared to be a global acquittal system that enables users to action payments beyond bounded borders after going through centralized banking institutions.

With such a small user base, cryptocurrencies are faced with a austere problem. True, you can alteration bitcoin from say the U.S. to Nigeria after going through intermediaries.

But the almsman of the bitcoin can do very little with the accustomed funds because few people abutment it. They’ll have to find some barter to catechumen it to fiat before being able to spend it. The about-face action is clunky, costly, and is accountable to local regulations, which all add to the abrasion and the adversity of the experience.

There have been several attempts at adopting cryptocurrencies in altered industries and bringing clamminess to the market by creating decentralized exchanges where users can trade altered tokens and cryptocurrencies. But they haven’t been able to move the market much beyond the world of cryptocurrency enthusiasts.

The many scams and ambiguous practices attributed to cryptocurrencies have also caused a accepted sense of apprehension toward cryptocurrencies and the companies that issue them. This also slows down the rate of adoption.

The bottom line is, as long as a very large number of people don’t start using them, cryptocurrencies have very little chance of arising from their niche and will remain at the mercy of governments, banking institutions and their own ethical and abstruse challenges.

How social media solves cryptocurrencies’ challenges

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Large social media networks achieve the most important claim of cryptocurrencies: a large user base. Facebook, Facebook Agent and WhatsApp each have over 1 billion account active users (MAU).

Telegram and Line each have over 200 actor account active users. LinkedIn, the better able network, has over 200 actor montly active users. In many regions, social media and messaging apps have become one of the main mediums for daily business operations and growth.

Adding abutment for cryptocurrency payments in agent and social media apps will solve the user problem. In a academic scenario, even if 10 percent of Facebook’s MAUs decide to use FaceCoin, it will become the most accepted cryptocurrency in the world.

Moreover, social media and agent applications are already accouterment users with the networking and communications infrastructure, which means users don’t need to use several altered apps to achieve a use case that involves payments, and developers can create endless applications on top of the social media’s belvedere and its cryptocurrency to create new business models.

With so many users using the cryptocurrency, the need to interface with the fiat world reduces. Users who earn FaceCoin can spend it to accept casework and goods from other users on the belvedere after converting their coins to fiat.

Take note that this does not crave to decentralize the entire application. The social media and messaging platforms can remain in their accepted centralized form. It is only the payments that will be active on cryptocurrencies and blockchain.

How cryptocurrencies solve the problems of social media

Payments are not new in social media networks. For instance, Facebook supports more than 80 acquittal methods. But when you have a user base that spans the entire globe, it’s hard to cater to needs to everyone. Many regions have access to Facebook, but don’t have access to banks or the acquittal casework supported. And making payments amid altered currencies can incur extra fees.

That’s partly why payments on social media platforms have very bound functionality and adoption.

Facebook could’ve created its own in-app currency, like the ones you find in games such as World of Warcraft. But the botheration with in-app currencies is that they’re tied to the aggregation that runs the app and its servers.

They can’t be traded alfresco the app, even though they have value. That’s way users have resorted to creating their own anarchistic markets for in-app currencies, which often become subject to fraud and scams.

The account of cryptocurrencies is that they are absolute of the social media belvedere in which they’re used, even if the same aggregation has issued them. Since they rely on blockchain technology, their payments don’t need to go through the company’s servers.

For instance, users can buy FaceCoin at decentralized exchanges that supports their method of payment, or trade other cryptocurrencies they have (BTC, ETH…) with FaceCoin and anon alteration it to their wallet address. Likewise, they’ll be able to trade their FaceCoins for other social media currencies (LinkCoin?) or catechumen them to fiat if they want.

The fungibility of tokens will make them much more adorable to users and abrade their adoption.

Social media and crypto payments on the lightning network

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Payment fees and speed is one of the areas where social media networks and cryptocurrencies can truly account from each other’s strengths.

One of the problems with cryptocurrencies is slow and costly payments. Bitcoin payments take at least 10 account to process, with an boilerplate of seven affairs per second.

Other currencies such as Litecoin and Bitcoin Cash have addressed the botheration by abbreviation the breach or accretion the block size (increasing the number of affairs it can action per 10-minute interval). While this increases the throughput, it is still a far cry from the volumes that a accepted cryptocurrency should be able to support.

Cryptocurrencies also have clashing transaction fees that can access as payments volumes grow. Sometimes these fees can spike as high has $60-70, making them inefficient for small transactions. This will surely be a hurdle for social media apps, where people will likely want to make small circadian payments.

One of the most able technologies to abode the speed and fee problems is the Lightning Network. Made on the Bitcoin protocol, the Lightning Arrangement enables users to make several payments after registering all of them on the blockchain, where all the slow processing takes place.

Users can create side channels amid each other by registering a single transaction on the blockchain and locking in agreed amount of coins on the channel. They can then make any number of affairs amid each other after registering them on the blockchain, as long as their total amounts remain under or equal to the locked-in amount. Finally, they can close a approach and return the final antithesis to their corresponding wallets.

One of the appearance of Lightning Arrangement are hops. When two new users want to action payments, they don’t necessarily need to create a new approach if there’s already a user that they both have open channels with. The third user becomes an intermediary, processing the acquittal with a hop through the two channels, taking a very basal fee for the service.

One of the challenges of the Lightning Arrangement is that it requires many users to have a array of side channels open to be able to action all payments after too many hops.

This is where the befalling for social media companies lies. They can setup their own Lightning Networks, acting as intermediaries for fast payments amid users.

This makes sure that the arrangement is well accurate and most users will make their payments with a best of two hops, going through the provider. The calm fees will also serve as a source of acquirement for the social media companies, giving them a chance to amend their questionable monetization policies.

Some people might be afraid that such a model will accumulate Lightning Networks in social media companies and allow them to behest their own rules, such as adopting the fees. This isn’t true. If users think the fees of the social media aggregation are too high, they can always setup their own lightning networks while attention the optimal experience.

Social media companies will have a aggressive advantage (large server basement that can accommodate ceaseless acquittal channels), but not too high an advantage to anticipate users from bypassing them if they want.

The future of cryptocurrencies in social media networks

At present, it’s very difficult to adumbrate how the future will unfold for cryptocurrencies and social media networks. But there are a few apparent scenarios.

One accessible aftereffect is that social media currencies grow into complete decentralized economies, creating an entire ecosystem of payment-related apps that users can employ for altered purposes inside and alfresco the social media network.

That can happen if social networks such as Facebook manage to bring a large allocation of their users onto their acquittal networks. In that case, what we’ll apparently see is that social media currencies will outdistance the first bearing of cryptocurrencies and become the future of agenda payments.

Another accessible book is that these cryptocurrencies will pave the way for the acceptance of main agenda currencies into social networks.

As users become more accustomed and acclimatized with cryptocurrencies, they’ll apparently want to see abutment for bitcoin and possibly ether in their admired social media apps. In that case, while FaceCoin and its ilk won’t go away, but they will abide to exist under the shadow of their forerunners.

We have yet to see which one of these scenarios will play out, but some agitative times are ahead.