This past week every social media post was all about the release of Facebooks white paper on its new project, a digital coin named Libra; aiming at being launched in the first half of 2020.
As soon as this white paper was released everyone started commenting on its project and yes divided opinions but for the most part, it seems that the crypto community isn't too supportive, and the project is being questioned on how it will work.
Before reading about Facebook's proposal with Libra coin, immediately I thought this would be a great way to create financial inclusion with those who don't know or haven't used cryptocurrency. This social media platform has currently 3.38 billion active users, it’s a pretty big deal, but not only Facebook is behind this awaited project; the currency will be backed up by very prominent companies such as Uber, Visa, MasterCard, among others. The power of Facebook, combined with these other companies makes Libra seem unstoppable.
Why create Libra?
According to Libra's white paper "We believe that the world needs a global, digitally native currency that brings together the attributes of the world’s best currencies: stability, low inflation, wide global acceptance, and fungibility. The Libra currency is designed to help with these global needs, aiming to expand how money works for more people around the world.”
“Libra is designed to be a stable digital cryptocurrency that will be fully backed by a reserve of real assets — the Libra Reserve — and supported by a competitive network of exchanges buying and selling Libra. That means anyone with Libra has a high degree of assurance they can convert their digital currency into local fiat currency based on an exchange rate, just like exchanging one currency for another when traveling.”
“It is important to highlight that this means one Libra will not always be able to convert into the same amount of a given local currency (i.e., Libra is not a “peg” to a single currency). Rather, as the value of the underlying assets moves, the value of one Libra in any local currency may fluctuate. However, the reserve assets are being chosen to minimize volatility, so holders of Libra can trust the currency’s ability to preserve value over time.”
While reading the white paper, it seems like a mass adaptation of digital currency. Most of what the paper states are things that have been said before and that are currently working with different cryptocurrencies. Digital currencies have become a great help for countries with difficult governments like Venezuela. We already have crypto that is pegged to fiat cash like Tether; Facebooks is using blockchain and a combination of all these things and is taking it to the next level — having enough monetary power and social influence to lead a massive adaptation that hasn’t been seen in cryptocurrency. Being able to create alliances with well-known companies to back up Libra; solving the volatility problem.
Facebook is one of the most popular social media out there. The popularity that this company has with the users would help the launch of this new currency. Being a company with worldwide recognition, the effect it can have when launching a new product is gigantic. The company has gone through ups and downs. “Mark Zuckerberg faces allegations that he developed a “malicious and fraudulent scheme” to exploit vast amounts of private data to earn Facebook billions and force rivals out of business.” However, the majority of people, despite having heard this news it has not stopped them from using this platform.
My main concern with Libra is how to trust a company that has been linked to a "malicious and fraudulent scheme," especially when it comes to people's money and the information behind these transactions. Now, who buys what and how much money an individual has will be in the power of Facebook, a company linked to pretty invasive things when it comes to privacy. Let's remember the idea behind crypto and its blockchain technology is to eliminate third-party interference.
Many say Libra has nothing on Bitcoin and there is nothing to worry about; yes, this may be true because; because Bitcoin is different and does not involve centralization which is the whole idea behind cryptocurrency. Nonetheless, Libra will be implemented by heavyweights within the industry, and it must not be underestimated. Others believe those who should be worried about this new crypto are banks, and I think so. Libra's white paper is very ambitious and at times feels very idealistic, many things are not explained fully like fees, taxations, etc. Yes, just like banks have had a war with crypto, why won't this happen with Libra?
When it comes to all these online theories at the end of the day, no one knows their agenda; hopefully, it's not one that screws everyone.
Hope you enjoyed it!
By: Carolina Pérez