Meta: a Step Back From Blockchain

    04 May 2022

    Mark Zuckerberg’s company made a lot of noise a few years ago with an attempt to create its own stablecoin as a basis of a worldwide payment system built around Facebook, Instagram, and WhatsApp. Now, the once ambitious move has been reduced to some faint cracks at creating a kind of in-game currency for the Metaverse – and not even on the blockchain.

    The Financial Times, citing its own sources, reported that Meta (fka Facebook) has plans to create a virtual currency for the Metaverse. The digital money, unofficially called Zuck Bucks inside the company, is unlikely to be a blockchain-based cryptocurrency, the sources say, without elaborating.

    In addition, the newspaper claims Meta could introduce so-called reputation tokens that users would receive, for example, as a reward for their contributions to developing Facebook. (It is not precisely clear what is meant by this.)

    The anonymous interlocutors state that the company is currently looking for alternative sources of income due to the decline in popularity of Meta’s key apps – Facebook and Instagram. One other means to that end is a potential launch of a pilot project to enable NFT placement and exchange on Facebook in mid-May.

    Overall, the information is scarce but undoubtedly noteworthy. It also brings back memories, like the fact that the term “Zuck Bucks” first appeared back in 2019. Then, the information that Facebook was preparing to release its own cryptocurrency had only begun to come in. I clearly recall how before the public heard anything about Libra, let alone Diem, the words “Zuck Bucks” were already circulating among insiders.

    Another thing you may remember is Facebook’s plans to release its own stablecoin in the first half of 2020. But the decisive intervention of American legislators and regulators caused Zuckerberg to almost abandon the idea. Instead, the CEO changed the token’s name from Libra to Diem and assembled an entire business association around the project, which even included Visa and MasterCard. The Diem Association then moved from the United States to Switzerland, a state more tolerant of cryptocurrencies.

    In 2021, Diem founder David Markus left Meta and the project entered into a partnership with Silvergate Capital Corp. to proceed with the issue of their stablecoin. However, according to Fortune magazine, US Federal Reserve officials warned Silvergate Bank – owned by Silvergate Capital and designated to be the issuer of Diem USD – that they were concerned about the launch and could not authorize it.

    So, in the end, the initiative did not work out. In February of this year, the Diem Association announced the sale of their intellectual property and other assets to Silvergate Capital. Shortly prior to this, the WSJ wrote that Meta was looking to sell its crypto project for $ 200 million. Diem explained that throughout the entire development process they actively cooperated with regulators and received positive feedback. However, despite their efforts, it became obvious the project could not proceed. “The best way out was to sell the Diem Association assets, so that was the course we took,” their press release said at the time.

    There is some ambiguity in the Financial Times’ reporting: it is impossible to tell for sure from their article whether Zuck Bucks and the upcoming NFTs are parts of the same project or two different endeavors. The former would be similar to what is already used in some gaming apps, like the Robux currency in the Roblox online multiplayer.

    The latter, though, seems to be the likelier option. And if true, it would mean that Meta wants to release its Metaverse virtual currency with the same technologies that were used by video games to produce in-game cash 5-7 years ago. But since modern games usually issue internal currencies following the established crypto playbook – on the blockchain, with limited emission, etc. – the company would actually be taking a step back.

    The decision is all the more surprising considering how much hope the crypto community has placed and still places on metaverses. They have consistently been one of the main topics in cryptocurrency media ever since the fall of 2021 when Facebook changed its name to Meta and Mark Zuckerberg solemnly announced the creation of the Metaverse.

    From that point on, no one really doubted that individually and jointly created metaverses of different companies would widely use blockchain technology, primarily to build the financial component of these new worlds. The concepts of metaverses and Web 3.0 were all but equated. But now, in a sudden twist, Meta itself tramples on the idea, instead clumsily grafting NFTs and some confusing “reputation tokens” onto their Metaverse.

    But the march of progress cannot be stopped. Recently it was revealed that Mastercard has filed 15 applications for its own metaverse trademarks. Judging by the available information, the payment giant intends to create:

    – NFT platform for digital asset trading.

    – Payment and transaction processing within the metaverse.

    – Virtual metaverse credit and debit cards.

    Furthermore, multiple other companies – both startups and market veterans – are adapting DeFi and GameFi services to fit the metaverses. So while Zuckerberg may have sowed the seeds, it is those unafraid to integrate the blockchain and metaverses who are about to reap the rewards.

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