Got a spare Zuckerbuck? Social networks may give cryptos weight

Social networks and messaging providers may give legitimacy to the cryptocurrency market, says data and analytics company GlobalData.

Despite widespread media coverage, cryptocurrencies have not made much progress toward becoming a mainstream currency.

With subscriber growth and active users continuing to be a cornerstone of monetisation, social networks and messaging providers are struggling to become profitable due to geographical preferences and lack of scale.

As a result, these providers are turning to cryptocurrencies for revenue and product enhancements in the hope that cryptocurrencies will create self-sustaining economies.

In September 2017, Kik Messenger became the first mainstream company to announce plans to raise money by issuing a cryptocurrency, KIN, in an initial coin offering (ICO).

It raised nearly US$100m from accredited investors and the public.

Cloud-based instant messaging service Telegram has even more ambitious aspirations than Kik aiming to use a payment platform that uses multi-blockchain architecture to compete with Mastercard and Visa.

It is reportedly gearing up for its own cryptocurrency and could raise as much as US$500m in the pre-ICO sale.

Facebook's Mark Zuckerberg has also indicated that the company will research the feasibility of incorporating cryptocurrency into its services.

With more than 2 billion monthly active users, the company could drive mass adoption of a cryptocurrency.

GlobalData telecom analyst Lynnette Luna says, "The blockchain, which cryptocurrencies operate on, lends itself well to this type of strategy because the technology does not require a third party, such as a bank or even a social network, to settle the transaction.

The blockchain-steered social network model allows users to wield more commercial ownership of their data and also get paid directly for their user-generated contributions.

"It's a good time for a strategy rethink - the social network is trying to go back to its roots of connecting friends and family by de-prioritising public content and content from publishers. The key for both Kik and Telegram are to find ways to encourage their respective ecosystems to freely spend their currencies rather than hoarding them for speculative purposes.