With the massive impact blockchain technology has had on the fintech space, it was only a matter of time before a giant tech company started their own cryptocurrency – so it was no surprise when Facebook announced the Libra cryptocurrency in 2019. So what is Libra, the “Facebook” cryptocurrency?
Libra goes beyond just being another “Bitcoin” copy; with some of the strongest and most intelligent developers, researchers and top talent at Facebook working on the project. Unlike Bitcoin, it does not feature decentralization as its top priority, and nodes processing transactions are run by members of the Libra Association – who each have to put up a hefty sum of $10 million to even attain membership.
The Purpose And Goals Of The Libra Cryptocurrency
Libra, unlike Bitcoin, is a permissioned blockchain; this means that the set up is closer in nature to being a central bank than the peer-to-peer approach taken by Bitcoin and other large cryptocurrencies. Libra’s mission is to create a globalized, accessible financial infrastructure that can be used by billions of people with minimal fees and as a more convenient alternative to traditional finance.
Originally, Libra’s value was intended to be pegged to reserves maintained by members of the Libra Association, weighed against a basket of fiat currencies that would fully back the value of Libra. However, various governments raised concerns that such a plan would potentially damage the sovereignty of individual currencies if Libra became “too big”, causing loss of control over monetary policy.
Instead, Libra has announced an intention to switch to individual currency equivalents on the Libra Network – for instance, LibraUSD, or ≋USD, would be the USD variant of Libra, while LibraSGD, or ≋SGD, would be the SGD variant of Libra.
With the power of Facebook’s 2.7 billion monthly active users, it seems likely that Facebook would be well placed to accomplish Libra’s goals.
Resistance Against Adoption By Regulators
Despite the large fanfare that accompanied Facebook’s announcement of Libra, the cryptocurrency has not received strong support from governments and regulators, who are heavily concerned about the cryptocurrency’s positioning and potential to replace fiat currencies. They are equally concerned about the operation of the cryptocurrency, being centralized and owned by large companies instead of governments.
Some of the biggest fears put forth are as follows:
- The currency would open up potential for money laundering and criminal activity given its digital nature.
- It would mean that Facebook and the members of the Libra Association were in effect opening or attempting to operate a “shadow bank”.
- The monetary sovereignty of individual countries whose currencies were part of the Libra reserves would be threatened if it grew too big.
- Concerns over the already unclear regulatory approach for cryptocurrencies meant that Libra could be something released too soon.
- Currency control in the hands of large companies was a dangerous conflict of interest.
- Privacy and consumer protection concerns given Facebook’s past history and association with customer data breaches meant that Libra may not be in safe hands.
Departure Of Early Announced Members
Although the Libra Association initially announced with a stellar list of member companies from the payments, venture capital and fintech space, the controversial response has led to the departure of many of its top members who were well placed to make Libra’s goals a reality.
Here’s a diagram showing the original partners who were named as involved with the Libra Association:
However, the following companies have since distanced themselves or openly announced departures from the project:
The departures were widely believed to have been a result of bad press and controversy over the announcement of the Libra cryptocurrency, much of it to do with the strong negative reactions from governments.
Novi: The Libra Wallet (Formerly Calibra)
Novi is the Facebook-driven implementation for a Libra wallet, which would store Libra cryptocurrencies and be integrated into its suite of products (Facebook, Messenger, Whatsapp…), providing an integrated experience for users to transact without having to download a separate application for Libra.
This user-driven experience is one of the key highlights that drive interest around the cryptocurrency. Unlike Bitcoin, Ethereum or other cryptocurrencies, the integrated experience that Libra would be able to support due to its user penetration from the get-go, was likely to have a large user base from day 1 without much effort.
In order to start using Novi, users must first pass a Know Your Customer (KYC) procedure to help Facebook identify and ensure that any use of the Libra cryptocurrency was traceable and tagged to a real world user.
Originally, the wallet was called Calibra, but was likely renamed to avoid confusion with Libra, which is open-sourced and independently operated by all members of the Libra Association (who all have equal votes).
What Does Libra Mean For The Cryptocurrency Industry?
Although Libra is not decentralized nor is it aligned with the typical perspectives that make up a lot of cryptocurrency’s attractiveness, it is nonetheless a welcome addition and mainstream implementation of the idea of a globalized digital currency.
Despite its permissioned approach contrasting with that of established blockchains such as Ethereum and Bitcoin, it has seen heavy involvement and the occasional support from industry leaders such as Coinbase (who is a Libra Association member), who believe it to be a stepping stone to make cryptocurrency more accessible to the masses.
Oobit believes that both permissioned and permissionless blockchains have a role to play in the digitalization of finance; when Libra is announced, our intention is to support the token as one of the key offerings available on our platform for all of our tools. Find out more at Oobit.com and purchase your first Bitcoin today!
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