Bloomberg had earlier reported that the association, which oversees the digital currency, was considering a sale of the project in order to return capital to its members. Meta owns about a third of the project, according to Bloomberg, with the remainder in the hands of a variety of investors, including Uber, Shopify and Union Square Ventures.
The sale is hardly unexpected. Diem has been scaled back since it was first pitched as Libra in by Facebook as a global stablecoin. Like Facebook, the cryptocurrency rebranded, adopting the Diem name in December as concerns mounted. The project faced more trouble when David Marcus, one of the executives behind Meta's push into cryptocurrencies, said last year that he would leave the company to pursue entrepreneurial projects.
Diem hasn't gotten much love in its brief history. Partners have bolted from the project , details have shifted , and legislators have criticized the plans. Meta's launch of a cryptocurrency wallet called Novi prompted a backlash, with a group of five Democratic senators urging Meta CEO Mark Zuckerberg to stop the Diem project.
Diem wasn't actually Facebook's cryptocurrency. It was a project of the Diem Association, which Facebook originally co-founded as the Libra Association. The association would've served as its monetary authority. The project was designed to "empower billions of people," and organizers cited 1.
Of course, Facebook had its own interest in digital cash, which predates Diem. The social network ran a virtual currency , called Credits, for about four years as a way to make payments on games played within Facebook. Zuckerberg has said sending money online should be as simple as sending photos. Diem was designed to make it easier and cheaper for people to transfer money online, which might also attract new users to the social network.
Zuckerberg has acknowledged that having people use cryptocurrency would likely benefit Facebook by making advertising on the social network more desirable and, therefore, more expensive. Meta's Novi subsidiary ran a wallet for holding and using the digital currency. Meta was one of the members of the Diem Association. Meta's membership is through Novi. Each member had the same vote in the association, so Meta didn't technically have any more say over the association's decisions than any other member.
Some of the bigger founding members appeared to get cold feet. A quarter of the 28 founding members dropped out before the association's inaugural meeting in Geneva. The departures were big losses because those members brought expertise in payments and transfers technology. Let's start with how it looked like other cryptocurrencies, such as bitcoin and ether. Like them, Diem, would've existed entirely in digital form.
No physical notes or coins. And like other cryptocurrencies, Diem transactions were to be recorded in a software ledger, known as blockchain. Diem was to be pegged to the US dollar, a format widely known as a stablecoin. That contrasts with bitcoin, ether and some other cryptocurrencies that aren't backed by anything and swing wildly in response to speculation.
Initially, the plan was to use a basket of assets to anchor the cryptocurrency's value. The association didn't say what those assets would've been but indicated they'd be denominated in major global currencies, like the dollar and the euro, which don't fluctuate intensely day to day. The association would've bought more of the underlying assets to create, or "mint," new Diem when people wanted more of the cryptocurrency.
When people cashed out, the association would've sold those assets and "burned" Diem. Backing a currency with an asset isn't anything new. In fact, it used to be common. The US dollar was backed by gold until The value of the Hong Kong dollar is pegged to the US dollar and managed by a currency board , which can issue new notes only if it has enough in reserves.
The US dollar is tried and true and pretty much accepted anywhere in the world. Some countries like the dollar so much that they use it instead of their own money. Dollars earn interest, though at current rates that won't add up to very much. News Company News. Compare Accounts. The offers that appear in this table are from partnerships from which Investopedia receives compensation.
This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace. Related Articles. Entrepreneurs Who Is Charlie Lee? Is It the Same as Ethereum? Blockchain Blockchain ETFs vs. Bitcoin Top Cryptocurrency Myths. Partner Links. Related Terms What Is Cryptocurrency? A cryptocurrency is a digital or virtual currency that uses cryptography and is difficult to counterfeit. What Is Coinbase Commerce?
Coinbase Commerce allows merchants to accept multiple cryptocurrency payments from global customers. Launched in the year , Litecoin LTC is an alternative cryptocurrency based on the model of Bitcoin. What Is Ethereum?
Ethereum is a blockchain-based software platform with the native coin ether. Ethereum smart contracts support a variety of distributed apps across the crypto ecosystem. Investopedia is part of the Dotdash Meredith publishing family.
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