184 - Why Facebook’s Stablecoin Failed, with David Marcus
Aug 21, 2023
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David Marcus, CEO of Lightspark and former VP at Facebook, shares insights from his involvement in the ambitious Libra project. He discusses why it ultimately failed, implicating government resistance and banking lobby pressures. Marcus argues that the West struggles to innovate in banking systems and explains why SuperApps may not work. He suggests that the future of money on the internet is rooted in crypto, particularly Bitcoin, and highlights the lessons learned from navigating congressional scrutiny.
Facebook's Libra project failed due to opposition from the US government and the banking lobby, highlighting the struggle to innovate banking systems in the West.
SuperApps, like Facebook's attempt with Messenger, are unlikely to succeed as the primary money layer of the internet.
Lightspark believes that the money layer of the internet will be built on crypto, specifically Bitcoin, due to its neutrality and censorship resistance.
Deep dives
Building an Open Payments Protocol on Lightning Network
Lightspark is building tools and software to accelerate the adoption of the Lightning Network as an open protocol for payments on the internet. Their focus is on making Lightning behave predictably, reliably, and easily for large and small companies.
The Importance of Neutral, Open Internet Money
Lightspark has chosen to build on top of Bitcoin and Lightning because they believe it is the only network that behaves like the internet and is not controlled by any single entity. They believe that for a true neutral, censorship-resistant money of the internet, Bitcoin is the only show in town.
Avoiding Dependence on Single Assets
While Lightspark acknowledges the use of stablecoins on Lightning, they caution against being solely dependent on one stablecoin or asset. They emphasize the need for a neutral settlement asset and network foundation that can handle a range of currencies, including fiat and stablecoins, while ensuring the core network remains decentralized and independent.
The need for innovation in global payment systems
The podcast discusses the importance of innovative technologies in global payment systems. It highlights that many of the successful fintechs, like Visa, originated in the late 60s to 70s and continue to be the underlying technologies powering global payments today. The speaker emphasizes that the limitation of the current payment rails is hindering trillions of dollars of payments. While praising the progress of FedNow in the US, the speaker notes that it primarily benefits banking institutions and is not a global solution. The lack of interconnected systems is a challenge faced in Europe as well. The podcast suggests that an open, global network, similar to the internet, would greatly enhance the value and efficiency of global payments.
Different approaches to fintech innovation in the US and China
The podcast explores the contrasting approaches to fintech innovation in the US and China. It highlights that in the US, there is a clear separation between tech companies and banks, while China embraced the collaboration between banks and tech companies, resulting in the success of companies like Alipay and WeChat Pay. The Chinese government's willingness to allow tech companies to disrupt the banking industry has led to a more advanced digital money and payment system in China. The podcast suggests that the regulatory constraints and control over banks in the US, along with the fear of potential risks, have limited the progress in fintech innovation. It also acknowledges that there are nuances and complexities to this issue beyond a simple dichotomy between the two countries.
David Marcus started a company that was acquired by PayPal, he then became President of PayPal (running the company), then he joined Facebook as VP of the Messenger app, and that’s when he started Facebook’s Libra project. Currently, he’s the CEO and Co-founder of Lightspark, a company that builds out Bitcoin Lightning tech.
----- From whitepaper to being summoned in front of Congress in 3 weeks…what really happened to Facebook’s stablecoin endeavors and what can we learn from it?
This episode is a post-mortem of Facebook’s highly ambitious crypto project from 2019. They tried to build a stablecoin but the U.S. government stopped it.
Topics covered in today’s episode: 1) Facebook’s Libra project…why did it fail? Who tanked it? The U.S. gov? The banking lobby? Why can’t the West seem to innovate its banking systems? 2) Why SuperApps won’t work? 3) Why our David Marcus thinks the money layer of the internet will be built on crypto…but more specifically…on Bitcoin!
----- TIMESTAMPS
0:00 Intro 7:20 The Libra Project 9:10 Facebook’s Involvement 9:59 Super App Thesis 12:05 Getting Government Approval 14:39 Messaging & Payments Intersection 16:45 Releasing the White Paper 18:05 Libra’s Government Reaction 19:50 Summoned to Congress Experience 21:25 U.S. Crypto Competition 25:40 Government Money Power Structure 30:00 FedNow 42:40 Will Twitter/X Become a Super App? 48:18 Bear Case for Super App 51:42 Lightspark 54:35 Bitcoin vs. Stablecoins 58:15 Why Lightning Uses Bitcoin 1:06:25 Bitcoin vs. Ethereum 1:11:37 The Future in 5-10 Years 1:14:40 Closing & Disclaimers
