We’ve heard a lot in recent years about different cryptocurrencies, but now a huge name in social media has got in on the act – Facebook. In June 2019, Libra – Facebook’s own virtual currency – was announced to the world. So, what is Libra and what does it mean for all of us?
The Libra whitepaper says that it will be run on a blockchain – an unchangeable digital record of payments. Blockchain, unlike regular banking transactions, is decentralized and that means that all transactions are verified and processed by independent computers instead of a central bank.
This enhances security to guard against hacking and also guarantees that governments aren’t able to block any transactions by exerting pressure on the central authority. Essentially, it’s an anti-banks, anti-state libertarian tool.
There has been some controversy over whether Libra really is a cryptocurrency like Bitcoin or not. Libra’s blockchain isn’t decentralized like Bitcoin’s and that means that its nodes are run only from Libra Association Members’ servers, all of which happen to be mega-corporations. This puts the Association more likely to crumble under pressure from governments ordering the blockage of a transaction.
Decentralization helps to reduce the vulnerability of the system to shutdowns or hacks, however it’s a time-consuming process. Bitcoin’s blockchain is only capable of processing around 7 payments a second. Libra will be much faster than that, handling around 1000 transactions every second. That’s a big difference. However, in the whitepaper, it says that Libra is eventually going to shift to a completely decentralized blockchain, although whether that will happen is anybody’s guess.
Bitcoin is known for its volatility, and while that’s great news for speculators, it isn’t such good news for anyone who wants a stable global payment network. Libra’s value will therefore be tied to real-world values of a basket of big name currencies and low-risk government securities. The basket’s value will determine how much the Libra units are worth.
At this time, there isn’t much else to learn about Libra. All we know is that Facebook Calibra is going to launch their own Libra Wallet which will allow its users to exchange the Libra currency via WhatsApp, Messenger or their own standalone app.
However, as you we don’t know which companies are planning to accept the currency – but it seems likely eBay and Uber will be on the list since both are part of the Libra Association.
Libra won’t be launched until next year, however it’s already causing concerns. Facebook are promising they won’t be using payment information for advert targeting, but can they be believed? Regulators, too, are frowning on the move saying that only a government is capable of minting money and warning against possibly nefarious uses which Libra could be put to.
Not only that, but lawmakers have deep concerns about Facebook expanding into the financial domain. Who knows what the future will hold, but it seems clear that Facebook is only going from strength to strength.