FinTech: Facebook’s new crypto wallet: Novi

What is a crypto wallet?

A cryptocurrency wallet is a medium through which cryptocurrencies can be sent, received and spent on. It stores private keys, i.e. passwords, that enable you to access cryptocurrencies that the consumer owns, providing them with an element of protection.

There are two main types of crypto wallets: hardware and software. Hardware wallets store keys on a device that isn’t connected to the Internet (for example, Ledger devices resemble USBs) and because of this, they are normally the most difficult to hack and are therefore the most secure.

On the other hand, software wallets use computer software. These are generally less secure as several types of software wallets, like online wallets are controlled and operated by a third party, thus increasing the risk of hacking

What’s happening to Facebook’s crypto wallet?

Facebook’s crypto wallet, Novi, is a virtual wallet designed to work through Facebook and related apps such as WhatsApp and Facebook Messenger, enabling consumers and SMEs to “move money around domestically and internationally in a quick and affordable way”, according to David Marcus, head of Facebook’s financial division F2, in a post from Wednesday 18th August. It’s designed to hold stablecoins – cryptocurrencies offering price stability due to being backed by a reserve asset such as gold or the US Dollar. Whilst Marcus claimed that the wallet was “ready to come to market”, it has not yet been made clear which stablecoins the wallet would hold. Marcus also explained how stablecoins could prove more effective than the mainstream financial system, due to the added ability of being able to implement extensive controls within them and their wallets.

In more recent news, there have also been talks about the implementation of NFTs in Novi. NFTs, non-fungible tokens, are digital assets representing real world items, for example Jack Dorsey’s first ever Tweet. They enable artists and creators to monetise online work more easily. NFTs often utitlise blockchains like cryptocurrencies, although unlike cryptocurrencies, they have unique digital signatures making it impossible to exchange them with other NFTs of identical value (unlike with Bitcoin or traditional currencies like the GBP or USD).

Whilst Facebook is still in the early research stages of exploring the viability of NFTs in their Novi platform, Marcus believes that by leveraging them, Novi could have the potential to have an even greater positive impact, creators and consumers alike

Having understood the negative public scrutiny of Facebook dipping into the financial industry, Marcus assured that he’s not “advocating for blind trust”, but rather “advocating for a shot of earning people’s trust over a long period time”, especially judging by the revolutionary impacts  that Facebook has had in the past of attracting competition to areas like communication and consequently making texting and international calling more affordable and hence more accessible.

–James Gordon, University of Warwick

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