What is Libra Coin and What Does Facebook’s Cryptocurrency Presence Mean for Bitcoin
Earlier this week, Facebook finally took the veil off of Libra, the new cryptocurrency with which the world's largest social network hopes to revolutionize e-commerce and global online payments.
The currency will be officially launched in the first half of 2020 and will be managed by the Libra Association, an independent non-profit organization based in Geneva, Switzerland. 28 heavyweight partners have already announced their membership in the association, and it’s expected that another 70+ names should soon become part of the project.
Ultimately, Libra is being developed to become a universal currency, but with features that aren’t actually very similar to those of today’s top cryptocurrency, Bitcoin.
“The mission is to create a global financial infrastructure that serves billions of people around the world”, writes Facebook CEO, Mark Zuckerberg, himself.
“We want to make it easy for everyone to send and receive money just like with our apps to instantly share messages and photos”, all with blockchain technology.
Libra represents the first mass adoption ready cryptocurrency on paper, and will likely be used for everyday payments in countries across the globe. The implications are profound, both from an economic and regulatory standpoint: it aims not only at Facebook users, but also at the many individuals in developing countries who do not yet have a bank account but already have a smartphone.
“Easy, fast, stable, safe” are some of the watchwords used by the group of David Marcus, former president of PayPal. Marcus, who conceived the Libra project, was hired by Zuckerberg in 2014.
It can be used not only on Facebook, Instagram and Whatsapp, but also on eBay, Uber, Lift, Spotify, Booking, Iliad, Vodafone and all the companies that are joining the Libra Association. In this way, international corporations have a strong incentive to support Libra, as it can help them to reach a much larger percentage of the public that don’t have the possibility or don't want to have a credit card.
The transactions will cost less than those of traditional financial service providers, Facebook said, although the executives of the multinational have refused for the moment to provide further details. Finally, there is also the possibility of receiving a refund in case of fraud — something which more decentralized cryptocurrencies do not have.
The Main Features of Libra
The name “Libra” is inspired by the word Libbra, a unit of Roman origin whose name derives from the Latin libra (“scale”). Not only that, it is also the astrological sign for justice and the French word for freedom, according to what Marcus explained: “Freedom, justice and money, which is exactly what we are trying to do here”. He also said,
“People will be able to send, receive, spend and protect their money, thanks to a more inclusive global financial system.”
Each member of the Libra Association has the right to vote on substantial decisions concerning the cryptocurrency network, and companies must invest at least US $10M dollars to join.
In addition, Facebook has created a subsidiary called Calibra that will offer digital wallets to store, transfer and spend Libra. Calibra will conduct compliance checks on customers who want to use Libra, and in doing so will use verification and fraud processes that are very common among banks. The subsidiary will only share customer data with Facebook or external parties that have consent, or in “limited cases” where it is needed, Facebook said.
This could concern the application of particular laws, problems for public safety or the general functionality of the system. For the moment, Facebook is trying to present themselves as having very good intentions. In fact, the company has made commitments to work with regulators in the United States and abroad. Without specifying which regulatory authorities are involved or whether the company has requested financial licenses in various parts of the world, it is clear that Facebook hopes to be able to bring global regulators around the same table and to make Libra compliant.
In this regard, Kevin Weil, VP of Product and Blockchain of Facebook, said:
“This launch gives us a basis for having productive conversations with regulators around the world”.
Is Libra Really a Threat to Bitcoin?
Although Libra's blockchain is not accessible to everyone, it can still be used as a foundation by anyone who wants to build new products based on this digital currency. According to Libra's white paper:
“Open access ensures lower entry barriers, encourages innovation and a healthy competition that will benefit all consumers. This is foundational to the goal of building more inclusive financial options for the world.”
