Cryptocurrencies are believed to usher in the next digital wave, and why not? Their potential is undeniable when it comes to easing payment processes and making them much more secure. Add to it the fact that they are decentralized and come with near-zero processing fees, the scope of cryptocurrency is beyond general imagination.
Not someone to fall behind in emulating disruptive trends, Facebook announced its own cryptocurrency, Libra, on June 18, 2019, and is planning to publicly launch it in 2020. Read on to know more about Libra.
How stable is Libra?
Libra is a cryptocurrency that is intended to be sent instantly, and with almost no fees, anywhere in the world. It is built on the same principles as Bitcoin, but unlike Bitcoin, whose stability is followed by a huge question mark, Libra aims to have a stable value backed by trusted international currencies, such as the Dollar, Euro, and Yen. Libra will be pegged to a group of low-volatility assets, including fiat currencies, bank deposits, and government securities, which makes it extremely stable.
Is Libra a pure cryptocurrency?
This is a pretty contentious question that started making the rounds soon after Libra was announced. Let us make it clear for you. Compared to the Rupee or Dollar, Libra is definitely a cryptocurrency, since there’s no central bank that controls its minting.
However, compared to bitcoin, Libra isn’t as pure. While bitcoin is a permissionless system, meaning anyone can participate, Libra is a permissioned system, which means only a trusted few entities can keep track of its ledger (that is, mine the coin). But then, Libra will allow you to buy and transfer money under a pseudonym, which again makes it a cryptocurrency.
According to Nicholas Weaver, a researcher at the International Computer Science Institute, Libra is indeed a cryptocurrency and the permissioned model only means it needs less computing power.
How exactly does Libra work?
Basically, you cash in a local currency to get Libra, spend it like you would spend rupees without huge transaction fees or your real name attached, and cash it out whenever you want. Every time you buy Libra, your money is deposited in a bank account where it sits untouched. This is to ensure that every Dollar’s worth of Libra is backed by a Dollar in the bank, so it can generate interest that can be used to pay back the cryptocurrency’s initial investors.
What is the Libra Association?
In an attempt to spur Libra’s adoption and make it more stable, Facebook recruited the founding members of the Libra Association, a not-for-profit that will oversee the development of the cryptocurrency. The association will also monitor the reserve of real-world assets that gives Libra its value so as to avoid any untoward incidents that might nudge the cryptocurrency to crash.
For now, there are 28 founding members of the Libra Association, including giants like Visa, Uber, and MasterCard, which have invested at least $10 million each into the project’s operations. Facebook hopes to reach 100 founding members before the official Libra launch.
How will Libra be governed?
The Libra Association will be responsible for recruiting more founding members. Facebook claims that every member of the association will only get up to one vote or 1% of the total vote (whichever is larger) in the Libra Association Council. This is to provide a level of decentralization that will protect against Facebook or any other player attempting to hijack Libra for their own gains.
Plus, the association will also be responsible for protecting your privacy by never mingling your Libra payments with your Facebook data. Your real identity will not be revealed at any point, so Libra can’t be used for ad targeting.
Despite all the controversy that’s been going around the announcement of Libra, Facebook got one thing right for sure. Traditional money isn’t really accessible to everyone; you’d need a bank account at least. Facebook hopes to create a global currency that can be accessed by anyone with a simple internet connection, sans the concerns of theft, misuse, and heavy transaction fees. If Libra successfully gains universal traction, the world will become a much smaller place than all the News Feed Likes combined.