Speaker 1: Welcome to tex Stuff, a production from I Heart Radio.
Speaker 1: Hey there, and welcome to tech Stuff. I'm your host,
Speaker 1: Jonathan Strickland. I'm an executive producer with iHeart Radio. And
Speaker 1: how the tech are Yeah, well, let's get to it.
Speaker 1: In the summer of twenty nineteen, Facebook, the company, you know,
Speaker 1: the one that's now known as Meta. I keep forgetting
Speaker 1: to call it that anyway, Facebook announced a project called Libra,
Speaker 1: and it was to be a new cryptocurrency sort of
Speaker 1: more on that in a second. In fact, I think
Speaker 1: it might be more fair to just call it a
Speaker 1: digital currency. But it was meant to be a currency
Speaker 1: that would allow folks to send money around the globe
Speaker 1: with a minimum of fuss, including stuff like transaction fees
Speaker 1: and you know, currency convert Asian fees and all the
Speaker 1: stuff that mounts up as you try to move money
Speaker 1: from one region in the world to a different region.
Speaker 1: And it was going to work all through various applications
Speaker 1: such as Facebook Messenger or WhatsApp, both of which obviously
Speaker 1: are Facebook slash Meta properties. Now that alone would have
Speaker 1: been a huge benefit to millions, perhaps as many as
Speaker 1: a billion people. There are so many folks who leave
Speaker 1: their families behind in order to travel to some other
Speaker 1: part of the world where they can get work, and
Speaker 1: a lot of them want to send money back home
Speaker 1: to their loved ones. You know, maybe they're able to
Speaker 1: earn a decent wage whereas back home they couldn't, and
Speaker 1: they still want to be able to support their family.
Speaker 1: But international money transfers are, to put it lightly, somewhat clunky,
Speaker 1: and various fees often eat away significantly at any money
Speaker 1: you actually send back, so the amount that your family
Speaker 1: receives might be a fraction of what you actually sent.
Speaker 1: A digital currency that could streamline that process and work
Speaker 1: natively within apps that billions of people are already using
Speaker 1: seemed like a no brainer. But we recently learned that
Speaker 1: silver Gate Capital, which is a bank located in California,
Speaker 1: has paid two hundred million dollars for the assets of
Speaker 1: what was once called Libra. So today I thought we
Speaker 1: would talk about what Libra was, how Facebook was involved,
Speaker 1: the changes that the currency went through, and how we
Speaker 1: got to where we are now with the project essentially disbanded.
Speaker 1: So let's start at the very beginning, which is a
Speaker 1: very good place to start. According to CNBC, the natural
Speaker 1: starting point is with a woman named Morgan Beller who
Speaker 1: joined Facebook in ten. She joined as part of the
Speaker 1: company's corporate development department. Now, in case you're not down
Speaker 1: with business speak, corporate development is usually the part of
Speaker 1: a company that's always looking for the next deal, you know,
Speaker 1: whether it's a merger or an acquisition, divestiture, a partnership,
Speaker 1: anything like that. When you get down to it, it's
Speaker 1: really the part of big companies that's always looking for
Speaker 1: ways to grow the company further and to restructure it
Speaker 1: so that it works more efficiently. Um Typically, when I
Speaker 1: think of efficiently in these terms, it's really how can
Speaker 1: we do more but with fewer resources and with better revenue. So,
Speaker 1: in other words, what are we doing now? Can we
Speaker 1: do more of that? And can we do more of
Speaker 1: that without spending so much? It's really how how it
Speaker 1: boils down in Beller began reaching out to crypto experts
Speaker 1: with the question, Hey, if you had access to a
Speaker 1: couple of billion people through a platform you had built,
Speaker 1: how would you integrate cryptocurrency into that platform and you know,
Speaker 1: use that to the benefit of both yourself and your users.
Speaker 1: The implication being that Facebook, the company, which again would
Speaker 1: not be called meta until late had this enormous user
Speaker 1: base more than a billion people, and a digital currency
Speaker 1: that was native to Facebook could be an incredible source
Speaker 1: of revenue as well as potentially help countless people out.
Speaker 1: CNBC reports that Beller was the sole employee in the
Speaker 1: company working on blockchain initiatives in those early days in seventeen.
Speaker 1: In January eighteen, Mark Zuckerberg himself posted on Facebook that
Speaker 1: he wanted to delve further into technologies like encryption and
Speaker 1: cryptocurrency due to their potential to create decentralized assets that
Speaker 1: quote take power from centralized systems and put it back
Speaker 1: into people's hands end quote. Yes, Mark Zuckerberg, man of
Speaker 1: the people. I'm sure when you think who represents the
Speaker 1: average Joe, Mark Zuckerberg leaps to mind. Uh. It wasn't
Speaker 1: an outright admission that Facebook the company was getting into
Speaker 1: cryptocurrency or even blockchain, but it was an early sign. Also,
Speaker 1: I do want to say that while the model is
Speaker 1: conceptually decentralized as and you don't have like a centralized
Speaker 1: bank or financial authority at the center of most cryptocurrencies,
Speaker 1: the Internet itself conceptually is decentralized, but in practice we
Speaker 1: tend to see a few very powerful players take center
Speaker 1: stage in various domains, if you will, of those technologies,
Speaker 1: and effectively at least parts of the system become centralized.
Speaker 1: Those those companies become the centralized authority within the system.
