The most discussed topic in crypto industry this week was Facebook’s official announcement about the release of its own cryptocurrency and ecosystem, called Libra.
Rumors had long been circulating that the IT giant was preparing a blockchain and cryptocurrency solution to offer its user base (which is currently more than 2 billion large). However, the bigger story through much of the year so far was around another communications giant?—?and in many ways a competitor to Facebook?—?the blockchain and the coin of the Telegram messenger called TON, which is also expected to be launched publicly in 2019.
But on June 18, 2019, Mark Zuckerberg personally published a post in which he presented a cryptocurrency called Libra, forcing not only the crypto community, but the whole world to talk about it.
Surely there will be plenty of detailed analysis on the technical components of Libra coming out in the following months. In this article, I propose to consider Libra’s main components and to then talk about how this event is useful and necessary for the general mass adoption of blockchain and cryptocurrencies.
So, what are the main features of Libra and what is known at the moment:
1. Cryptocurrency and Wallet
Facebook has announced not only the creation of the Libra cryptocurrency, but also the Calibra online wallet for its storage and use. Wallet development is planned to take place in 2020.
Once launched, it will be possible to use the Calibra wallet with a special application or directly from Facebook Messenger and WhatsApp.
2. The Main Goal
The main objective of the project is to give access to basic financial services to those who do not yet have them. This can solve several large problems:
- Almost half of the adult population of the Earth don’t have an active bank account.
- Migrants around the world spend huge amounts of money on fees for international money transfers, called remittances.
- Small businesses in developing economies often do not have access to credit.
3. Stable Cryptocurrency
Libra will in fact be a stablecoin. It will be backed by its own reserve, consisting of reliable fiat currencies. According to Techcrunch, it is expected to start with a value of about one US dollar.
4. How it works
Each unit of Libra will be created when it is purchased by a user with their national currency. In the opposite scenario when Libra is exchanged for fiat, the Libra will be burned (i.e. permanently removed from circulation). This means that each unit of the currency will be really backed by more tangible fiat money in the reserve. Meanwhile, the Calibra wallet will enable anybody to retake custody of their fiat money after selling Libra by sending it to a PayPal or bank account.
5. Libra Association
The cryptocurrency will be managed by a non-profit organization, the Libra Association, which will be headquartered in Geneva, Switzerland. Facebook will be only one of the participants in the association and is not expected to have a majority control over key decisions made by the association about the future of the Libra blockchain and ecosystem.
At the moment, the association has 27 members (on picture), including Mastercard, Visa, PayPal, eBay, Uber, Coinbase, several venture companies, as well as non-profit and scientific organizations. By the time of launch, it is assumed that there will be 100 independent participants in the association. For entry, companies must make a contribution of at least $ 10 million and meet special requirements. Having so many association members ensures that each participant can’t control more than 1% of the vote.
6. BFT ?onsensus
The system will have a BFT (Byzantine Fault Tolerant) consensus mechanism, and it is expected that it will launch with 100 validators?—?which can eventually increase up to 500–1000.
In the BFT system, 75% of the validators must agree on changing the state of the balance sheets in order for the change to take place.
There’s no need to buy Libra for the purpose of potential enrichment. Libra is backed by a reserve of stable assets, meaning that it won’t have much of any speculative value.
8. How to set up a Libra wallet?
It will be possible for Facebook users to set up a Libra wallet by passing KYC procedure?—?verifying their identities online with official document.
Other companies working with Libra will be able to verify their own customers. Facebook says that this process will be open to people almost anywhere in the world.
You can learn more details in Libra’s official White Paper: https://libra.org/en-US/white-paper/
What it means for crypto industry
Libra was met somewhat ambiguously by major influencers in the worlds of blockchain and finance.
Not surprisingly, many respected people in the crypto industry have clearly trolled Facebook’s idea. For example, here’s what CZ, the head of Binance, wrote about it on Twitter:
However, the phrase “mass adoption” (i.e. global use of cryptocurrencies by people, companies, and institutions) is heard quite often in the crypto world, and it appeared to be a distant dream prior to this announcement. Indeed, most people outside of the crypto industry still only know what cryptocurrency is on a superficial level, and often have gross misconceptions about it. Getting hands-on experience with crypto through Facebook Messenger or WhatsApp can change that very quickly.
Together with Libra, many people will soon begin learning about using cryptocurrencies and their advantages for enabling economic growth. On top of that, the concept can potentially even disrupt central banks, since this would be a global central currency that billions of people can easily buy and hold on their smartphones.
Yes, Libra is not Bitcoin, which essentially belongs to the people. This is a stablecoin and, in fact, a corporate cryptocurrency?—?obviously not decentralized. Nevertheless, this can provide a huge boost to the growth of the entire industry.
You can find more news, thoughts and insights from inside the crypto industry on my
Telegram channel: Sell Me This Token, and on my Medium blog.
Comment what you think about Libra and whether or not this Facebook currency will help in mass adoption of cryptocurrency in general?