All this, however, hides non-secondary risks. Josh Constine on TechCrunch wrote:
“Apparently Facebook has already forgotten how allowing anyone to build on the Facebook app platform and its low barriers to “innovation” are exactly what opened the door for Cambridge Analytica to hijack 87 million people’s personal data and use it for political ad targeting,”
For example, a developer could create a fraudulent wallet quite similar in appearance to the official Calibra one, but that cleans out the digital wallet of its users or directs the money sent to an account. This is just one of the risks that lie behind the decision to allow any third party to build on the Libra platform.
Certainly, when the first scandal hits, the advantages of Bitcoin and decentralized blockchain will be reaffirmed in unison. The question that Bitcoin supporters are asking themselves strongly, however, is the following:
“Is Libra good or bad for the spread of real, decentralized cryptocurrencies?”
The answer to this question must be analyzed from several points of view. First and foremost, the creation of a digital currency by Facebook can represent a sort of ‘threat.’ This is because the tech giant will be able to offer Libra coin to its 2.7 billion total existing users — greatly outnumbering the existing user bases of Bitcoin and all the altcoins (Ethereum, XRP, Litecoin, Monero, etc.) combined.
On the other hand, all the criticisms about the actual usefulness of blockchain technology and the skepticism that has always surrounded cryptocurrencies would probably fade away in the face of Libra’s widespread adoption.
Unlike Bitcoin, Libra will start out as a permissioned system that’s far less decentralized than it’s 10-years-older counterpart. One of the biggest obstacles Facebook and the Libra Association will face in the years ahead is the reality that they themselves need to ask permission to launch their cryptocurrency in new markets. Where Bitcoin can remain secure and even thrive when governments try to shut it down, Libra will end as a miserable failure if it doesn’t gain cooperation from regulators in major global economies.
But this is something Libra’s founding teams seems to already be aware of. In order for it to be truly global and usable by anyone, and not just by Facebook's partners, “an open blockchain is required, similar to that of Bitcoin”, stated Christian Catalini, an economist at MIT who worked directly on the Libra project.
Ultimately, Libra can provide value to the world by normalizing the concept of a global currency that’s available to people who don’t have traditional bank accounts or access to legacy financial infrastructure. In the long-term, however, Bitcoin is still king of the decentralized “Internet of money” it created.
What Top Crypto Influencers Are Saying About Libra
Jill Carson – Co-founder of Open Money Initiative
For anyone who has been following the crypto / blockchain space, a lot of Libra looks pretty familiar.
⛽️ Account Model & Gas Fees of ETH
🤝 Consortium of R3
♊️ Dual Asset Model of DAI
💰 Collateralization of Basis
😈 BFT Consensus similar to Cosmos
🏛️ Swiss Foundation like Tezos
— Jill Carlson (@jillruthcarlson) June 18, 2019
Eric Voorhees, CEO of Shapeshift
1/ Thoughts on Libra (and my first tweetstorm!): first, zoom out for a second and realize how far this industry has come. The biggest companies in the world are now launching cryptocurrencies. BOOM.
— Erik Voorhees (@ErikVoorhees) June 18, 2019
Andreas Antonopoulos – World-renowned expert on Bitcoin and blockchain technology
"Libra doesn't compete with central banks, they're using a basket of currencies"
Think about what happens in, say India, when they decide to apply monetary policy (devalue) and people have access to a "hard" Libra alternative. It undermines their power of monetary policy
— Andreas ☮ 🌈 ⚛ ⚖ 🌐 📡 📖 📹 🔑 🛩 (@aantonop) June 19, 2019
Ask the five basic questions: Is it open? Neutral? Borderless? Decentralised? Censorship-resistant?
— Andreas ☮ 🌈 ⚛ ⚖ 🌐 📡 📖 📹 🔑 🛩 (@aantonop) June 19, 2019
Naval Ravikant – Entrepreneur, investor, and thought leader
Libra is a fine digital currency, but it’s not a cryptocurrency.
Cryptocurrencies have value precisely due to decentralization.
Muddling the two may be in Libra’s interests in the short term, but is against everyone’s interests in the long term.
— Naval (@naval) June 23, 2019