Speaker 1: So you can have something that you know in theory
Speaker 1: is decentralized and still in reality it can change into
Speaker 1: more of a centralisis to him, a great example of
Speaker 1: that is UH cloud hosting, like various you know, applications
Speaker 1: and things of that nature. Amazon has essentially a lockdown
Speaker 1: on that, effectively a lockdown. If you talk about Internet search,
Speaker 1: Google has a lockdown on that, and what is in
Speaker 1: theory decentralized in practice becomes very centralized. A lot of
Speaker 1: people have argued cryptocurrency falls into that same category, but
Speaker 1: that's a discussion for another time now. It wouldn't be
Speaker 1: until the spring of when Beller's work started convincing folks
Speaker 1: higher up on the corporate chain, which ironically is not
Speaker 1: a blockchain, that she was onto something and that more
Speaker 1: people should pay attention. In May, David Marcus posted on
Speaker 1: his Facebook account that he was taking the lead on
Speaker 1: a blockchain working group in Facebook. He also said the
Speaker 1: group was building everything from scratch and maybe I missed it,
Speaker 1: but it seemed like he didn't acknowledge Beller's work at all. Like,
Speaker 1: from what I can tell, the reason that Libra even
Speaker 1: got started is because Beller was hard at work trying
Speaker 1: to figure out ways to incorporate blockchain and cryptocurrency technologies
Speaker 1: into Facebook products UH, and so I thought it was
Speaker 1: a little odd that there was no acknowledgement here, although
Speaker 1: from all accounts, Beller was an integral component in the
Speaker 1: creation of UH the Libra initiative. Anyway, David Marcus had
Speaker 1: previously led the Facebook Messenger division within the company for
Speaker 1: nearly three years um or maybe it was like almost
Speaker 1: four years, and before that he was president of PayPal,
Speaker 1: So this was someone familiar with both financial organizations and
Speaker 1: communications organizations, and of course that was the crux of
Speaker 1: Facebook's value proposition. When the company was actually ready to
Speaker 1: talk about this currency project, in the meantime, Marcus and
Speaker 1: Beller began building out a team to draft out ideas
Speaker 1: for a digital currency that could work with Facebook, as
Speaker 1: well as a digital wallet that would interoperate with Facebook services.
Speaker 1: And the wallet is the part of the system that
Speaker 1: the end user UH interfaces with right The wallet is
Speaker 1: where the user accesses their funds or they purchase more
Speaker 1: crypto units, uh, and its stores the crypto units that
Speaker 1: they own. It has their account on it. Essentially, it's
Speaker 1: called a wallet because it acts like a real world
Speaker 1: wallet would and UH, it would be a delicate thing
Speaker 1: to talk about this moving forward because Facebook was trying
Speaker 1: very very hard to position itself as we are really
Speaker 1: focusing on the wallet side of this. And yes, we're
Speaker 1: involved in drafting out what the currency will be, but
Speaker 1: that's that's not our thing. Know, it's not Facebook's currency,
Speaker 1: but we are going to create a wallet. However, it'll
Speaker 1: just be one of many wallets that could be created
Speaker 1: for this currency. So Facebook in the very early days
Speaker 1: was still trying to create a narrative that gave a
Speaker 1: little bit of separation between the company and the currency.
Speaker 1: Now occasionally the tech media would remind everyone that Facebook
Speaker 1: was working on something in the cryptocurrency realm, and by
Speaker 1: May twenty nineteen, journalists had pretty much confirmed a Facebook
Speaker 1: cryptocurrency like service was coming. At the time, people were
Speaker 1: referencing this as Facebook Coin or sometimes as global Coin,
Speaker 1: but for the most part, you know, it was it
Speaker 1: was pretty quiet news outside the company. You know, you
Speaker 1: didn't hear about it very much until June of two
Speaker 1: thousand nineteen. That's when the website for what was then
Speaker 1: called the Libra Association launched. There's gonna be a lot
Speaker 1: of then called because all the stuff I'm gonna talk
Speaker 1: about has changed names. Facebook changed its name, the Libra
Speaker 1: Association changed its name, The Libra unit of currency changed
Speaker 1: its name. Calibra, the digital wallet that Facebook was gonna
Speaker 1: make changed its name. Everything changed its name. It's almost
Speaker 1: like everyone wanted to try and assume a brand new
Speaker 1: identity and wipe the slate clean. That's foreshadowing, um. But anyway,
Speaker 1: in June two thousand nineteen, that's also when someone and
Speaker 1: I'm not sure who, published a piece in Facebook's newsroom section.
Speaker 1: There was no attribution as to who wrote it, but
Speaker 1: this was announcing Calibra. Now, that was the digital wallet
Speaker 1: service specifically crafted to work with the Libra unit of currency. Okay,
Speaker 1: let's do a quick overview again, like a quick rundown.
Speaker 1: We have the Libra Association. That's an organization that would
Speaker 1: oversee the development of this digital currency. The currency itself
Speaker 1: was called Libra, and Facebook digital wallet was called CA,
Speaker 1: Libra c A, l I, B R A. All Right, Now,
Speaker 1: folks in the currency division have been hard at work
Speaker 1: forming relationships with numerous companies to create a sort of alliance,
Speaker 1: the Libra Alliance that would or a Libra Association that
Speaker 1: would collectively be the force behind the Libra digital currency
Speaker 1: um I figure. They realized pretty early on that if
Speaker 1: Facebook tried to do this all on its own, people
Speaker 1: would bring up a whole bunch of tough questions, which
Speaker 1: they did anyway. Plus Facebook just didn't have the deep
Speaker 1: background of expertise in the financial world to be able to,
Speaker 1: you know, authoritatively, come forward and take the reins on everything. Now,
Speaker 1: initially the Libra Association had twenty seven partners in it
Speaker 1: besides Facebook, and there were some really big companies in
Speaker 1: this association like Visa and MasterCard. Now these are financial
Speaker 1: institutions with a very long history of processing transactions. There
Speaker 1: was also a PayPal, David Marcus, his old stomping grounds uh.
Speaker 1: Spotify was on there too, way before the company would
Speaker 1: become mired down in a mess of battling ideologies and
Speaker 1: misinformation campaigns. Then you had Uber and Lift that were
Speaker 1: also on that list, as well as coin Base, and
Speaker 1: lots of others. Now, the digital currency being proposed was
Speaker 1: in some ways similar to cryptocurrencies and in other ways
Speaker 1: very different, and a lot of outlets would refer to
Speaker 1: Libra just as a cryptocurrency as sort of shorthand, but
Speaker 1: some were a little more nuanced in their description. For example,
Speaker 1: Elizabeth Lapato, who's an editor at The Verge, wrote a
Speaker 1: phenomenal piece about Libra back in June of two thousand nineteen.
