Facebook Libra’s Whitepaper – A Map for Global Cryptocurrency Adoption
This is a part of an ongoing blog series focused on important blockchain news. In one of our prior pieces, we touched on Facebook Libra and its implications. Since then, Facebook has released a whitepaper detailing how it plans to create and roll out its own cryptocurrency-based payment platform.
An Overview on Libra
Libra is Facebook’s initiative to grow a blockchain platform and cryptocurrency. The company’ recently realized a 29-page whitepaper on Libra, which detail’s Facebook’s plan to create the cryptocurrency. At a high level, it can be summed up by Dante Disparte, the head of policy and communications for Libra Association, who says that “implied in this project is that wherever the Visa or Mastercard logo are accepted, Libra would follow suit.” In other words, Libra is focused on creating a cryptocurrency that has stable prices and can be used for transactions all around the world.
It’s important to understand the structure of Libra. Facebook created a new subsidiary called Calibra to facilitate financial transactions, which includes digital wallets. While the company is new, Calibri is being made in a deliberate way that allows it to be integrated into existing applications, very similar to Apple Pay. The cryptocurrency, Libra, will be governed by the Libra Association, an independent nonprofit based in Switzerland, which is backed by titans of industry, such as Visa, Mastercard, Uber, Coinbase, Lyft, Paypal, and many more.
Libra’s Programming Language, Move
One of the strengths outlined in Libra’s whitepaper is customizability. Libra is borrowing heavily from many other cryptocurrencies that were tried and tested over many years. In many ways, Libra is centralizing the best practices and parts of other cryptocurrencies, such as borrowing from Ethereum’s smart contracts.
Libra is going to be supported by a programming language called Move, which allows the creation of custom transaction logic. This could potentially mirror “smart contracts” which are available on Ethereum: autonomously running contracts that eliminate the need for a third party to manage or oversee transactions. These types are transactions are incredibly powerful and efficient. In addition, Move can be used to facilitate all sorts of transaction types (such as recurring payments, transfer of goods…), with more being developed every day. Move plays a multi-part process within Libra – it keeps the platform secure while also giving options to create new types of transactions.
Libra’s Provides Stability
However, Move is only going to see widespread adoption if people use Libra. Libra’s goal is to create a “low-volatility cryptocurrency that will have the ability to serve as an efficient medium of exchange for billions of people around the world.” While Libra seems to borrow heavily from Bitcoin, there are a few key differences – such as Libra’s laser-focus on payment and financial use-cases. The cryptocurrency is designed to be an ultra-high throughput platform that programs to influence what users can do. In addition, Libra is emphasizing price stability by backing itself to a basket of assets, which include many major currencies.
Facebook is pegging the value of Libra to a basket of currencies to create stability. This approach by Facebook acknowledges that a cryptocurrency with floating value (such as Bitcoin) can’t be effective as a payment method because its value fluctuates so much. For example, if somebody was offered one bitcoin each month, it would be almost impossible for them to predict their future cash flow. Bitcoin prices vary too much. Half a year ago, Bitcoin was trading at almost $3,000 and now it trades at over $12,000. Perform a mundane purchase when you have no idea what the future value of Bitcoin is psychologically difficult – what if the price of Bitcoin spikes right after this purchase?
Libra’s stability solves this psychological barrier to using the asset in transactions. In addition, Facebook is also implementing Libra in a way that is familiar to users. Libra’s implementation is not going to be radial. Similar payment functionality can be seen in many apps already, such as how WeChat, Venmo, and PayPal facilitate transactions using pounds and dollars.
The difference with Libra is that instead of making transactions with dollars, pounds, or yen – users buy and sell with Libra. A key difference between Libra and other messaging apps is reach. The payment functionality of messaging apps like WeChat, KakaoTalk, and WhatsApp are primarily region-focused. Libra can potentially give a global option, primarily since so many people already use Facebook.
Another benefit of Libra is how its approach to stability mirrors that of major currencies. Most currencies are pegged to each other in some way, especially the U.S. dollar. From the institutional mindset, it makes Libra an easier pill to swallow too.
Is Libra Truly Decentralized?
While Libra has the potential to reach further than any other cryptocurrency, is it really decentralized? Libra’s blockchain is scheduled to go live in 2020, where its network is to be secured by 100 servers, also known as nodes. Currently, there are 28 node-running members, all of them corporations. While corporate security around each node makes it very difficult to compromise a single node, much less the entire platform, it does make Libra extraordinarily vulnerable to government regulation. Especially the U.S., since many of the node-running members are based in America.
When comparing this with other blockchain networks such as Ethereum, which allows anybody in the world to dedicate computing power to validate transactions, Libra falls short. Fortunately, Libra also has plans to open up node participation in the unspecified future. Since Libra is still in development, this implementation of a set number of nodes can change. The more nodes there are, the more decentralized Libra becomes.
Libra Will Grow Blockchain Acceptance
At the end of the day, Facebook Libra may not be a completely decentralized cryptocurrency, but it’s not a bad thing. Facebook’s platform is a symbol for blockchain acceptance – and the support thrown behind the project by Facebook and the Libra Association signals to the market that blockchain technology is here to stay. Libra will ultimately spur more institutional development and investment into blockchain technology, as other corporations develop their own in-house solutions. For everyday consumers, Libra could be the critical gateway for people to finally adopt, hold, and spend their first cryptocurrency.
The largest challenge for Libra is going to be government regulation. Libra is currently highly dependent on the 28 corporate nodes to keep it running. Since these corporations are based primarily in the United States, it makes Libra extremely vulnerable to government regulation. Libra definitely has staggering potential, but that potential can be destroyed if governments decide to roadblock development.
