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April 25, 2022

What is Facebook’s crypto currency Libra and what happened to it?

Welcome to the cryptohunt jam where we spend one minute a day to explain crypto. In plain english.

Did you know that Facebook was working on their own crypto currency? Let’s dive deeper into that project and the reason why it is now shut down.

The project was initially launched in 2017 with the goal to bring digital payments with very low fees to everyone, especially the underbanked. Depending on where you are tuning in from, you may not be aware: But many people do not have access to dependable bank accounts and have to waste billions of dollars in fees on services like Western Union.

Facebook, together with a consortium of payment providers such as Square and Visa and large merchants such as the Bookings group, set out to change that.

Libra, or Diem as it was rebranded to, had the goal of creating a digital stable coin backed by real world currency to guarantee its value. For every Diem you would exchange, the operators would buy a real world asset of that value. 

To keep complexity low, the decision was made to centralized control. While Diem was technically supposed to be on a blockchain, only a few approved partners would be able to mine it… and pocket the transaction fees.

The project was troubled from the beginning though. Very quickly, the largest partners all left the consortium. The US government was also getting worried about Facebook's market power in creating an unregulated de facto US dollar alternative.

Under the pressure, Facebook eventually scrapped the plans earlier in 2022, citing regulatory hurdles. 

But that doesn’t mean nobody is solving the original problem though. Stablecoins like USDC already exist, and blockchains like Celo are tackling the problems of the unbanked world, and in a decentralized way as well.

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