Speaker 1: It was titled simply Libra Explained. Now, first, miss Lapato,
Speaker 1: you are far too modest. Not only did you explain
Speaker 1: Libra thoroughly, I mean seriously, it is an excellent article.
Speaker 1: You should read it. But Lapato also did in a
Speaker 1: way that was really entertaining as it was informative. Also,
Speaker 1: just side note to miss Lapato, I also have a
Speaker 1: habit of capitalizing words for comedic effect, and I don't
Speaker 1: care if I'm the only person who finds it funny. Anyway,
Speaker 1: Lapato's piece points out how the proposed currency has laid
Speaker 1: out in a white paper compares to a cryptocurrency like bitcoin.
Speaker 1: Uh So, with bitcoin, you have a finite number of
Speaker 1: bitcoin that will ever be in circulation, and once they
Speaker 1: are all in circulation. That's it. That's all that will
Speaker 1: ever be in circulation. They will continue to circulate, but
Speaker 1: you won't generate more. You can't print more, you can't
Speaker 1: mind more. That's it. Now. In the beginning, most of
Speaker 1: the bitcoin were locked away essentially, and the process of
Speaker 1: mining would liberate a certain number of bitcoin every ten
Speaker 1: minutes or so. That number released would diminish over time,
Speaker 1: so every four years it reduces by half. Originally, if
Speaker 1: you were on the ground floor of bitcoin when it
Speaker 1: first launched, those first four years, if you were the
Speaker 1: one to mind a block, you know, to essentially verify
Speaker 1: a block of transactions in the blockchain of bitcoin, well
Speaker 1: you would be awarded fifty bitcoin for your efforts. Four
Speaker 1: years after that, it was down to twenty five bitcoin
Speaker 1: per block. Four years after that twelve and a half bitcoin.
Speaker 1: Then you get to where we are right now. If
Speaker 1: you were to mine a bitcoin successfully, if you were
Speaker 1: to you know, verify a block of transactions in the
Speaker 1: bitcoin chain, you wouldn't at six point to five bitcoin
Speaker 1: per block. That's gonna jump down to three point one
Speaker 1: to five bitcoin per block. This, by the way, is
Speaker 1: one of the elements that might actually stabilize bitcoins value
Speaker 1: over time. Uh and and also have lots of other effects,
Speaker 1: like we might see a huge decline in massive operations
Speaker 1: that have huge electricity consumption needs. But again that's a
Speaker 1: topic for a different episode. And then there's the block
Speaker 1: chain itself. You can think of bitcoins blockchain as a
Speaker 1: record of all transactions going back to the very beginning
Speaker 1: of bitcoin. It would be a little bit different with
Speaker 1: liebra I'll explain more, but first let's take a quick break. Okay,
Speaker 1: let's talk about blockchain. So it is a chain of blocks, right,
Speaker 1: and each block, new block that joins the chain has
Speaker 1: information in it that relates back to the previous blocks
Speaker 1: in the chain. It's it's got a value that's tied
Speaker 1: to the previous blocks, and then the subsequent block, the
Speaker 1: next new block, will have information of all the links
Speaker 1: back to all the blocks that came before it. The
Speaker 1: benefit of this approach, or one benefit of this approach,
Speaker 1: is that should somebody, some nefarious ne'er do well, decide
Speaker 1: they to make a change in the history of all
Speaker 1: those transactions. Maybe they spent their bitcoin back, you know,
Speaker 1: ten years ago, and they used it to buy a pizza,
Speaker 1: and they had thousands of bitcoin, and they're just ruining
Speaker 1: the day that they did that because now the bitcoin
Speaker 1: are worth so much more than they were way back then.
Speaker 1: So what they want to do is go back and
Speaker 1: change a couple of numbers in that list of transactions
Speaker 1: that suggests they never spent that money in the first place.
Speaker 1: All those thousands of bitcoins are still There's that would
Speaker 1: instantly make the millionaires. Well, because of the way that
Speaker 1: the chain forms, if you make a change in a block,
Speaker 1: every block that follows it is going to also change
Speaker 1: because they're all tied to this value that's associated with
Speaker 1: the block, and that means that if you try to
Speaker 1: alter the system, everybody knows it, everybody can see that
Speaker 1: you did it, and they can invalidate the changes you make,
Speaker 1: go back to the stable blockchain, and your attempt to
Speaker 1: hoist money through the blockchain would be thwarted. There are
Speaker 1: other ways to hist cryptocurrency, but this is one that
Speaker 1: the blockchains design itself is uh is going to combat well.
Speaker 1: Libra would not use a block chain system. It would
Speaker 1: use kind of a unified ledger, just an unbroken ledger
Speaker 1: of transactions, not a not a a series of blocks. Also,
Speaker 1: bitcoin is what we call a permissionless system. That is,
Speaker 1: to participate in bitcoin mining, you just have to join
Speaker 1: the bitcoin ecosystem and boom, you're part of it. You
Speaker 1: don't have to secure permission from any entity, you don't
Speaker 1: have to do anything special, just join the system and
Speaker 1: there you go. Now, just because you join doesn't mean
Speaker 1: you're gonna raake in any bitcoin, because mining is such
Speaker 1: a computationally intensive activity, because bitcoin is a proof of
Speaker 1: work cryptocurrency, and you've got other group that report literally
Speaker 1: millions of dollars into computer resources, massive computer systems, all
Speaker 1: just so to get the jump on everybody else in
Speaker 1: the ecosystem. It means you don't stand a chance if
Speaker 1: you just like have your laptop hooked into it, but
Speaker 1: you are technically allowed to participate. It's just you're not
Speaker 1: gonna You're not gonna mind anything. Uh. Libra, in contrast,
Speaker 1: was to be a permissioned system, at least initially. The
Speaker 1: entities that could ment coins would be limited to the
Speaker 1: partners in the Libra Association. Each partner would contribute a
Speaker 1: certain amount of money dedicated to the system. For the
Speaker 1: major partners, this was said to be around ten million
Speaker 1: dollars each and individual users would then buy into the ecosystem,
Speaker 1: but wouldn't be able to participate in any kind of mining.
