Not everything Facebook touches turns to gold. It's sometimes easy to forget that fact, given the company's success as a whole, but the history of the social media company's side projects isn't exactly covered in glory.
For every successful side-product or purchase, like WhatsApp or Instagram, there's a failed initiative like Lasso, which tried and failed to replicate the service provided by TikTok.
The company is fortunate enough to have so much money that even its failures don't make a significant dent in its profits, but history tells us that when it ventures outside the comfort zone of its core business, it sometimes struggles.
Away from the clearly-defined successes or failures, there have been Facebook products and tie-ins that have landed somewhere in the middle. One example would be the High 5 Facebook Casino, which was (and still is) an attempt to cash in on the success of online slots websites.
Facebook hoped that by allowing millions of people to play online slots without leaving the main Facebook site, it could cut the slots websites out of the deal and take a big slice of the market. The dedicated page on the company's website has around a million followers, but the success of online slots websites elsewhere continues unabated.
It might be that there just weren't enough online slots players among Facebook's user base to succeed, or it could be that online slots with 10 free spins aren't something that people want or need Facebook to provide for them.
If the reception to Facebook's foray into the casino market had been tepid, the response to its attempt to make inroads into cryptocurrency has been positively hostile. In fact, it's been so hostile that it might yet cause problems for other cryptocurrencies.
Regulators in the United States of America hadn't spent much time considering the intricacies and unique issues posed by the existence of cryptocurrencies before Facebook decided it was going to try to launch a virtual currency called Libra. Now, because of an investigation into Libra that was carried out during Facebook's attempt to gain approval, they're very much aware of it - and they don’t like it very much.
After receiving so much criticism in the US about Libra in 2019, Facebook appeared to back away from the idea of launching a currency at all. Mark Zuckerberg himself stated that his company wouldn’t go ahead until they’d gained approval from regulators, and that appeared to be the end of the matter.
With Facebook enduring a storm of bad news in the months that followed, which included the fallout from the Cambridge Analytica scandal, everything Libra-related appeared to have gone quiet, and most tech journalists suspected that we’d never hear its name again.
That’s why the tech and crypto world got a shock last week when Facebook confirmed that not only was it reviving its Libra project, but it might go live with it as early as January 2021.
If you've been following the story so far, you're probably wondering how and why Facebook would attempt to do this when they've been told so firmly that they have no chance of getting Libra approved from a regulatory point of view in its current format.
The answer to that question is that the 'current format' has changed. This is no longer the full-scale cryptocurrency product that Facebook initially marketed it as. This is a stripped-down, scaled-back, lightweight version of the same idea that appears to have been specifically tailored to gain acceptance in the market and might later allow Facebook to revert to the original plan once the "Libra-lite" product is up and running.
The original plan called for multiple 'stablecoins' backed by major global currencies, including the Euro, the British Pound, and the US Dollar. This new version of Libra is just one single coin, backed by the US Dollar at a rate of one-for-one.
In a move that’s presumably designed to boost the chances of regulators giving the project the go-ahead, the currency will no longer be launched or directly backed by Facebook. Instead, it’s being brought to market by the “Libra Association,” which is backed by Facebook but doesn’t answer to Facebook directly.
Their stated aim is to bring banking and digital finance facilities to almost two billion people around the world who don’t currently have access to bank accounts or electronic payments. From Facebook’s point of view, though, it offers the chance for the currency to become the default form of payment for transactions made through Facebook, with the ability for purchases to be completed through a ‘Facebook Wallet’ with just one single click of a button.
There would be obvious advantages of that simplicity for any company advertising products and services through Facebook - and Facebook could, therefore, justifiably charge more for those adverts. Facebook might not directly manage or maintain the currency, but it still stands to profit handsomely from it if everything goes to plan.
Even if this new proposal gains approval from regulators - which could be a big ask with an intended January launch date - there are still significant hurdles for Facebook and the Libra Association to overcome. Initially, the Libra plan was backed by Stripe, PayPal, and a multitude of other companies with significant experience in handling online payment transactions.
Now those partners have withdrawn, Libra will either need to be backed by its own payment handling mechanisms or find new partners to provide them. Given their confidence that they'll be in a position to go live within less than three months, it's to be presumed that suitable partners or technologies have been procured, but full details aren't available at the time of writing.
Because Libra will be backed by a 'stablecoin' (in this case, the US Dollar), it shouldn't be prone to the kind of wild ups and downs that typify Bitcoin, Ethereum, and other notable cryptocurrencies. This is more typical of a traditional currency than a cryptocurrency.
For example, the dollar itself was backed by gold until the early 1970s, and the US dollar backs other versions of the dollar worldwide through currency boards. Bitcoin isn't backed by anything at all. Libra might market itself as a cryptocurrency, but whether it truly meets that definition is a matter of some conjecture.
Even in this limited format, the coin will still have to meet US-based regulators' approval before the service goes live. We suspect that the USA's political and regulatory schedule might be a little busy during January, so it's impossible to say how likely any such approval might be.
At this stage, all we can do is wait and see - but even that's an improvement for a project that appeared to be dead in the water as recently as a week ago.
Md Rasel is a professional blogger.