Executive behind Facebook-backed Novi crypto wallet to leave company


Facebook and its partners plan to launch Diem, a new global cryptocurrency.

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David Marcus, one of the executives behind Facebook’s cryptocurrency push, said on Tuesday he would leave the social network’s parent company by the end of the year to pursue entrepreneurial endeavors.

Marcus, who joined Facebook from PayPal, has been running Novi, the company’s financial technology business, since May 2018. He was responsible for launching Libra, a still-un-launched cryptocurrency that was renamed Diem after the project faced headwinds.

“While there is still so much to do right after the launch of Novi – and I’m still just as passionate about the need to change our payment and financial systems as ever – my entrepreneurial DNA has driven me for too many mornings in a row. to continue to ignore it “, Marcus said in a series of tweets.

Marcus’ departure from Facebook, which was recently renamed Meta, comes as the company’s cryptocurrency ambitions struggle to materialize. In October, the company launched the Novi cryptocurrency wallet without the Diem stablecoin it initially ran. The start of the wallet, which allows users to send and receive the Pax dollar managed by blockchain business Paxos, was limited to Guatemala and parts of the United States.

Formerly known as Libra, Diem hasn’t had much love since Facebook backing up Diem Association publicly launched in mid-2019. Partners have bolted from the project, details have changed and lawmakers criticized the plans. The launch of Novi caused a backlash, with a group of five Democratic senators urging CEO Mark Zuckerberg to stop Project Diem.

The group, which included Brian Schatz from Hawaii and Elizabeth Warren from Massachusetts, called on Zuckerberg to “immediately arrest your pilot Novi.” He was also looking for a commitment that Diem would not come to market.

Nevertheless, Facebook has indicated that he will press with the project, whose ambitions have narrowed over time. Here’s what you need to know.

Why does Facebook want cryptocurrency?

It is not actually Facebook’s cryptocurrency. It’s a project of the Diem Association, which Facebook originally co-founded as the Libra Association. The association will serve as the monetary authority for the cryptocurrency. He says his goal is to “empower billions of people,” citing 1.7 billion adults without bank accounts who could use the currency.

But Facebook has its own interest in digital money that predates Diem. The social network has used a virtual currency, called Credits, for about four years to make payments on games played on Facebook. Facebook CEO Mark Zuckerberg said send money online should be as easy as sending photos. Diem is designed to make it easier and cheaper for people to transfer money online, which could also attract new users to the social network. But Zuckerberg acknowledged that having people use cryptocurrency would likely benefit Facebook by making social media advertising more desirable and, therefore, more expensive.

Facebook may have other plans for cryptocurrency as well. The Novi The subsidiary manages a wallet for holding and using digital currency and says its mission is “to help people around the world access affordable financial services.” RBC Capital Markets analysts said these services will likely include gaming and trading.

Will Facebook have direct control over Diem?

No. Facebook is a member of the Diem Association, the nonprofit that will serve as the de facto monetary authority for the currency. (Facebook membership is via Novi.) The association hopes increase to 100 members, most of which will pay $ 10 million to get the project started. Each member has the same vote in the association, so Facebook will technically have no more say in the decisions of the association than any other member.

That said, Facebook played a disproportionate role in the initial stages of the project. Once the network is launched, according to Facebook, the role and responsibilities of the social network will be the same as those of any other founding member.

Why did the members of the association give up?

Some of the biggest founding members seem to have had cold feet. Seven of the 28 original founding members – a quarter of them – dropped out before the association’s inaugural meeting in Geneva. Those that came out included PayPal, eBay, Stripe, and financial services giants Visa and Mastercard. Departures are big losses because these members brought expertise in payment and transfer technologies. The other dropouts are Mercado Pago, the Argentinian marketplace’s online payment platform Mercado Libre, and Booking Holdings, an online travel company that operates sites like Priceline, Kayak, and OpenTable.

The association currently has 26 members.

How is Diem different from other cryptocurrencies?

Let’s start by explaining how it is similar to other cryptocurrencies, such as bitcoin and ether. Like them, Diem will exist entirely in digital form. You will not be able to get a physical ticket or coin. And like other cryptocurrencies, Diem transactions will be recorded on a software ledger, called a blockchain, which confirms each transfer. The Diem blockchain will be managed by the founding members in the early stages, but is expected to evolve into a fully open system in the future.

What the Calibra Wallet should look like on a phone.

This is what a wallet might look like on a phone.

Facebook

Diem will be pegged to the US dollar, a format widely known as stablecoin. This contrasts with bitcoin, ether, and some other cryptocurrencies which are not backed by anything and oscillate wildly in response to speculation.

Initially, the plan was to use a basket of assets to anchor the value of the cryptocurrency. The association did not say what those assets would be, but said they would be denominated in major world currencies, such as the dollar and the euro, which do not fluctuate intensely from day to day. The association would buy more underlying assets to create, or “mint”, a new Diem when people want more cryptocurrency. When people cash in, the association will sell these assets and “burn” Diem.

Supporting a currency with an asset is nothing new. In fact, it was common. The The US dollar was backed by gold until 1971. The value of the Hong Kong dollar is indexed to the US dollar and managed by a Monetary advice, which can only issue new tickets if it has enough reserves.

How do cryptocurrencies compare to the dollar?

The US dollar is tried and true and pretty much accepted all over the world. Some countries love the dollar so much that they use it instead of their own money. And dollars earn interest, but at current rates that won’t amount to much.

Of course, the dollar has weaknesses. Using dollars, especially across borders, can be costly as banks take a share to convert them into local currencies. If you’re using dollars on a prepaid card, the credit card company likely charges the merchant for part of your purchase. And if the US government prints too many dollars, inflation could follow.

Despite the hype, cryptocurrencies are not yet widely used. Try to buy a cup of coffee with ether. (Yes, it is possible but not prevalent.) The value of cryptocurrencies is volatile, often increasing or decreasing by more than 5% per day, making it difficult to get a sense of the long-term value of the currency. ‘active.

Cryptocurrencies can make it easier to send money directly to someone. Bitcoin transactions are not really untraceable, although they can be very difficult to trace. Likewise, the use of bitcoin is not absolutely anonymous. It is a pseudonym, which means that your bitcoin address is saved even if your identity is not.

Some cryptocurrencies, notably bitcoin, limit the number of coins that can be minted, meaning owners of existing coins don’t have to worry about arbitrary creation of new ones, although it may create others. problems in the future.

Is this just a ploy for Facebook to get my financial data and send more targeted ads?

We hear you. Facebook does not have a great reputation for protecting privacy.

The social network says don’t worry, not that you expected them to say something else. When the plans were first unveiled, Facebook was careful to point out that its wallet was hosted at a branch of the social network. The arrangement was designed to allow the holding company to be regulated by the authorities and to prevent money laundering and other financial crimes. The company also said it will keep financial data separate from Facebook’s social data.


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