Speaker 1: So you and I, if we wanted to use Libra, well,
Speaker 1: we could use whatever our native currency was to purchase
Speaker 1: Libra units of currency, but we couldn't mind Libra. In fact,
Speaker 1: the original idea kind of went like this. You decide
Speaker 1: you want to purchase some units of Libra so that
Speaker 1: you can send some money to your dear sweet auntie
Speaker 1: who lives in a different country, and you spend whatever
Speaker 1: your local currency happens to be. Let's say it's in euros,
Speaker 1: so you spend ten euros to purchase libra. Your money
Speaker 1: would then enter into the Libra reserve that would be
Speaker 1: this big pool of resources. That pool of resources backs
Speaker 1: the value of every Libra unit of currency, and you
Speaker 1: would receive an amount of libra equivalent to the ten
Speaker 1: euros you paid, right, So whatever the Libra equivalent of
Speaker 1: ten euros was, that's what goes into your your digital wallet.
Speaker 1: Then you send the digital Libra to your auntie. And
Speaker 1: let's say your auntie lives in Canada and she wants
Speaker 1: to cash out, and she wants to trade the Libra
Speaker 1: in for Canadian dollars, so the Libra association covers the
Speaker 1: cashing out of the process. So the reserve like ten
Speaker 1: whatever the the equivalent in Canadian dollars is, gets chucked out.
Speaker 1: At your auntie, she gets her money, and then the
Speaker 1: Libra that she used to trade in to get that
Speaker 1: cash that got deleted. So Libra units only exists as
Speaker 1: long as the user has them in a digital wallet.
Speaker 1: But once you cash out, the Libra would get deleted
Speaker 1: rather than recirculated. It's a big difference between Libra and
Speaker 1: other cryptocurrencies. And like I said, not a blockchain, just
Speaker 1: a long list of all transactions that the partners would
Speaker 1: be able to see. Um again, not in blocks, just
Speaker 1: as this this tree like structure that they described. Uh.
Speaker 1: Then there was the fact that bitcoin is not a
Speaker 1: commodity backed currency. It's not a fiat currency either. A
Speaker 1: fiat currency is a government issued currency that is not
Speaker 1: backed by some other commodity like gold. You know, way
Speaker 1: in the old back in the old days of the
Speaker 1: dollar was on what was called the gold standard, where
Speaker 1: there was a reserve of gold that backed up the
Speaker 1: value of the dollar. End In theory, you could trade
Speaker 1: your dollar in for a dollar's worth of gold at
Speaker 1: any time. But we've long since abandoned the gold standard,
Speaker 1: and now the US dollar is a fiat currency. It's
Speaker 1: government issued, but it is not backed by a specific commodity.
Speaker 1: Bitcoin is not issued by a government, and it is
Speaker 1: also not backed by a commodity. Like gold, Bitcoin's value
Speaker 1: comes from a restricted supply and a high demand. So,
Speaker 1: in other words, bitcoin is valuable because people want it.
Speaker 1: There's nothing magical about bitcoin that makes it valuable on
Speaker 1: its own. Hamlet would say it's valuable because thinking makes
Speaker 1: it so. Then again, you could also apply that same
Speaker 1: logic to stuff like gold. You could say, like, well,
Speaker 1: gold is not really valuable on its own, it's valuable
Speaker 1: because people want it, right, Like, there's nothing intrinsic about
Speaker 1: gold anyway. If you go down that road long enough,
Speaker 1: you start to question what is real. I don't recommend
Speaker 1: you do it. It's pretty tough out there. Already, Libra
Speaker 1: would not be a fiat currency because it wasn't issued
Speaker 1: by a government. However, it would be backed by a commodity,
Speaker 1: and the initial commodity consisted of the money pooled by
Speaker 1: the various partners in the Libra Association. Now The idea
Speaker 1: was that Libra's value would be tied to a quote
Speaker 1: unquote basket of resources of commodities, which would include fiat
Speaker 1: currencies and low risk investments. Uh. The Association would take
Speaker 1: this big old poll of cash from the twenty eight
Speaker 1: partners who were part of the association and then invest
Speaker 1: that money in various low risk investments and guarantee the
Speaker 1: value of the Libra currency from that investment pool. And
Speaker 1: the partners in return would actually earn interests off of
Speaker 1: those investments, like if they actually made money, Well, that
Speaker 1: money would go to the partners, it wouldn't get circulated
Speaker 1: into the Libra ecosystem. Uh. The association, the members of
Speaker 1: the Association would enjoy those profits uh, and then that
Speaker 1: would continue to back the initial pool. There would continue
Speaker 1: to back the value of the Libra currency in circulation. Now.
