10 July 2020
“What new technology does is create new opportunities to do a job that customers want done.” – Tim O’Reilly
Facebook revolutionized the way we socialize and communicate; it gave a hit of exposures and thus was one of the technologies that were the beginning of the era. It took over the major brands, such as Instagram, Whatsapp, Oculus VR, and so forth. Saying that, how could it possibly not indulge itself in the hype of Cryptocurrency?
Facebook made headlines when they announced their plans on Libra and its related components. Libra is a cryptocurrency-powered by Blockchain Technology and is represented by a Unicode character “≋”. Libra in its release of whitepaper stated its mission to enable a global currency that is simple and the financial infrastructure empowering billions of people.
Here are a few of Libra’s features:
Libra Coin is built on a scalable, secure and reliable blockchain.
To give intrinsic value it is designed and backed by a reserve of assets.
It is governed by the Libra Association tasked with evolving the ecosystem.
Users will be able to exchange fiat currency through this digital currency to use them for online transactions.
It is stated to be a stable coin as Libra seeks to facilitate a normal consumer transaction.
It aims to be an open network to everyone- developer, consumer or business.
At the initial stage, it also intends to be only available on the Facebook messenger and Whatsapp, including the rest of the Libra Association’s partners, will integrate to find methods for Libra payments.
Along with Libra coins, Facebook is also planning to launch a subsidiary company named Calibra which will facilitate financial services and will let people access and participate in Libra network.
The cryptocurrency will allow users to spend through interoperable third-party wallet apps or Facebook’s Calibra wallet.
Facebook is also planning to install ATM-like terminals for users to manage their Libra coins.
It also aims for lower fees, more flexible and accessible to unbanked individuals. People are charged an average of 7% to send money abroad, which in total would be approximately $50 from users every year.
Libra Reserve: Libra is backed by a reserve of real assets unlike the majority of cryptocurrencies and be supported by a network that is competitive of exchanges selling and buying Libra. Each time a user cashes in its native currency, the money goes into the Libra reserve, wherein Libra coins are minted on the factor of the specific amount and then the money is transferred. If someone cashed out money from the Libra Association then those coins are burned and gets equivalent to their local currency back.
Libra Blockchain: Libra blockchain would provide a solid foundation which is operated by a network of validator nodes. The Libra Blockchain uses a BFT Consensus Approach, iterates on widely adopted blockchain data structures, and utilizes moving programming language. The Libra team came up with a new blockchain platform such as high security, ability to scale billions of accounts and flexibility to power Libra ecosystem’s governance and future innovations.
Libra Association: Libra coins are not just Facebooks’ but is also governed and partner with a few reputed companies such as Vodafone, Spotify, Uber. The Libra Association is a not-for-profit organization headquartered in Geneva, Switzerland. The Association is designed to facilitate the operation of the Libra blockchain, to manage the Libra reserve, to coordinate the agreement amongst its stakeholders, the network’s validator nodes and to develop, expand and promote the Libra network.
Each of the Association members have invested a minimum of $10 million into the operation to become a validator node, thus every member has received a single vote in the governance, to oversee the reserve of the real-world assets of the Libra Blockchain, and are also entitled to a share of dividends from the interest earned off the Libra reserve. The partner’s companies themselves are the high-end brands and are associated with people which will in a way lead for the Libra coins to ensure with a high level of penetration. However, Facebook expects and strives to reach 100 members before it officially launches the Libra Coin.
Given below are currently the founding members as per their industry:
Technology and marketplaces: Farfetch, Lyft, Facebook/Calibra, Spotify AB, Uber Technologies, Inc.
Telecommunications: Vodafone Group, Iliad
Blockchain: Anchorage, Xapo Holdings Limited, Coinbase, Inc., Bison Trails
Venture Capital: Breakthrough Initiatives, Thrive Capital, Ribbit Capital, Union Square Ventures, Andreessen Horowitz
Nonprofit and multilateral organizations, and academic institutions: Kiva, Creative Destruction Lab, Women’s World Banking, Mercy Corps,
Forbes reported that a group of thirty-three privacy, economic policy, consumer and few other organizations stated Congress and regulators for a moratorium Facebook’s Libra Coin. They quoted “We call on Congress and regulators to impose a moratorium on Facebook’s Libra and related plans until the profound questions raised by the proposal are addressed” and “All of us believe that the risks posed by Facebook’s proposal are too great to allow the plan to proceed with so many unanswered questions.” The questions were based on Governance, National Sovereignty, Law enforcement (including tax), Consumer Protection, Privacy and Competition, and systemic risk.
Facebook came up with the term to bank the unbanked however for one to obtain the Libra coin, the user has to make the exchange accessed through a bank which only bank can facilitate.
As compared to other cryptocurrencies, Libra is more centralized, permissioned, pegged to fiat currencies and is governed by demand and supply.
Here are few statistical facts:
Facebook’s relationship with 7 million advertisers and 90 million business groups will aid the libra coin to evolutionize.
Facebook has more than users of 30% from the world’s population which benefits the consensus to global adoption.
A survey conducted by LendEDU had stated that out of 1000 Americans, 91% which would be 910 people said ‘they have had never invested in cryptocurrency.’ However, when the ‘non-cryptocurrency user’ were asked if they would invest on Facebook’s cryptocurrency, 57% of this said ‘YES’ because they expect Facebook to be a trusted and reliable company.
Facebook is a brand that is extensively used and hence the success of Libra coins in the Blockchain perspective can hit its peak.
As Facebook said in the Libra Documentation, “Success will mean that a person working abroad has a fast and simple way to send money to family back home, and a college student can pay their rent as easily as they can buy a coffee.”