Facebook announced its “crypto asset” Libra in June 2019. It had the vision of making Libra a global asset and making financial systems accessible to billions of people, especially from developing economies that could not access the existing financial systems.
However, Facebook wouldn’t be its only parent company. It was to be governed by the Libra Association, a consortium of 28 members, including some household names from tech and finance like Uber, Mastercard, Stripe, Visa, Paypal, etc.
The project had a lot of differences as compared to other crypto assets.
As per Libra’s white paper, it was to be run on a “blockchain”. A blockchain is a digital database on which all transactions made in the Libra would be recorded in an unchangeable record. This was controversial.
A blockchain is supposed to be “decentralised”, which means that the transactions are stored and verified by multiple independent computers called nodes compared to one central entity. However, Libra’s blockchain is not decentralised because the blockchain’s nodes are only the 28 members of the Libra Association. Compare this to the Bitcoin blockchain, for example, where anyone can run a node (although it may be quite expensive).
Facebook Libra was designed as a “stablecoin”, meaning the value of Libra is derived from the value of real-world assets. The Libra association would create a basket of reserve currencies coupled with government securities. The value of this basket would be divided by the number of Libra coins in circulation to determine its value. Other crypto assets are either not pegged to any real asset or are pegged to a single currency like the US Dollar.
Calibra’s subsidiary company was launched to create a digital wallet to allow users to send and receive Libra.
The project saw opposition from many governments globally who believed that Libra would diminish their control over monetary systems and facilitate crimes.
In an attempt to secure regulatory support, the project tried to incorporate government feedback worldwide with promises to comply with KYC laws just like any other bank. In May 2020, to bring in a fresh start, Facebook renamed the wallet Calibra to “Novi” and renamed Libra and Libra Association to Diem and Diem Association a few months later. Diem would be backed only by the US Dollar instead of a basket of reserve currencies.
However, later Diem’s assets were sold to Silvergate Capital in a deal valued at $182 million. Silvergate plans to continue investing in building a stablecoin and a blockchain network with assets purchased.As investors you can also begin trading in other crypto assets through the Zebpay App.