What Happened To Facebook’s Libra (Crypto)?
In June 2019, Facebook announced that it would be launching its very own cryptocurrency under the name Libra. But if you look at the markets, Libra is nowhere to be found. So what happened to this pending cryptocurrency? And is it a good cryptocurrency to invest in?
Facebook's Cryptocurrency / Libra Background
Libra is a cryptocurrency that Facebook announced it was creating back in 2019. The coin was supposed to make it much easier for people to send and receive money online. It was also intended to for people without a bank account to be able to access financial services typically provided by banks. Facebook announced that Libra would be built on a blockchain network just like any other cryptocurrency. It was supposed to be much faster than the rival blockchains like Ethereum and Litecoin and would be run more like a stablecoin, with fiat currencies backing the value of the coin.
The project would be open source, and eventually be a public blockchain. Facebook also stated that the company would not oversee the blockchain and rather it would be run by a specific association assigned to the blockchain called the Libra Association. This association would be made up of over 100 big name companies and would be based in Geneva, Switzerland.
What Happened To Libra?
When Facebook announced the cryptocurrency, they didn’t exactly plan for the backlash they received. The US government was especially not keen on a large company like Facebook running a stablecoin type cryptocurrency. They were afraid of the social and economic implications, as well as to how they were going to govern it. Facebook was scheduled for two different congressional hearings in late 2019 to discuss the cryptocurrency.
These hearings, unsurprisingly, did not go well. In fact these hearings caused a huge delay in the release of the cryptocurrency. The coin was originally supposed to be released in mid-2020, but with regulations tying up the legalities, Facebook had to make a decision to change or abandon the project altogether. Almost all of the companies which were once part of the Libra association abandoned the project sometime in late 2019 or early 2020.
Say Hello to Diem!
Of course Facebook didn’t want to let go of the possible cash cow they created. And when Libra was tied up in courts and regulations, Facebook introduced a new cryptocurrency which would be based on the same principals and technology as Libra without all the regulatory issues. This new coin is called Diem, and it is registered in Switzerland, bypassing a lot of the regulatory problems experienced by Libra. Essentially, Facebook took Libra and made it into Diem.
They did not give a launch date for this coin, but on April 20, 2021, a news report was released saying that the coin would be released sometime later this year in 2021, for beta testing.
What Are The Differences Between Libra and Diem?
Although both of these projects are based on the original Libra blockchain, they are not the same project. This is because Facebook announced Libra before they fully understood how to run a stablecoin, and as the years have passed, they have learned a little more about what is needed to run a stablecoin.
The main difference is that Libra was supposed to be a stablecoin which wasn’t backed by any certain currency. Rather Facebook wanted it to be backed by a pool of all currencies. But of course, this simply wasn’t feasible. Thus, Diem will be released as a USD backed stablecoin only, and there will be no other currencies involved.
Another change the blockchain underwent is that it changed from planning to be a more private blockchain controlled by Facebook, to a completely public blockchain like Ethereum. This means that developers will be able to develop on the Diem platform in the same way that they currently can on other public blockchains.
Besides some changes, Diem has also specified some variables that Libra left unnamed. Libra was supposed to be a “fast” blockchain, and it seems they’ve somewhat achieved this goal as Diem will process 6 to 24 transactions per second to start, with updates that will eventually make it possible to process up to 1000 transactions per second. Diem has also announced that it will have near zero transaction fees, which is much less than what most blockchain companies currently take. Diem is no longer backed by the large number of companies which originally came out to back the Libra project. Rather, Diem is backed by a few smaller and few larger companies. The Diem supply will not have a hard ceiling like Bitcoin so the number of Diem available in the market will be fluid.
So Is Diem Legal?
Well, this is the complicated part, even though the Diem cryptocurrency is now based in Switzerland to bypass the American regulations, it cannot bypass the Swiss regulations. In order to be considered legal currency, Diem must be approved by the Swiss Financial Market Supervisor Authority (FINMA) and as of the writing of this article, this has not yet happened.
Should You Buy Diem?
This is a difficult subject, as the currency is currently not available for sale, but it will likely hit markets soon. But here’s the deal, Diem is a stablecoin, and this means that it has no investment potential because its value will be pegged directly to the US dollar. So if you want to buy Diem, it would be for the purpose of using it as a digital form of payment. And because it has not yet been announced where Diem will be accepted and what markets will carry it, it’s impossible to know how useful or not useful this stablecoin will be. Thus, you cannot yet make any decision as to whether or not you will purchase the Diem coin.
Overall, when news of Libra hit the market, people were positive of the outlook of the coin. But Libra has not help up to its expectations. The project has changed and been renamed, and even though the launch is coming soon, it’s impossible to know what this new coin, Diem will be like. So whether you were pro Libra when it was announced or not, it’s better to wait and see what Diem will be before you get too excited for Facebook’s pending cryptocurrency.