Speaker 1: The Association said that this approach would make the Libra
Speaker 1: currency less volatile than cryptocurrencies, and that has been a
Speaker 1: real issue with lots of cryptocurrencies, especially recently. If you've
Speaker 1: heard me talk about crypto before, you know one of
Speaker 1: my big complaints is that for a lot of cryptocurrencies,
Speaker 1: the volatility is so great that you can't really rely
Speaker 1: on crypto to act like a real currency. If I
Speaker 1: have a unit of currency that can buy five dollars
Speaker 1: worth of goods or services today, but then tomorrow I
Speaker 1: could use that same unit of currency to buy twenty
Speaker 1: dollars worth of goods or services, I would be petrified
Speaker 1: of spending any cash at all, because I'd be worried
Speaker 1: I'd be bleeding wealth in the process. I would constantly
Speaker 1: be thinking this could buy me four times as much
Speaker 1: tomorrow as it can buy me today, and two days
Speaker 1: from now I might be able to buy twenty times
Speaker 1: as much stuff. I would never spend anything because the
Speaker 1: following day I would think, oh, I just I totally
Speaker 1: wasted all that buying potential. That's the way I feel
Speaker 1: about cryptocurrency. So Libra would instead be connected to real
Speaker 1: world assets that would have, in theory a more predictable value,
Speaker 1: a more stable value to them, and that would make
Speaker 1: Libra a bit more stable. In return, Libra would literally
Speaker 1: be what we call a stable coin. The major partners
Speaker 1: in the Libra Association would each have a single vote
Speaker 1: over matters of governance that would include Facebook. Facebook would
Speaker 1: have one vote, just like all the other partners and
Speaker 1: that was probably a move to help kind of dilute
Speaker 1: the perception that Facebook was behind a digital currency, because
Speaker 1: various governmental officials around the world were already pretty leery
Speaker 1: of Facebook at this point, and that would be a
Speaker 1: trend that would intensify over the following years. And you know,
Speaker 1: it's pretty easy to see why Facebook would want in
Speaker 1: on this. The company has a long history of integrating
Speaker 1: products and services that are proven to be successful or
Speaker 1: at least popular elsewhere. Facebook as a rep for acquiring
Speaker 1: potential competitors, and if that's not an option for copying
Speaker 1: competitors and and their products in their services, and an
Speaker 1: effort to monopolize your time on Facebook's and various platforms.
Speaker 1: Anything that takes your attention away from Facebook is bad
Speaker 1: for Facebook, so they always try and find ways to
Speaker 1: make sure if something else is vying for your attention,
Speaker 1: Facebook wants to be able to provide that same thing
Speaker 1: to you so that you don't go away from Facebook.
Speaker 1: Having a stake in a digital currency that could be
Speaker 1: used across Facebook services would represent a truly enormous surge
Speaker 1: and revenue and power for the company. The trouble for
Speaker 1: Facebook is that a lot of other folks have come
Speaker 1: to a similar conclusion. By twenty nineteen, there was already
Speaker 1: inherent distrust in the company, and so regulatory agencies around
Speaker 1: the world were instantly critical of the Facebook lead initiative.
Speaker 1: It didn't matter if Facebook was just one member of
Speaker 1: the twenty eight member Libra Association. Pretty much everyone referenced
Speaker 1: Libra as a Facebook project that also happened to have
Speaker 1: some other big companies involved. One of the very big
Speaker 1: concerns expressed both by government officials and media outlets centered
Speaker 1: around privacy, obviously, something that is a huge issue at Facebook.
Speaker 1: I mean, Zuckerberg himself famously declared privacy to be dead
Speaker 1: years and years ago. He walked that back after a while,
Speaker 1: but you know, you get the feeling that they pretty
Speaker 1: much went whole hog with that idea ever since. So
Speaker 1: an early question was how much of a user's data
Speaker 1: would the various partners in the Libra Association see, Like
Speaker 1: they would be able to see the history of transactions.
Speaker 1: They had to to be able to validate transactions, otherwise
Speaker 1: there's no control over if someone's actually using, abusing, or
Speaker 1: lying on the system. So how much of the user
Speaker 1: data would the Libra Association be pretty d two. And
Speaker 1: how might they otherwise use that data If they know
Speaker 1: that someone is using libra to purchase a specific type
Speaker 1: of thing, could that mean that they could also market
Speaker 1: directly to that person? And then this would mean there
Speaker 1: could be an overlap between commerce and banking. Now, that's
Speaker 1: the kind of thing that regulations tried to protect us against,
Speaker 1: particularly here in the United States, because there's a pretty
Speaker 1: clear conflict of interest that can rise here in America.
Speaker 1: It was described as avoiding a situation in which banks
Speaker 1: end up competing with their own customers in the marketplace,
Speaker 1: and considering the amount of money that banks handle, it
Speaker 1: would give the banks an enormous and unfair advantage in
Speaker 1: that regard. Now, there was also the case that the
Speaker 1: Liberal Association seemed to be positioning the digital currency as
Speaker 1: both a global digital method to move money around without
Speaker 1: all those nasty entanglements, but also to be compliant with
Speaker 1: the various complicated regulations around the world at the same time,
Speaker 1: and a lot of analysts questioned whether that's even possible
Speaker 1: or if this is just a case of trying to
Speaker 1: have your cake and eat it too. This idea of
Speaker 1: you can't be both, you can't be unfettered and be
Speaker 1: able to send money without all these different UH checks
Speaker 1: and balances and hurdles in the way, and also be
Speaker 1: compliant with all the different regulations. It's the regulations that
Speaker 1: create a lot of those issues in the first place,
Speaker 1: so you can't be both. There were also concerns about
Speaker 1: potential scams and hoaxes that could proliferate should Facebook effectively
Speaker 1: roll out a massive digital currency plan across its billion
Speaker 1: plus users, or the possibility that criminals would make use
Speaker 1: of the system in order to move money around and
Speaker 1: avoid what Obi Wan Kenobi would call imperial entanglements money laundering.
