Reflecting on Facebook's Hilarious, Well-Deserved Crypto Failure

Diem: derailed, deferred, now dead.

By David Z MorrisLayer 2
Jan 28, 2022 at 6:49 p.m. UTC
By David Z MorrisLayer 2
Jan 28, 2022 at 6:49 p.m. UTC

David Z. Morris is CoinDesk's Chief Insights Columnist. He holds Bitcoin, Ethereum, Solana, and small amounts of other crypto assets.

Reports surfaced this week that Facebook, now known as Meta Platforms, is planning to sell intellectual assets from its proposed digital currency, originally dubbed Libra, and shutter the project. Drinks are on me, because there’s nothing quite so gratifying as watching Facebook and Mark Zuckerberg fail – and Libra, later known as Diem, was a glorious trash fire of unforced screwups from beginning to end. If you dream of a future in which our online world isn’t dominated by predatory data hoarders, the ineptitude displayed by Facebook here should keep you warm until spring.

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The collapse of Libra/Diem is a huge positive, not just for the crypto industry, but for privacy and social justice more generally. A successful launch of Diem would have disastrously muddied the waters about what constitutes a real cryptocurrency, since Facebook’s token was never going to be properly decentralized or uncensorable. The project also appeared poised to give a new stream of transaction data to a company that will go down in history as the Standard Oil, United Fruit or R.J. Reynolds of digital surveillance. That such a rapacious and destructive entity has been rebuffed from creating its own currency is a win for humanity.

And there are broader positive lessons to be learned – above all, that wealthy and influential people still have to exhibit at least a shred of competence to get what they want. The Libra effort was a shambolic mess from the jump, with Facebook showing again and again that it hadn’t thought through the implications of either its overall goal or its specific proposals. That it went down in flames shows there’s at least still some justice in the world. These are the supposed masters of the digital universe, and they still failed because their ideas were so fundamentally terrible and consistently half-baked. All the money in the world can’t buy brains – at least, not if you’re Mark Zuckerberg. (For a full rundown of the mess, check out CoinDesk’s complete Libra chronology.)

The saga is also a reminder to give some serious side-eye to the public relations claims of any tech company, especially Meta. That’s particularly worth remembering as the former Facebook now attempts to build the virtual-reality based social network Horizon Worlds. While the regulatory landmines may be fewer, Zuck’s “metaverse” pitch is just as conceptually flawed and morally bankrupt as Libra was, and will be largely overseen by the same C-suite that guided Libra off a cliff.

Probably the clearest sign of how badly Facebook screwed up its coin ambitions is that the name of the overall project was changed from “Libra” to “Diem” in December of 2020, just after the “Calibra” wallet that Facebook was building rebranded to “Novi,” and barely 18 months after the initial announcement. Facebook framed the change as an attempt to affirm the project’s independence from Facebook, but Occam’s razor suggests it was really to wash off the stink of the torrent of white-hot hostility that greeted Libra’s initial launch.

That tarnishing began almost immediately, with project lead David Marcus’ hapless performance before the House Financial Services Committee in July of 2019. Facebook was clearly on hostile ground – the hearing opened with California Congressman Brad Sherman comparing Libra to the 9/11 hijackers.

But Marcus made things even worse by failing to clearly address a laundry list of really, really obvious uncertainties about Libra. Those included whether Libra could be used to pay for, say, illegal drugs – and if not, who had the power to censor transactions? Marcus also failed to allay concerns that Libra’s use of a basket of currencies as backing for a global stablecoin would destabilize national currencies, including the U.S. dollar itself. Close listeners heard him weaseling about plans for collecting and sharing Libra transaction data, even as Facebook was still in the midst of a privacy scandal.

The privacy questions were closely linked to legislators’ skepticism that the Libra project would be a “nonprofit” independent of Facebook’s control. Facebook’s hilariously inept attempt to make it seem like it wasn’t in control of Libra involved creating a “Libra Association” made up of companies including, for about 10 seconds, Visa, PayPal and Uber. To set up this group, Facebook, a massive public company, basically copied and pasted the “Swiss nonprofit foundation” legal structure that was popular among sometimes-shady initial coin offering-driven crypto projects circa 2017-2018.

This structure was generally a convenient fiction when used by small-time crypto-native projects, and Facebook’s group seemed just as much of a paper-thin misdirect. Facebook had invited all the members, most of them had preexisting ties to Facebook, and some even suggested they had felt pressured to join. Harvard tech scholar Primavera De Filippi told Wired at the time that the Libra Association created only “a facade of decentralization.” The fact that lawyers for a then-$400 billion market cap public company looked at the scheme and assumed it would convince U.S. lawmakers that Facebook wasn’t really in charge suggests nothing short of gross incompetence up and down the org chart.

See also: Diem: A Dream Deferred? | The Node

For critical-minded crypto insiders at the time, all this was high-grade surrealist comedy. My immediate reaction to Marcus’ testimony was nothing short of befuddlement – it was simply hard to believe that an executive in his position was so painfully unprepared for immensely important testimony.

Taken as a whole, the list of fumbles in the Libra saga is so long that it nudges you towards conspiratorial speculation: What if Libra was never actually meant to launch? A full-blown tinfoil-hat theory might speculate that it was all an elaborate attempt to undermine open systems like Bitcoin, perhaps an echo of Zuckerberg mentor Peter Theil’s affinity for tightly moated tech monopolies. More reasonably, commentators like CoinTalk’s Aaron Lammer figured the “decentralized” elements of Libra would be slowly scaled back until it was just another attempt at doing payments in-house at Facebook.

But in the end, Facebook couldn’t even salvage that much from the wreckage. So farewell, Libra – and thanks for all the laughs.

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David Z. Morris is CoinDesk's Chief Insights Columnist. He holds Bitcoin, Ethereum, Solana, and small amounts of other crypto assets.

David Z. Morris is CoinDesk's Chief Insights Columnist. He holds Bitcoin, Ethereum, Solana, and small amounts of other crypto assets.

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