Lately, there has been a lot of fuss around cryptocurrency Libra, announced by Facebook on the 18th of June. There were a lot of discussions. Do you want to understand it well and really see what it is all about? Well, we have prepared a nice and short review for you!
Wait a second, I haven't heard anything. What is it?
Libra is a cryptocurrency, based on Libra Network blockchain. It is developed by Facebook along with a Swiss fund Libra Foundation. It will be available on Messenger and WhatsApp everywhere in the world. If you don't use either of them - there will be an app (digital wallet) called Calibra for you. The main goal is to give financial services to people, who still don't have bank accounts. Per Facebook, it will be extremely cheap and very easy to send money to anyone in the world, as long as they have a smartphone.
The release is planned for 2020.
Will Facebook fully control my money?
Libra will be managed by a nonprofit foundation The Libra Association, which is based in Switzerland. The board currently includes members of 27 organizations, including Visa, Mastercard, Vodafone, Coinbase, Paypal, Stripe, Uber among others. Each member has agreed to invest at least $10 million in Libra. Each partner will have an equal vote in governing Libra, which means Facebook will not have full control.
Libra Association will be supported by Libra Reserve. It will contain a collection of assets, stable currencies: USD, EUR, JPY, and GBP.
It's not decentralized. Is it even a cryptocurrency?
Only certain partners will be able to process transactions. While it is powered by blockchain, Libra is not going to be decentralized, so it is not considered as a true cryptocurrency by many Bitcoin enthusiasts. However, it is indeed a cryptocurrency, as it uses a secure form of cryptography to verify transactions. Libra is a new type of cryptocurrency. Reserve-backing Libra makes it stable, so it is not going to be as volatile as other cryptocurrencies and it will have a value, whereas Bitcoin often grows because of speculation.
One thing that might disappoint cryptocurrency-savvy people - in order to use Calibra digital wallet, you will have to provide a government-issued ID to sign up for the account. Which is unseen on current cryptocurrency wallets.
Is it another way for Facebook to collect my data?
According to Facebook, they do not plan to sell targeted ads based on your transactions with Libra.
All right, I know all of that. What about the tech stuff?
Shortly speaking, Libra will work with Libra blockchain with PoS (Proof-of-Stake) mechanism. Independent servers around the world, called nodes, make up the network that operates the blockchain. Nodes will be governed by partners of Libra Association. These nodes are based on LibraBFT algorithm (BFT - Byzantine fault, named after Byzantine Generals Problem, where actors must agree on a concerted strategy to avoid catastrophic system failure, but some of the actors are unreliable. I recommend to read more about it). This can allow Libra to be compatible with other BFT-based blockchain systems, like Binance Chain.
Libra is written on Move, a programming language, created for Libra blockchain. The move is an executable bytecode language used to implement custom transactions and smart contracts. There are ready smart contracts, which are pre-approved to work with Libra and these are going to be the only ones possible. This limits opportunities with smart contracts but ensures security and safety.
Libra blockchain works with the two-token system. The first token- Libra Investment Token (LIT) is basically like a share of Libra Association and will allow governing the blockchain. The second token is for users.
How will it influence our life, our finances, and the economy?
Libra might be the first cryptocurrency to be widely used and accepted everywhere. It has the potential to finally close the gap between traditional fiat currencies and cryptocurrencies. It will be easy to use for everyone, who already uses Messenger and WhatsApp! Also, eBay is among the partners of Libra Association, which means an even easier integration of Libra into e-commerce. We might see Libra becoming a global, international currency, which can open so many doors! As you can see, I am very optimistic about it. Looking at all the great partners of Libra Association makes me quite excited about the future of the financial industry.
- The payment industry will be changed, and yes, disrupted. This is a serious threat to the global banking industry
- New fintech services will arise and we will hopefully see more innovations in the fintech area
- It will be cheaper and easier to manage finances and transfer them around the world. Banks won't be able to control the financial market and implement strict monetary policies
- Might be far-fetched, but Libra might create a new standard for world trade and USD might have to step back
- Further growth of the cryptocurrency market
There is some valid criticism, of course. Will it work offline, especially where the internet is not easily accessible? How will priorities work for normal transactions/smart contracts? Which financial institutions will participate in governing Libra? What will be the costs? Will there be any income (like for Bitcoin - mining)? Will Libra Association provide people's identities over to governments? Can we trust Libra after Facebook's issues with privacy? Why would I voluntarily give my ID over to Facebook?
There are still so many questions, but there is still time for answering them. But even now we can see the potential of Libra cryptocurrency.
Ok, I want to read even more!
Great news to all developers out there! Libra core is published for everyone to see and play with!