Facebook’s Libra Coin: Crypto of a New Age or Another way to Control Mass Audiences?

Facebook has recently announced the release of its own cryptocurrency in conjunction with Libra and some other business giants.

According to the project’s white paper, its mission is to enable a simple global currency and financial infrastructure that empowers billions of people. It pursues the honorable mission to help “unbanked” people all over the world get access to the financial services at low costs. 

What does this new cryptocurrency represent, what benefits and what dangers does it conceal? Let’s take a closer look.

Prerequisites for Facebook Going Crypto

After so many successful ICO’s and Bitcoin reaching its all-time high of almost 20,000 USD per 1 BTC in 2017, many big corporations have turned their attention towards blockchain technologies. And there’s nothing to wonder at. With such a big demand from the market and all the benefits that the new technology provides, why not implement it into your business model to make even more profits?

Next, the possibility to print your own money. For ages, governments represented the only monopoly to issue the most liquid means of exchanging value. It was only in 2008 that Satoshi Nakamoto gave the world the currency that truly belongs to people. Now corporations join the game and challenge local authorities by trying to take this function onto themselves.

Finally, the new bull run. Have you noticed that all these corporations have come out with new crypto projects only after Bitcoin started growing after the long crypto winter? Okay, skeptic mode off, moving on with Libra investigation.

Libra Coin Features

Facebook is not the first and neither it is the last company to issue its own “cryptocurrency”. I’m using the quotes here because, despite the common underlying technology, such coins are fundamentally different from Bitcoin. JP Morgan rolling out its own bank-backed cryptocurrency, Samsung working on its own blockchain – they all lack the decentralized essence. 

But unlike other whales of the big business, Facebook has an indisputable benefit that may help its mass adoption from the very start – a huge user base. Let’s review the features of the upcoming digital currency.

1. A Stable Coin

Libra Coin is backed by a reserve of real assets that consists of bank deposits in multiple fiat currencies such as USD, EUR, GBP, etc. and short-term government securities. Just like in case of Tether, this helps to maintain its rate at a stable level and avoid this crazy volatility inherent to Bitcoin.

2. Wide Coverage and Mass Adoption

Facebook is one of the most popular social media around the world with more than 2 billion users. It alone can do thousandfold more for cryptocurrency mass adoption than all those small crypto startups that were shining in 2017 aiming to “revolutionize” specific industries.

3. Financial Services for Unbanked Areas

It is already possible to make payments via WhatsApp and Facebook Messenger by linking your account with a bank card. Now the new payment method based on the blockchain technologies will be available for those regions that are deprived of banking services.

Once Facebook implements its own currency and makes it possible to convert it into local money, it will let people from poorly banked areas make use of the financial conveniences that we all take for granted. Make online shopping with ease, send money to a relative or a friend  – what else can one dream of? 

4. Open-Source Software

Initially, as Facebook was the only developer of Libra for more than a year, it was concealing the code working on it in a private team of developers. But after the new cryptocurrency was announced, the new blockchain has become available for the broad publicity on GitHub. Obviously, Facebook expects cunning minds to improve the code and expand Libra’s capabilities over time.

5. Cryptocurrency for Corporations

Unlike Bitcoin that is an open decentralized cryptocurrency backed by people, Libra is a centralized digital coin created by corporations for corporations. Here’s what Andreas M. Antonopoulos, a famous Bitcoin advocate said in his Twitter:

Which Corporations are Going to Implement Libra? 

Libra has a wide network of partners including VISA, MasterCard, Stripe, eBay, Uber and many more. The participants of the network make up the governance board to make key decisions on how the Libra Blockchain development and the management of the Libra Reserve.

Libra’s lists its partners on its website. The business support is impressive, isn’t it?

How Will Libra be Used?

The users of Libra will be able to exchange this currency via Facebook Messenger and WhatsApp with zero fees is the same way they make payments with fiat now.

Some sources claim that Facebook was talking to eCommerce platforms and apps about accepting the coin back in May this year along with small investments from their side. The users should be able to checkout using their Facebook credentials as one of the possible payment methods. Lower processing fees is one of the key benefits that Facebook offer to merchants.

The coins will be easily converted to fiat and withdrawn to a linked bank card. For unbanked areas, there will be no means to cash out Libra, at least in the beginning.

Technical Aspects

Since Libra developers create their own blockchain from scratch, they are free to make use of whatever technologies they desire and are not limited by existing infrastructures such as Ethereum. Here are some interesting technical aspects to consider for those who plan to make further use of Libra blockchain.

Scalability

Bitcoin has very limited throughput indices (only 7 transactions per second) which resulted in incredible transaction fees and long confirmation when the network was overly congested in December 2017. All cryptocurrencies that are created on its principles (starting from Ethereum) have the same issue. 