Speaker 1: In other words, Then there were the various tax authorities
Speaker 1: around the world. Here in the US, cryptocurrency can be
Speaker 1: treated like a commodity, So while the purchase of cryptocurrency
Speaker 1: itself isn't really that big a deal from a tax
Speaker 1: sage and standpoint, any wealth you gain due to the
Speaker 1: appreciation of that cryptocurrency's value is a taxation issue. In
Speaker 1: other words, if I bought ten dollars worth of bitcoin
Speaker 1: and then tomorrow the amount the amount I bought is
Speaker 1: now worth one hundred dollars, well, that ninety dollars of
Speaker 1: wealth that suddenly became mine would also be taxable income. Now,
Speaker 1: it pretty quickly became clear that there were a lot
Speaker 1: of challenges ahead for the Libra Association and that the
Speaker 1: goal of launching Libra in twenty was going to be
Speaker 1: a long shot. They're all the regulatory hurdles that made
Speaker 1: ton of news, but there were also technological obstacles, and
Speaker 1: according to sources like Bloomberg, the approach that the Libra
Speaker 1: Association was planning to take didn't yet work, so that
Speaker 1: whole ledger system I was referring to, while the idea existed,
Speaker 1: the actual execution didn't. All Right, when we come back,
Speaker 1: I'll talk about the beginning of the end and then
Speaker 1: hopefully the end of the end of Libra. But first
Speaker 1: let's take another quick break. Okay, So liber Association, CA,
Speaker 1: Libra Facebook. They're all under this intense regulatory scrutiny around
Speaker 1: the world. I mean here in the US it was
Speaker 1: particularly intense, but we were not the only country to
Speaker 1: bring up some tough questions, and it scared off a
Speaker 1: few of the partners in the Libra Association. They decided
Speaker 1: to peace out in October two thousand nineteen, just a
Speaker 1: couple of months after the public announcement that the Libra
Speaker 1: Association was even a thing. PayPal pulled the rip chord
Speaker 1: on its parachute and got the heck out of there.
Speaker 1: The company did say it was total rooting for the
Speaker 1: rest of the association, like we're not gonna be a
Speaker 1: part of it, but you guys, good luck. And a
Speaker 1: week later news broke that Visa, Master, car eBay and
Speaker 1: a couple of others also decided they were going to
Speaker 1: dip out. Now, this was all in advance of the
Speaker 1: first official meeting of the Libra Association. They had not
Speaker 1: even had their first meeting yet, that was to take
Speaker 1: place on October fourteenth, in two thousand nineteen. David Marcus
Speaker 1: would subsequently tweet quote, I would caution against reading the
Speaker 1: fate of Libra into this update. Of course, it's not
Speaker 1: great news in the short term, but in a way
Speaker 1: it's liberating. Stay tuned for more very soon. Change of
Speaker 1: this magnitude is hard. You know you're onto something when
Speaker 1: so much pressure builds up. End quote, which I have
Speaker 1: to admit, is a heck of a way to spend
Speaker 1: the fact that a significant number of partners in a
Speaker 1: fledgling association just bailed on you to say, like, hey,
Speaker 1: you know you're onto something would people are scared of
Speaker 1: it seems like, I don't know, I get where he
Speaker 1: was going, but it just seems comical to me. Anyway,
Speaker 1: time marched on and Libra continued to wade through a
Speaker 1: lot of regulatory resistance. By the spring of twenty twenty,
Speaker 1: just as the world was really going into isolation due
Speaker 1: to the pandemic, a few big changes began to take place.
Speaker 1: One was the underpinning for Libra itself. Now represent Libra
Speaker 1: announced that rather than using this quote unquote basket of
Speaker 1: assets that was the original plan, remember to kind of
Speaker 1: anchor Libra's value in this collection of real world assets
Speaker 1: that the association would invest in. Instead of using that,
Speaker 1: the currency would switch to a model in which Libra
Speaker 1: would be backed by single currency stable coins. And this
Speaker 1: gets a little bit complicated. The original idea for Libra,
Speaker 1: as I mentioned earlier, had it as sort of a
Speaker 1: stable coin itself. So a stable coin is a type
Speaker 1: of digital currency, usually cryptocurrency. The anchors its value to
Speaker 1: some external thing, such as a fiat currency from a
Speaker 1: specific country or a specific commodity, you know, like gold.
Speaker 1: And the original Libra coin did that with that Libra reserve,
Speaker 1: that pool of assets that was initially created by the
Speaker 1: Libra Association and then would be fed by the various
Speaker 1: Libra users cashing into it. But the new model would
Speaker 1: create stable coins for various fiat currencies. For example, there
Speaker 1: would be a Libra USD and that would be tied
Speaker 1: to the United States dollar, or the Libra eu are
Speaker 1: tied to the euro. In theory, if you were to
Speaker 1: put one US dollar into Libra, you would get one
Speaker 1: Libra USD. It would be a one to one exchange,
Speaker 1: which would make it really simple for any individual within
Speaker 1: a nation to understand how much money they have in Libra,
Speaker 1: because it would be equivalent to whatever the fiat currency
Speaker 1: they were using in their day to day lives happened
Speaker 1: to be. This is one of the issues I have
Speaker 1: with digital currencies in general is often it can become
Speaker 1: difficult to figure out how much wealth you actually have
Speaker 1: represented in that digital currency. Xbox game Mer's out there.
Speaker 1: If you've been playing for a while, you might remember
Speaker 1: back when all purchases were made in Microsoft points and
Speaker 1: the points did not match up point to dollar, so
Speaker 1: it became hard to judge how expensive something was because
Speaker 1: you would be given the cost in points, but you
Speaker 1: would have to do the conversion in your head of
Speaker 1: all right, well how much money would it cost me
Speaker 1: to buy that number of points, and then that will
Speaker 1: tell me how much this is being sold for. It
Speaker 1: creates this level obviuse skation. Well, by making stable coins
Speaker 1: that are tied to specific FIAT currencies, you remove that.
Speaker 1: It makes it more transparent. That's a bonus. But in
Speaker 1: the background you would have the Libra coin itself like
Speaker 1: you have Libra USD for the U. S dollar. Right
Speaker 1: well above Libra USD is Libra proper, and David Marcus
Speaker 1: said it would effectively act as quote a smart contract,
Speaker 1: stitching together fixed nominal weights of underlying stable coins end quote.
Speaker 1: So another way of looking at it is that the
Speaker 1: Libra system would come far more complicated. Gone was this
Speaker 1: idea of a single digital currency that could smoothly operate
Speaker 1: across the globe. Now you would have different regional Libra
Speaker 1: currencies that could work pretty smoothly within that region, but
Speaker 1: there would still have to be conversion issues whenever you
Speaker 1: wanted to send it to a different region. On May six,
Speaker 1: the Libra Association announced that Stuart Levy, who had previously
Speaker 1: served as an under secretary for Terrorism during two different
Speaker 1: presidential administrations, would become the CEO of the Libra Association.
