The Brief: Facebook announced plans to launch its own cryptocurrency called Libra, inspiring much speculation about what this will mean for the future of digital currency.
What Is Libra?
On Tuesday, Facebook officially announced its move into cryptocurrency with a project called Libra, a decentralized cryptocurrency that will allow Facebook and WhatsApp users to send money to each other and make purchases online. Libra has been secretly in the works for over a year and is set to launch in early 2020.
People will able to trade cash in their local currency for Libras, which they can then use to make transactions without large fees and without their name attached. Libras will be able to be exchanged for cash at any time and are backed by a reserve of assets. Libra will run on Facebook’s version of blockchain technology: an encrypted network that safely stores transaction records on a peer-to-peer network.
Unlike other cryptocurrencies like Bitcoin, Libra is designed to have a stable and reliable value, with fluctuations similar to those of already established national currencies. Libra also hopes to be accepted around the world as a valid currency and available to people without bank accounts Notably, Libra seeks to assist people in developing countries and others affected by high fees to be able to send money internationally with much lower transaction fees than those of traditional financial institutions.
The name Libra is a reference not to the Zodiac sign but to the Roman measurement for a pound: “Libra,” which was once used to mint coins. It also alludes to concepts of liberty and freedom.
The Libra Association
Libra will not be operated solely by Facebook. Rather, it will be run by a group of stakeholders who make-up the not-for-profit Libra Association. At present, in addition to Facebook, there are 27 members of the Libra Association including venture capital firms, nonprofit organizations, and corporations including Uber, Mastercard, Visa, Spotify, and other big names. The Libra association reportedly hopes to have over 100 partners by early next year.
The idea behind the Libra association is to form a pool of assets so that Libra currency will be backed by something of value and so that it’ll be run by a group of organizations rather than a single one.
Calibra is Facebook’s forthcoming digital wallet application. It will be a tool for people to access and exchange Libras. It will be separate from but can be linked to Facebook and WhatsApp and users will not need Facebook or WhatsApp accounts in order to have Calibra or use Libras. Facebook has stated that Calibra plans to use the same kinds of verification and anti-fraud methods as banks and credit cards. Calibra is headed by David Marcus, the former president of PayPal.
The Future Of Libra
Facebook and other proponents of Libra a characterize it as a decentralized cryptocurrency with the power to make financial exchanges more accessible worldwide. Libra has the potential to empower those who are poor, disenfranchised, who live in developing countries, and/or who do not have a bank account to make financial transactions domestically and internationally with low fees.
Facebook has stressed that Libra users’ financial information will be kept separate from their social data. As it will be run by the Libra Association rather than by Facebook alone, Libra may be able to distance itself from some of Facebook’s past problematic issues.
Several lawmakers in the U.S. and EU including Maxine Waters have already expressed their apprehensions about Libra, citing Facebook’s previous records with breaches of privacy and issues with monopolizing markets as sources of concern.
The exact future of Libra is unclear. Its development, implementation, usage, and reception have the potential to reshape the cryptocurrency market. Libra’s goals are ambitious and as with any new technology or business, time will tell exactly what Libra does and where it goes.