What is Libra?
- by susith nonis
- in IT News
Libra, or what’s commonly known these days as ‘Facebook money’ or ‘Zuckerberg money’ is a new cryptocurrency which will be launched in the first half of 2020. There’s a lot of controversy regarding the new cryptocurrency due to Facebook's infamous reputation. Nevertheless, we will focus on what exactly is Libra and the motive behind the new digital currency. Facebook will launch a subsidiary company called Calibra that will handle all the crypto dealings and protects users’ privacy, which will help the users to feel at ease as Facebook will not play any part in it.
What’s special about Libra is that it’s built on a native blockchain which makes it secure. It is also backed by a reserve of several major currencies meant to mitigate the impact of price volatility. This is known as the Libra reserve and is made up of the most stable international currencies like the Euro, US Dollar, British Pound, Swiss Franc, and the Japanese Yen. The Libra reserve is designed to withstand price fluctuations of its parent currencies, thus if one of the currencies goes up or down in value, the Libra will be maintained at a stable value. The goal of Libra is to be used as a day to day currency just like using Euros or US Dollars to buy groceries, pay rent or buy metro tickets.
Libra is a cryptocurrency, however, it will not have a very extreme difference with fiat money as Bitcoin or Ethereum do. These cryptocurrencies are not very popular with the public due to their sky-high value per coin. Unlike Bitcoin, one Libra will have a value similar to that of the most common currencies in use today. When it comes to transactions, Libra is designed to handle 1000 transactions per second while Bitcoin can do about 7 per second. Facebook has already started setting up the infrastructure to make this a reality (the details of the infrastructure can be found on Libra's white paper).
Okay! So Libra sounds good, but how is all this possible? Will our data be misused by Facebook as it was in the past? For starters Facebook won’t have full control over Libra but instead will get a single vote like the other founding members of the Libra Association. There are 28 founding members so far including Facebook (of course), Visa, Master Card, Uber, Spotify, Lyft and Vodafone, which have invested at least $10 million to join, gain one vote in the Libra Association council and be entitled to a share (proportionate to their investment) of the interest earned on the Libra reserve. Facebook hopes to have 100 founding members before the official launch of Libra if they meet the requirements (including Google and Twitter). The Libra Association is based in Geneva, Switzerland because of the country’s neutral status and for strong support for financial innovations.
Facebook was right about one thing: today’s money doesn’t work for everyone around the globe. A lot of hardships fall under the people with no access to banking, migrant workers and people with no access to traditional financial services. If Libra succeeds, it will be a stable currency built on a secure and stable open source blockchain, backed by a reserve of real assets, and governed by an independent association. Libra hopes to create more access to better, cheaper, and more open financial services no matter who you are, where you live, what you do, or how much you have.
Facebook is reinventing money and this could as well be the make it or break it point for Facebook.