Speaker 1: Levy has extensive experience in detecting and fighting money laundering,
Speaker 1: and the move was seen by some as another attempt
Speaker 1: to appease regulators around the world. Here is someone who
Speaker 1: could help make certain that the system that was being
Speaker 1: built would not be one that criminals could easily use
Speaker 1: to move money around. Then on May, things are moving
Speaker 1: really fast now, because we're still just in the spring
Speaker 1: of Facebook changed the name of its spinoff, Calibra. You know,
Speaker 1: that was the thing that was to be the digital
Speaker 1: wallet that would work with Libra. The new name was
Speaker 1: no v Now. According to a rep from nov Quote,
Speaker 1: when we announced Libra and Calibra last June, we wanted
Speaker 1: to demonstrate that Calibra the digital wallet, was closely linked
Speaker 1: to Libra, the global payment system. Both brands were born
Speaker 1: out of the same vision to give people more access
Speaker 1: to the global economy. However, we found that Calibra and
Speaker 1: Libra sounded too similar and people were getting confused, so
Speaker 1: we set out to create distinction between the two end quote. Now,
Speaker 1: maybe that's just the straight up truth. The word no
Speaker 1: Vi was derived from novis, the Latin word for new
Speaker 1: and via the Latin word for way, so it was
Speaker 1: the new way. Personally, I suspect that part of the
Speaker 1: reason for renaming it was to distance Calibra from the
Speaker 1: various news stories, most of which we're shining a critical
Speaker 1: light on the whole project. But I must also add
Speaker 1: that's just a hunch on my part. I could be
Speaker 1: wrong about that. I just feel like a lot of
Speaker 1: the renaming that we're talking about here was an effort
Speaker 1: to say, like, oh, we got a negative association with
Speaker 1: this product, let's change the name and hopefully people won't
Speaker 1: carry that association to the new name. So no more Calibra.
Speaker 1: Now we have no Vi. And the plan was to
Speaker 1: incorporate Novi into Messenger and WhatsApp as well as launch
Speaker 1: a standalone Novie wallet app, and this would be how
Speaker 1: users would interact with the Libra digital currency okay rolling
Speaker 1: through and the Libra slash Calibra slash nov All of
Speaker 1: that kind of faded from public consciousness. The world was
Speaker 1: dealing with a pandemic. The US was in the midst
Speaker 1: of a well put lightly a tumultuous election cycle. There
Speaker 1: were tons of concerns about Facebook, but those concerns mostly
Speaker 1: had to do with things like misinformation and hate speech
Speaker 1: and that kind of thing and an election uh interference,
Speaker 1: that sort of stuff, and announced but not yet launched
Speaker 1: digital currency really did not merit much attention from the
Speaker 1: widespread world at that point. In December of the Libra
Speaker 1: Association rebranded and became d M. As in Carpe d M,
Speaker 1: the Latin word for day. The unit of currency would
Speaker 1: also become the d M. The decision had been made
Speaker 1: to launch the currency potentially as early as twenty one,
Speaker 1: with a single stable coin tied to the US dollar.
Speaker 1: So you might ask why did Libra become d M. Well,
Speaker 1: the official word was that this was an effort to
Speaker 1: establish an organizational independence of the association from Facebook, which
Speaker 1: is really in the hot seat at this point for
Speaker 1: lots of unrelated stuff, you know, like the misinformation sation
Speaker 1: and election interference stuff. And then we get to oh boy, okay,
Speaker 1: so if Facebook was in the hot seat in it
Speaker 1: really felt the heat turn up in one, uh, the
Speaker 1: in the United States where the infamous riots slash insurrection
Speaker 1: on January six, and a lot of people are pointing
Speaker 1: towards social networking platforms as playing a pivotal role in
Speaker 1: radicalization and facilitating to spread a misinformation, among other things.
Speaker 1: Then there was this growing movement against big tech companies
Speaker 1: in general and Facebook in particular, as governments around the
Speaker 1: world started to question if perhaps these companies might be
Speaker 1: a little too dominant in their respective markets and if
Speaker 1: they might not be playing by the rules, if in
Speaker 1: fact they might represent an effective monopoly. Then we have
Speaker 1: the incredible volatility of the crypto market in general and
Speaker 1: the response by regulatory bodies in particular to that to
Speaker 1: crypto So right now there is an increased amount of
Speaker 1: activity in the world as governments really come to terms
Speaker 1: with cryptocurrencies and they start cracking down on various loopholes
Speaker 1: and contributing to a pretty rough situation in the crypto community.
Speaker 1: There's lots of talk of regulations around the world, something
Speaker 1: that you know, the crypto community was really kind of.
Speaker 1: It was born out of this idea of an unregulated system,
Speaker 1: and now we have the potential for regulations to come
Speaker 1: creeping in. Now it would be an oversimplified statement to
Speaker 1: claim that government scrutiny is what is leading to crypto prices,
Speaker 1: declining that's way too simple a view of it, but
Speaker 1: it is a contributing factor. Facebook itself would change its
Speaker 1: name in late one to Meta, and some of the
Speaker 1: names associated with the Libra Slash, Calibra Slash, DM slash
Speaker 1: nov project left the company toward the end of the year,
Speaker 1: included David Marcus. He left in November of Morgan Beller
Speaker 1: also left. A third employee who's also referenced as a
Speaker 1: co founder, Kevin Wile, also left at the end of one,
Speaker 1: and the project was left without its internal leadership team
Speaker 1: at Facebook. The regulatory bodies were still a huge hurdle,
Speaker 1: Crypto in general was is going through a rough patch,
Speaker 1: and Meta Slash Facebook is still in the critical spotlight
Speaker 1: for lots of different reasons, so it's not really a
Speaker 1: surprise that ultimately all the parties decided they needed to
Speaker 1: just pull the plug on the whole thing, sell off
Speaker 1: the assets, and try to recapture at least some of
Speaker 1: the initial investment that was made to create the Libra Association. Now.
