Not to worry—this guide will provide answers to all these questions! You will find all the pros and cons of Facebook Libracoin and much more.
Without further ado, let's discuss what Libra is.
What is Facebook Libra Coin?
On June 18, 2019, Facebook announced Libra Coin. It is a virtual currency, or cryptocurrency, though some people don’t agree with that definition. We'll get into why later.
In Facebook’s vision, it should become a global currency for billions of people, especially those in developing countries who have no access to banks or financial services. In other words, Digital money which you can transfer to other people or simply use to buy stuff.
Facebook CEO Mark Zuckerberg is not doing this alone – a bunch of Silicon Valley hotshots are also on-board with the plan. The Libra Association will govern Facebook Libra Coin. This is a Swiss group including 28 financial big whigs– among which Facebook subsidiary Calibra, Mastercard, Visa, PayPal, Uber, and many others.
However, some of these bigger founding members appear to have gotten cold feet. Seven of the original 28 founding members dropped out before the Libra Association's inaugural meeting in Geneva on Oct. 14. The exits included PayPal, eBay, Stripe, Visa, and Mastercard. The departures are big losses because they brought expertise in payments and transfers technology.
The other dropouts are Mercado Pago, the online payments platform of Argentina's Mercado Libre marketplace, and Booking Holdings, an online travel company that runs sites including Priceline, Kayak and OpenTable.
In a statement, the Libra Association suggested it would weather the departures.
"Although the makeup of the association members may grow and change over time, the design principle of Libra's governance and technology, along with the open nature of this project ensures the Libra payment network will remain resilient," Dante Disparte, the Libra Association's head of policy and communication, said in a statement.
Earlier, we mentioned that Calibra is a Facebook subsidiary. Let's throw more light.
What’s Calibra?
Calibra makes, and is, a “wallet”: an app that lets you exchange Libra. While other developers can make their own wallets, Facebook will integrate Calibra into WhatsApp and other Facebook apps, so they’ll have a huge advantage. On those apps, you’ll be able to send money as simple as texting, similar to Apple Pay in the Messages app.
While Facebook shares control over the Libra currency with the rest of the Libra Association, it entirely owns Calibra, and that’s not likely to change.
Why Facebook wants a cryptocurrency?
The Libra Association, which Facebook co-founded has said Libra's purpose is to empower billions of people. It cited 1.7 billion adults without bank accounts who could use the currency.
Back in May, Zuckerberg said that sending money online should be as simple as sending photos. Libra is designed to make it easier and cheaper for people to transfer money online, which might attract new users to the social network. In his recent testimony, Zuckerberg acknowledged that having people use Libra would likely drive up the cost of advertising on Facebook, which would benefit the company.
Facebook may also have other plans for Libra. A new subsidiary, called Calibra, will run a wallet that will be necessary for the initial rollout.
"Facebook created Calibra, a regulated subsidiary, to ensure separation between social and financial data and to build and operate services on its behalf on top of the Libra network," according to a white paper describing the Libra project.
Analysts at RBC Capital Markets say those services will likely include games and commerce. But how will Libra work?
How will Facebook Libra Coin work?
Libra’s white paper – a sort of technical manifesto – says that it will run on a "blockchain". Again, that is a controversial definition in some quarters, so here's a quick and rough explainer.
Blockchain is the technology on which cryptocurrencies like Bitcoin, Ethereum, Ripple and the like run. It is a digital, unchangeable record of all the payments that ever happened in a given digital cryptocurrency.
Here’s a crucial thing: a Blockchain is decentralized. The transactions are processed and verified by a swarm of independent computers rather than by a single referee or central bank. Those independent computers are called nodes.
However, the Libra blockchain is not really a blockchain in the traditional sense. The Facebook team decided to code their chain from scratch for it to fulfill the following requirements:
- Must have the ability to scale to billions of accounts. This requires high transaction throughput, low latency, and an efficient, high-capacity storage system.
- Must be highly secure, to ensure the safety of funds and financial data.
- Should be flexible, so that it can power the Libra ecosystem’s governance as well as future innovation in financial services.
Is Libra a cryptocurrency?
The answer to the question is yes, but also no. This is where the disagreements start. The Libra blockchain is not decentralized like Bitcoin. With the Bitcoin blockchain, anyone can theoretically run a node, even if that’s expensive. In contrast, Libra’s nodes will be only run from the servers of the Libra Association’s members mentioned above.
Now, none of these companies will individually have much of a say on how transactions are processed and verified – it will be a collective effort – which is good, according to the blockchain ethos.
Still, the more libertarian cryptocurrency fans resent that Libra will be controlled by a club of mega-corporations. They also fear that the Libra Association could buckle under pressure if, for instance, a government-ordered it to block a transaction.
Facebook’s official reason for this make-up is that a fully decentralized model would not be powerful or fast enough to deliver the “global financial infrastructure” Libra aspires to become.
Pros of Facebook Libra Coin
Using Facebook Libra Coin comes with several advantages to the user. Some of these advantages are:
- Easily Accessible
Libra is available for use on mobile handsets and other devices. This makes it easily accessible to clients as most people already own the handsets which they use to access social media.
- Stable
Most of the already existing crypto is not tied to physical assets. This makes them immune to the control and regulations of national governments. On the other hand, it also makes them highly susceptible to flash crashes and speculative bubbles.
- Safe and Secure
The system has strong protection to ensure the safety of your money. It uses similar anti-fraud and verification processes used by banks and credit cards. The use of automated is important in detecting and preventing fraudulent activities.
- Fast
Sending money encrypted into Libra tokens is easy like sending a message. You just need a few taps on your in Facebook apps like WhatsApp and Messenger, and you are good to send money within seconds.
- Global Presence
Libra will work on the same global value even though will be tied to some major currencies. This makes it time-saving, efficient and protected from losing value.
Cons of Facebook Libra Coin
Regardless of all the advantages, we have just mentioned, Libra also has some disadvantages. Take a look:
- Support
One possible disadvantage is the fact that there are many companies that support it so that at least two-thirds of the members must reach an agreement to make changes.
- Privacy and Anonymity
Privacy is another one of the major issues Facebook has had to deal with in the wake of launching Libra. There are fears that Facebook will have access to the financial and transaction records of platform users. It is yet to be revealed how Facebook with a history of private data breaches will handle these important data obtained from Libra.
What is more, Facebook isn't getting any love for Libra.
Central banks and Facebook Libra Coin
Libra won't launch until 2020 but that doesn’t mean that people aren’t already fretting about the whole affair. Facebook has promised that it won’t use payment data in order to target adverts – but people don’t trust Facebook, for notorious reasons.
And regulators are also frowning upon the move. France has underlined that only governments can mint money, and has warned against Libra’s potentially nefarious uses. The bank of England said that Libra will have to meet very high financial standards to be allowed in the UK.
And, of course, lawmakers in both the US and the EU are concerned about Facebook’s expansion to the financial domain. For a company that is increasingly depicted as an oversized, unaccountable, arrogant monopoly, is launching a currency really the best way to avoid scrutiny?
Well, it's unclear where Libra will go from here, though Facebook has indicated it will press on. We’ll find out more in 2020.
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