The rest of the once ambitious cryptocurrency Meta project is sadly coming to an end. The beta program for Novi, the social media giant’s Meta (formerly Facebook) money transfer service that uses an eponymous cryptocurrency wallet, will stop working on September 1, according to a notice on its website. It’s not a service we’ll definitely miss, as the pilot only covered parts of the US as well as Guatemala when it launched last October.
Novi’s planned phase-out is not surprising. Earlier this year, Meta and its partners stopped work on Diem, a related cryptocurrency project launched in 2019 under the name Libra, when Meta was still called Facebook. In another blow to plans, David Marcus, one of the CEOs and the most prominent mastermind behind Meta’s rush into cryptocurrency, has decided to leave the company and go into entrepreneurial ventures.
Project Novi has gotten a lot of love in its short history. Partners withdrew, many developments emerged and many criticized the plans. CEO Mark Zuckerberg finally turned his attention to the metaverse and the end of the crypto project seemed inevitable.
So, without further ado, here’s what was really interesting about that project that never came to fruition and what circumstances led to that harrowing end.
Why did Facebook want to break into the cryptocurrency space?
Diem was not actually a cryptocurrency for Facebook. It was a project of the association of the same name, which Facebook originally co-founded as the Libra Association. The Federation was to act as its monetary authority. The project is designed to “enable billions of people with fast financial transactions,” and the idea behind the idea cited 1.7 billion people around the world who have no bank accounts and would therefore be very welcome to use that currency .
Of course, Facebook had its own interest in cryptocurrencies long before Diem. The social network has operated a virtual currency called Credits for about four years as a way to make payments on games played within Facebook.
Zuckerberg said sending money online should be as simple as sending photos. Diem is designed to make transferring money online easier and cheaper, which can also attract new users to the social network. Zuckerberg acknowledged that people’s use of cryptocurrency would potentially benefit Facebook by making advertising on the social network more desirable, and therefore more expensive and profitable for the platform.
Did Facebook/Meta have direct control over Diem?
No, Meta was a Diem member (membership is represented by Novi.). The union hoped to grow to 100 members, most of whom would raise $10 million. Each member had the same vote in the union, so the Meta technically had no say in decisions more than any other member.
However, Meta played a major role in the early stages of the project that cannot be ignored.
Why did the union members withdraw without warning?
Some of the senior founding members seemed to be suddenly in awe. A quarter of the 28 founding members withdrew before the assembly’s first meeting in Geneva. Deviations include PayPal, eBay, Stripe, and financial services giants Visa and Mastercard. The departures were a big loss because these members brought expertise in payments and cash receipts technology.
How will Diem differ from other cryptocurrencies?
Let’s start with what other cryptocurrencies looked like, like Bitcoin and Ether. Like them, Diem coin existed entirely in digital form. There are no physical banknotes or coins. Like other cryptocurrencies, Diem’s transactions had to be recorded in a software ledger known as the blockchain.
Diem would be pegged to the US dollar, a format commonly known as stablecoin. This contrasts with bitcoin, ether and some other cryptocurrencies which are not backed by anything and fluctuate wildly up and down in response to any external factors.
Initially, the plan was to use a pool of assets to shore up the value of the cryptocurrency. The union did not say what these assets are, but indicated that they will be denominated in major global currencies, such as the dollar and the euro, which have a good level of stability.
The consortium would buy more underlying assets to create a new Diem, or “sock”, when people wanted more cryptocurrency. When people withdraw money, the association sells those assets and “burns” Diem.
Backing up an asset is nothing new. In fact, there are many rumors circulating that the US dollar was backed by gold until 1971. The value of the Hong Kong dollar is pegged to the US dollar and is managed by the currency board, which can only issue new banknotes if it has sufficient reserves.
How do cryptocurrencies compare to the dollar?
The US dollar is a strong and widely accepted currency all over the world. Some countries love the dollar so much that they use it instead of their own money. The dollars earn interest, but at current rates it won’t add up to much.
Of course, the dollar has weaknesses. Using dollars, especially in some countries, can be expensive because banks take a cut to convert them into local currencies. If you use dollars on a prepaid card, the credit card company will likely charge the merchant tax on the value of your purchases. If the US government prints too many dollars, unprecedented inflation could follow.
Despite the hype, cryptocurrencies are not yet widely used. Try buying a cup of coffee with Bitcoin. (Yes, it’s possible, but it’s not practical.) The value of cryptocurrencies is volatile, often rising or falling by more than 5% per day, making it difficult to know the long-term value of an asset.
Cryptocurrencies can make it easy to send money directly to someone. Bitcoin transactions are not actually traceable, although it is difficult to trace them. Similarly, using bitcoin is not completely anonymous. This is an alias, which means your bitcoin address is registered even though your identity is not.
Some cryptocurrencies, notably bitcoin, have a limit on the number of coins that can be minted, which means that owners of existing coins do not have to worry about the arbitrary creation of new coins, although this may cause other problems in the future. create.
Was Diem just a ploy so Meta could get hold of users’ financial data and send more targeted ads?
We heard you, dear reader. Meta and its social network, Facebook, do not have a good reputation for protecting privacy.
The social network said not to worry. What else do you expect? When the plans were first announced, Meta took pains to indicate that its wallet was in a subsidiary of the social network. This arrangement is designed to regulate the wallet company by the authorities and prevent money laundering and other financial crimes. The company also said it would keep financial data separate from Facebook’s social data.
Would Project Novi have succeeded if it had continued? Probably! The world is changing day by day, and the financial markets and the form of monetary transactions are changing with it. Digital currencies certainly represent an upcoming economic revolution, but they currently lack the required stability compared to paper currencies and the many changes in the economic arena.
Unfortunately, Mark Zuckerberg did not put enough effort into making the project successful, and the partners failed at a critical time, and in return were faced with many government inquiries that imposed numerous restrictions, all of which coincided with the creation of the metaverse project core, which reversed all plans and forced Meta to accept the loss of the Novi project. And Diem Digital Coin!