Speaker 1: Not only is this a setback for Meta's plans to
Speaker 1: incorporate an in system currency program a global payment system
Speaker 1: within Facebook's products, like Messenger and WhatsApp. It's also a
Speaker 1: potential enormous blow to the metaverse project under Facebook. UM.
Speaker 1: I have no doubt that one hope that Zuckerberg had
Speaker 1: was that this digital currency, which Facebook would benefit from
Speaker 1: in multiple ways, would be the underlying financial transaction system
Speaker 1: within the company's version of the metaverse, whatever that might
Speaker 1: end up being. But I am absolutely certain that the
Speaker 1: idea was, when we have this metaverse product out there
Speaker 1: and people are able to engage in commerce virtually within
Speaker 1: this metaverse, our digital currency is going to be the
Speaker 1: unit of transaction and we are going to make so
Speaker 1: much money on every side of these deals. And now
Speaker 1: that has kind of fallen through. Now, all that being said,
Speaker 1: Facebook did launch no V the digital wallet, but instead
Speaker 1: of being centered on d M you know what used
Speaker 1: to be known as Libra, the wallet actually works with
Speaker 1: a stable coin called paxss that doesn't have any connection
Speaker 1: to Facebook, and this is in partnership with coin base
Speaker 1: also meta slash. Facebook doesn't hold the funds in this case,
Speaker 1: coin Base does, so it's really just created a digital
Speaker 1: wallet that works with another entities uh funding for a
Speaker 1: stable coin. UH. And this was all intended to just
Speaker 1: be a pilot program to test the various features of
Speaker 1: the digital wallet before d M got deployed. But now
Speaker 1: DM is no more, so it's just kind of there.
Speaker 1: It's a digital wallet. There are lots of different digital
Speaker 1: wallets out there. I don't know if no viv is
Speaker 1: a particularly good one or bad one. I don't use it,
Speaker 1: so I don't know, but uh yeah, it's that's all
Speaker 1: it is at this point. So this grand vision of
Speaker 1: this global financial system has now sadly withered away to
Speaker 1: just a digital wallet. I say sadly not because I
Speaker 1: wanted Facebook to succeed necessarily, everyone knows my feelings about
Speaker 1: that company. But rather I do wish there were more
Speaker 1: streamline methods for people to be able to send transaction
Speaker 1: around the world without going through all these different, uh
Speaker 1: you know, loopholes or red tape, or having to find
Speaker 1: a way to minimize the amount of money that's going
Speaker 1: to be taken out of what you're sending so that
Speaker 1: the person who receives it actually gets something that's useful.
Speaker 1: Like that's frustrating, and for a lot of people, it's
Speaker 1: a true hardship. Right. You've got people who are picking
Speaker 1: up stakes and transforming their entire lives in an effort
Speaker 1: to have a better life for themselves and for their
Speaker 1: family back home. And it would be great to have
Speaker 1: systems that facilitated that more effectively, where people were able
Speaker 1: to have more of the money that was sent to
Speaker 1: them actually get to them. I would love to see that. Uh.
Speaker 1: I don't necessarily think that Facebook was a great center
Speaker 1: point to make that happen, because I have lots of
Speaker 1: issues with Facebook the company or Meta the company, but
Speaker 1: I do want to see the effect come about at
Speaker 1: some point. Anyway, it's all moot now because it is
Speaker 1: no more. It all got dissolved. The folks who were
Speaker 1: connected to it have moved on to other projects or
Speaker 1: are currently on hiatus. I think David Marcus posted that
Speaker 1: he's he's currently in a hiatus looking for the next thing, um,
Speaker 1: you know. So, I'm sure they'll all land on their
Speaker 1: feet and they'll be fine. I'm worry about some of
Speaker 1: the lower level folks who are working on this. Don't
Speaker 1: know what happened to them, don't know if they got
Speaker 1: reassigned to other teams within Facebook, if they were let go.
Speaker 1: I have no idea all the companies that were part
Speaker 1: of the Libra association. They're all fine, they're all huge.
Speaker 1: So if they're not fine, it's not because of Libra
Speaker 1: association going under. That's something else. So I thought it
Speaker 1: was an interesting story to cover one That is another
Speaker 1: example of how this is tough right just there, there's
Speaker 1: this this thought in tech that if you of the
Speaker 1: technological capability of doing something, then everything else is easy,
Speaker 1: when in fact, I would argue the technological part, like
Speaker 1: making the thing work technologically is the easiest piece, especially
Speaker 1: when you're talking about stuff that has to do with
Speaker 1: giant global finance. Everything else is way more complicated than
Speaker 1: the tech side. It's relatively simple to get the tech
Speaker 1: to work. It's navigating the incredibly Labrinthian arrangement of financial
Speaker 1: relationships around the world. That's the hard part. Like, it
Speaker 1: doesn't matter how good your widget is if if the
Speaker 1: world is still super complicated, And it's a good lesson
Speaker 1: to remember just in general, not just for the case
Speaker 1: of cryptocurrency or digital currency, but generally speaking, like we
Speaker 1: have this tendency to put a lot of faith in
Speaker 1: technology to solve problems without fully understanding the scope of
Speaker 1: the problems we're tackling. And that's always a danger. I
Speaker 1: hope that you learned something in this episode that you
Speaker 1: enjoyed it. If you have any topics you would like
Speaker 1: me to cover in future episodes of tech Stuff, whether
Speaker 1: it's a technology, a tech company, a trend in tech um,
Speaker 1: anything like that, reach out to me on Twitter to
Speaker 1: handle for the show is text Stuff h s W
Speaker 1: and I'll talk to you again, Really Sick. Text Stuff
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