Everything You Need to Know About Facebook and its Cryptocurrency, Libra
Basics: Libra — Facebook’s Cryptocurrency
Facebook recently announced its own cryptocurrency, Libra. Facebook aspires to make this digital currency a global currency for billions of people, and become mainstream in the developing countries where people have limited access to banking and financial services.
Basically, Libra will allow you to do everything that you could do with physical currency. You will be able to buy things, send money to people, and so on.
How Will Libra Work?
According to the white paper of Libra:
Libra is a simple global currency and financial infrastructure that empowers billions of people. Libra is made up of three parts that will work together to create a more inclusive financial system:
- It is built on a secure, scalable, and reliable blockchain;
- It is backed by a reserve of assets designed to give it intrinsic value;
- It is governed by the independent Libra Association tasked with evolving the ecosystem.
Thus, the currency will run on blockchain, much similar to the Bitcoin which is the first cryptocurrency we ever had. For starters, blockchain is an unchangeable, digital database which stores all the transactions ever made in a given cryptocurrency.
It is important to mention here that blockchain is a decentralized database. This means that every transaction that is processed is verified by a range of independent contractors called nodes rather than a single central bank. This makes it difficult to hack, which in turn, enhances its security as there is no single entity that can be hacked.
So, Is Libra a cryptocurrency?
Well, there is no straight answer to this question. Partially yes, and partially no.
Why you might ask? This is because the Libra is not decentralized the way the Bitcoin is. While anyone can run a node in Bitcoin, this is not the case with Libra. In Libra’s case, a node may only be run from the servers of the Libra Association’s members which include Paypal, Facebook, Uber and the like.
In a way, it can be said that none of these members will individually determine the state of Libra and it will be a collective effort, which is pretty much in line with the ethos of blockchain.
But people have mixed views about it. The buzz is that Libra will be controlled by mega-corporations and the chances are high that the Libra Association will succumb under pressure.
What do Central Banks Think about Libra?
Libra is scheduled to be launched in 2020, but people are skeptical about its launch. Although Facebook has assured everyone that it won’t use the details and data related to the payment to target adverts at the of Libra, users still remain skeptical. People lost their trust in Facebook when it made headlines with the security breach and questionable actions involving Cambridge Analytica. Following the incident, Facebook’s usage fell by more than 10 per cent within a month.
Not only individuals, but also regulators are closely monitoring the launch of Libra, with both excitement and trepidation. Lawmakers in both the EU and US are cautious about the recent expansion of Facebook into the financial domain. Additionally, France has also expressed its speculation towards Libra by highlighting that money can only be minted by the government; whilst the Bank of England has also issued an advisory that Facebook’s Libra will need to meet high financial standards to be allowed in the UK.
Consumer Technology Firms and Finance
However, Facebook is not the only technology brand flirting within the digital finance space or specifically cryptocurrency. In fact, it marks a continued trend. Yahoo, for instance, owns a 40 per cent stake in Taotao, a Japanese crypto exchange. Though the position of Yahoo in this deal is not clear yet, its stake is worth 2-3B Yen (£14-22M).
Amazon has also reportedly registered a number of crypto-related domains like AmazonCryptocurrencies.com and AmazonEthereum.com. However, the main motive behind this move of Amazon might not be as interesting as the public believes. The VP of Amazon Pay, Patrick Gauthier, told CNBC that Amazon doesn’t plan to accept cryptocurrencies anytime soon due to lack of serious demand.
Going by this statement, the reason behind registering these domain names could be to protect the Amazon brand name. These purchases were made at the zenith of Bitcoin’s price (around Oct-Nov 2017), when fraudulent activity relating to cryptocurrencies was also said deemed to be very high. Instead, the firm is most likely to venture into the “new era of commerce” which Gauthier believes is voice activated payments.
On similar lines, Apple has launched ApplePay, Alibaba has its Alipay. WeChat has WeChat Pay. Not only this, Tencent QQCoin with its intricate and interesting history proves the staying power and significant demand for these firm’s financial products.
Keeping all these cases in mind, the fear of many financial services firms seems to be taking hold as well-established technological behemoths venture into their territory. But what does this mean for the users? Well, the truth is, we will have to wait to watch. However, it is clear that cryptocurrencies are here to stay with us, and it will be interesting to see how things unveil themselves shortly.