Everything We Know About Facebook’s Libra Coin
In June of 2019 the development of a new cryptocurrency, Libra, was announced. Although it’s often referred to as ‘The Facebook cryptocurrency’, is Facebook really in control? Will lawmakers or other stakeholders prevent it from reaching the marketplace? Is it even accurate to call it a cryptocurrency? Let’s take a look at what we know at this point.
How Does Libra Work?
Much like other cryptocurrencies, Libra will be accounted for via the blockchain. Unlike Bitcoin and many other prominent cryptos, it will not be decentralized, at least not initially. As opposed to a permissionless blockchain, trust will be placed upon the ‘Libra Association’, a group of partnering companies that have bought in, or will, prior to the currency’s launch.
In addition to monetary investment, these players, mostly from the fields of payment, tech, telecommunications, blockchain and venture capital, will have to meet certain criteria outlined in the association’s guidelines. Calibra, a subsidiary of Facebook, will be the primary wallet, and the association’s mechanizations mean that Facebook will only get one vote at the currency’s governing table.
Libra will not be mined, but will instead be issued according to demand. A stablecoin, the currency will be backed by deposits and securities. Consumers will buy in using local government issued ‘fiat’ currency, which will remain in trust. This will serve as backing for the Libra. Those cashing out will receive fiat currency, and the corresponding Libra will cease to exist.
As a result of these measures, the actual amount of Libra in existence will rise and fall with demand, and 100 per cent of the current level will be in circulation at any given time. All of this is designed to increase stability of value, in hopes that the Libra will be utilized for widespread transactions.
What’s In It for Facebook and Partners?
The prominence of Facebook and its partners means that the Libra could potentially be widely adopted. It is intended to be easy to use, with very minimal transaction fees. The investing companies largely rely on digital transactions, and many stand to gain by eliminating transaction fees. If consumers buy in, Facebook could collect a lot of ad revenue from companies wishing to capitalize on these easy transactions.
Facebook could also prevent rival companies from beating them to the punch with cryptocurrencies of their own. These currencies could provide other companies with an avenue for horning in on digital identity and other aspects of Facebook’s business model.
The partners will also benefit by collecting interest on the stored reserves.
Legal Libra Backlash
Not among the ranks of Libra’s fans: US President Donald Trump.
Back in July the 45th president used his famous Twitter account to offer the following, “If Facebook and other companies want to become a bank, they must seek a new Banking Charter and become subject to all Banking Regulations.”
While it may be tempting to dismiss this as another one of President Trump’s short-term feuds, the POTUS is not alone in his concerns. Congress has drafted a law titled ‘Keep Big Tech Out of Finance’, which aims to prevent the Libra’s launch. Libra’s broad network and centralized structure have raised concerns about its potential influence over monetary markets.
Across the pond, European Central Bank board member Yves Mersch recently warned attendees of the ECB’s legal conference about the Libra Association’s potential power.
“To begin with, Libra coins will be issued by the Libra Association – a group of global players in the fields of payments, technology, ecommerce, and telecommunications,” said Mersch. “The Libra Association will control the Libra blockchain and collect the digital money equivalent of seigniorage income on Libra.”
Also of issue is Facebook’s less than stellar reputation on issues related to privacy. Although Facebook has promised to prevent crossover between Calibra’s and Facebook’s data, some remain skeptical.
Reaction in the Cryptocurrency Community
It’s not just lawmakers who are raising their eyebrows over the Libra. Many in the cryptocurrency community are quick to note that the centralized nature of the coin’s management falls short of the core ideals of cryptocurrency.
Others fear that knee jerk reactions from regulators may punish other currencies for the sins of the Libra. Still others see the glass half full, believing that the involvement of a tech giant will make the public more comfortable with the concept of cryptocurrency.
Due to the aforementioned factors, as well as cold feet on the part of several partners, the Libra may or may not come into existence. Regardless, cryptocurrency is here to stay. The time to earn by mining cryptocurrency is now, so visit jvdriver.com/crypto/ today and start profiting.