Facebook recently announced its plan to launch its very own cryptocurrency, Libra. Though slated for launch in 2020, Libra has already created much buzz in the market. Given Facebook’s reputation for disregarding the privacy of its users, Libra has come under significant scrutiny. Launching this currency is expected to impact the world economy significantly.
If you aren’t aware of what Libra is all about and how it will likely function, then it is time to update your knowledge. Here is all you need to know about Facebook’s Cryptocurrency Libra.
What is Libra?
A three-wavy horizontal line Unicode character represents Libra cryptocurrency ≋ . It is expected to be quite similar to the cryptocurrencies that have already floated in the market. Libra will exist purely in digital form, just like other cryptocurrencies. Its transactions will be registered on the blockchain, a software ledger where other cryptocurrencies’ transactions are recorded.
The Libra blockchain, which will likely become a fully open system in the times to come, shall initially be managed by the Libra Association’s founding members. Libra’s value will be based on certain assets. Though it is not yet clear what these assets would be, it is speculated that a person may have bank deposits, government securities, and the like.
How will Libra Work?
Libra will allow you to purchase things online and send money to others. The transaction charges are expected to be nearly zero. You can purchase or cash out Libra online, at local grocery stores, and elsewhere. You can spend it using the Calibra wallet, which is Facebook’s. It will be integrated into WhatsApp, Facebook Messenger, and other apps.
In simple words, you can trade your local currency for Libra. You can spend Libra like any other currency without revealing your identity or paying a hefty transaction charge, and you can quickly cash it out.
Libra – Expected to be a Stable Coin
Libra is expected to be broadly stable, unlike many other volatile cryptocurrencies. This will help build trust among traders, and it is thus likely to be a preferred medium of exchange.
Libra Incentives
The Libra Association plans to issue incentives through Libra coins to encourage more developers and merchants to work with Libra. These coins shall be issued to the validated node operators to encourage people to use Libra. Wallets that pull more excellent users and keep them active for more than a year shall also be given incentives. These businesses will have the option to keep the incentives to themselves or distribute them among the users.
The Libra Association
Libra is being launched by the Libra Association, which Facebook co-founded. It is based in Geneva, Switzerland, a country known for its strong support for financial innovation.
The Libra Association aims to empower billions of people without bank accounts to use the currency and make easy transactions. Libra will facilitate more accessible and cheaper online money transfers. The supply of Libra is expected to increase or decrease depending on its demand. The Libra Association will create more of this cryptocurrency if it receives a good response. Else, it will stop generating it and even destroy the existing ones.
The founding members paid a minimum of $10 million to gain a vote in the Libra Association council and become validator node operators. This has also entitled them to a share of dividends earned from interest.
Founding Members of the Libra Association
Here is the list of the founding members of the Libra Association. The names have been mentioned category-wise:
- Technology and Marketplaces: eBay, Facebook/Calibra, Mercado Pago, Spotify AB, Booking Holdings, Farfetch, Lyft, Uber Technologies, Inc.
- Blockchain: Anchorage, Bison Trails, Xapo Holdings Limited, Coinbase, Inc.
- Payment: Mastercard, PayU, Visa, Stripe, Paypal
- Telecom: Vodafone Group, Iliad
- Venture Capital: Breakthrough Initiatives, Union Square Ventures, Ribbit
- Capital, Andreessen Horowitz, Thrive Capital
- Non-profit and Multilateral Organizations and Academic Institutions: Kiva, Mercy Corps, Creative Destruction, Women’s Banking
The number of founding members is expected to increase to 100 before the launch of Libra. The Libra Association is open to taking anyone on board, provided they meet the requirements.
Calibra
Facebook is planning to launch Calibra to restrict social and financial data. Calibra, a regulated subsidiary, will run a digital wallet. It will manage Facebook’s dealings and protect user privacy. Calibra will ensure that Libra payments are not minced with Facebook data at any time.
Calibra is expected to develop different products and services based around Libra. It will also manage Libra integration with other Facebook products. The authorities shall regulate Calibra. It aims to bar the issue of money laundering and other unsolicited financial practices.
The Libra Reserve
Every time someone cashes their local currency for Libra, the money goes into the Libra Reserve. An equivalent amount of Libra will be given to that person in return. In case someone cashes out from the Libra Association, the Libra they return will be destroyed, and they will be given an equivalent amount of their local currency. This implies that there will always be a 100% value of Libra in circulation.
The Libra Blockchain
Each Libra transaction will be registered in the blockchain, serving as a public ledger. The speed of this blockchain is such that it can register 1,000 transactions per second. Nominal charges would be levied on the Libra transactions.
A transaction, once made, will not be reversed. The Libra blockchain is currently permission. Only those entities that fulfill specific criteria can control the governance of blockchain. This type of system is vulnerable to attacks. This is why the Libra Association aims to shift to a permissionless system to distribute control and protect against attacks. Though permission at present, the Libra blockchain is open source. It has an Apache 2.0 license. Any developer can use the Move coding language to develop apps that work with it.
Facebook shall Not have Direct Control over Cryptocurrency.
Facebook is a member of the Libra Association. Vodafone, eBay, Uber, Paypal, Visa, MasterCard, and Mercy Corps are the other founding members of this association. While Facebook will be actively involved in the Libra project launch and run the Calibra wallet, it will not have any direct control over the cryptocurrency.
After the launch, all the founding members will have equal roles and responsibilities. Thus, like the other members, Facebook will get a single vote in iLibraiLibra’s governance. This should help build trust in the currency. The regulators and governments of different countries worldwide are watching oLibon oLibraoLibra’s operations and are pretty skeptical about the launch of this new cryptocurrency. The Libra Association might have to be interrogated to seek a permit to float this currency in the market.
If you want to know more or have any questions, contact us.