Ever since this problem has become perceptible, many developers have been trying to create their own platforms with the main goal to resolve it. Some of them (TRON, EOS, Zilliqa, Tezos) have even managed to present viable products that are already widely used by the developers’ community.

Unlike all these projects based on permissionless networks where anyone can join and run a node, Libra will be maintained by a small list of approved companies. This allows to bypass the problem of scalability and process thousands of transactions without inventing anything special.

Libra’s white paper claims that although the Libra protocol is still at a prototype stage and there are no exact performance metrics, it is expected that the network will be able to handle 1,000 payment transactions per second with a 10-second finality time between a transaction being submitted and committed. It’s still less than VISA with the capacity of 65,000 TPS, but much more than any blockchain can offer.

New Programming Language

Libra will be based on a new programming language named Move. According to the documentation, this is a safe and flexible programming language designed for the execution of transactions and smart contracts.

The downside is that this language is fairly new and those developers who wish to create their dApps based on Libra will have to study it from scratch. However, there’s practically no blockchain project that would not utilize a new programming language, everyone is in the same boat.

Incentive Program for Further Adoption

Libra has developed a special incentive program to encourage developers to create more dApps and for users to actively use these applications. Node operators (i.e. the founding members) will be rewarded in Libra coins for attracting more users. Merchants that operate on the network will receive a percentage of transaction value back. And of course, there will be bonuses for early adopters.

First App Will be a Wallet

Calibra will be a dedicated wallet for storing Libra coins and the first dApp developed on the new blockchain. It will be integrated with Facebook Messenger and WhatsApp to facilitate currency conversion for the end users.

Concerns Related to Libra

Despite all the upsides of the new cryptocurrency, the chances to reach wide audiences and to implement the new payment method at the scale, there are still some anticipated questions. Although Libra utilizes the blockchain technology, it is radically different from Bitcoin. The following aspects should be considered by those who are planning to use this payment method.

1. Centralization

Libra Coin is fully controlled by a single company, Libra Association. This results in all those issues of centralized financial institutions that Bitcoin was designed to stand against. Your money doesn’t truly belong to you and the payments can always be blocked by the central authority without any explanation. Why bothering about the blockchain at all in this case?

2. Inflation Rate 

Unlike Bitcoin that has a limited supply of 21 mln BTC, Libra can be minted with no limits in the same way that the Federal Reserve prints new banknotes. 

3. Opaque Issuance Model

Whenever Bitcoin miners find a new block, this event is immediately displayed on a public blockchain for any interested party to check the origin of new coins. Things are different with stable coins issued by centralized companies.

Libra’s white paper claims that coins are only minted when authorized resellers have purchased them from the association with fiat assets to fully back the new coins. The money flow will be scrupulously monitored by third-party audit companies, but who can ensure that there will be no secret collusion amongst them? How can a usual person check that there are no coins minted out of the thin air? 

Libra doesn’t provide the transparency we get with Bitcoin and leaves a lot of space for dark manipulations.

4. High-Entry Barrier

While anyone can mine Bitcoin by simply purchasing the necessary equipment (ASICs are far from cheap, but still affordable), it’s not so easy to join the Libra Association. A company must have a 1 billion USD of market capitalization to do that. Rich ones get richer.

5. Lack of Privacy

Facebook knows all about you: your name, your geographical location, who are your friends, who are your parents, what places you visit and much more. Here’s what CZ, CEO of Binance, said in his recent tweet:

BTW, it’s not only about your general private data. Facebook knows a ton about your habits and doesn’t neglect to make money on this information. Open your account, go to Settings – Ads, and see how much of your personal data Facebook sells to its advertisers.

6. Regulation

Libra coin has attracted the government’s attention ever since the announcement. It’s unclear yet how it will be regulated from above, but it’s obvious that authorities will do all they can to have it under their control. Governments can’t stand someone questioning their monopoly for creating money, and this is exactly what Facebook tries to do.

Summing Up

Bitcoin’s incredible success and the obvious market demand for peer-to-peer transactions has not been left unnoticed by big corporations. Despite the long crypto winter and numerous obstacles from authorities, businesses eventually come up with an offer to satisfy this particular request.

Libra surely has good perspectives and chances for quick mass adoption as its potential audience is really huge. If the project fulfills all its promises once it goes live, it has all the chances to become the 2nd most widely used cryptocurrency after Bitcoin. But does it offer the same freedom that BTC does?

With Libra, instead of giving away your private data to the government, you pass it on to the hands of corporations. It’s the reverse side of the same medal.

And while governments were created with the main purpose to maintain social structures in order and they are not driven by the lust for profits, the story is different with businesses. This is something to consider.

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