JohnRyan

Writer and Analyst

Will Libra Ever Expand Beyond the Facebook Ecosystem?

Even though Facebook has not released its own cryptocurrency yet, it has already made a lot of fuss on the internet. The expectations are huge, and many reputed companies are already backing the new project. Uber, Vodafone, MasterCard, and many others are eager to use Libra coin to provide better services to Facebook users. 
The users themselves are also waiting, as the Libra’s developers say that this will be the new dawn of the fast, safe, and cheap online payments. Allegedly, it will have some  of the advantages of Bitcoin, but with many additional benefits, and may even push the main crypto and fiat currencies from their leading positions. Are we really going to face the revolution in the cryptocurrency and finance world? Let’s see what is Libra, and how it can change the market of virtual money.

What Is Really Libra?

Libra is a still-to-be-launched cryptocurrency proposed by the largest social network in the world. The name is taken from the Roman weight measurement. The currency itself, the blockchain, transaction protocol, etc. — everything is being developed by Libra Association, the organization that was founded by 28 companies, including the Facebook’s subsidiary Calibra
The first moves towards creating its own cryptocurrency the social media corporation has made in 2017. One person, Morgan Beller, worked on the project then. In May 2019, when the first news about the Facebook coin appeared on the newspapers, there were more than 50 people working on it.
The actual release of the virtual asset is expected to happen sometime in the beginning or middle of 2020. At least, it was said in their announcement from the 18th of June 2019. The white paper of the upcoming coin was published on this date, and there was a lot of interesting information there:
  • the mission of the coin is to create a simple, user-friendly, and world-wide financial environment, for all people on Earth to improve their lives;
  • the coin will be available for the users of FB services, like Messenger, or WhatsApp;
  • the main problem it solves is inability of billions of people to have access to banking services, and thus — to comfortable, fast, and cheap payments and transactions, credit cards, etc. Many of them, though, are active internet users, and they surf the web via their mobile gadgets. Facebook declares Libra will be their provider to modern financial services;
  • the evolvement of the Libra coin and all accompanying projects, like Calibra wallet, blockchain, transaction maintenance, etc., will be managed independently of Facebook, or any other entity. Yes, the major social media company was the one that had actually created the coin and blockchain, but Libra Association is the organization where Facebook and all other participants have the same shares. This is what they declare, but we’ll talk more on that issue later;
  • the Libra blockchain will solve the main problems of all distributed ledgers — it will be scalable, meaning that it will be able to grow and manage billions of users and transactions, also, it will be highly secured and able to change together with the evolving world of financial services;
  • the Libra currency is promised to be low-volatility, fungible, and acceptable. The chosen method to achieve these aims is rather controversial, the Libra team plans to back it with the basket of major fiat currencies.
In conclusion... the authors of the white paper say that Libra will provide better financial services to all — regardless their income, social status, nationality or residence, etc.
I would like to point out the most important thing that differs Libra from cryptocurrencies as we understand them.
As you know, the main idea of creating Bitcoin was to have digital assets that had nothing to do with governments, financial institutions, and traditional currencies. However, Libra will be highly dependent on fiat money, as its price will be tied up to the value of the reserve.
This makes the Facebook coin, first of all, dependent on the global economic policy, prone to financial crises, and eventually — the centralized token.

What Are Benefits of Libra Coin?
Despite the huge criticism, including my own one, too, the Libra blockchain and coin have some advantages over the major cryptocurrencies, like Bitcoin, Litecoin, or Ethereum:
  • the “Move” programming language, used in Libra, is developed to manage digital tokens. The benefit of this technology is that it provides better security of smart contracts. Some even say that Libra in that respect will be superior to Ethereum;
  • Libra is more a stablecoin, which means that it is pegged to fiat currencies. Yes, it is not a feature of a true crypto asset, but it brings some advantages, as well. If you buy some Libras, you can go to sleep with peace of mind, your funds will not cost a penny tomorrow, or next Friday, their price will remain approximately the same. This is not the 100% guarantee, though, who knows what happens to USD and EUR when the next Goldman Sachs blows out;
  • the Facebook network encounters ~2.4 billion active users, which means that the coin will be useful for and accepted by all of them. This is a real benefit, just imagine — you rent an accommodation or a car, want to transfer money across the ocean, buy something, etc. What are the chances that the owner of your apartment or vehicle, your partner of the deal on the other side of the world, a seller, whoever, that he or she accepts BTC? Or that you can easily transfer some money from your credit card to their account? I believe, they are much lower than that they have a profile on Facebook, or use WhatsApp and Instagram. Hence, Libra will make transactions easier for billions;
  • in addition, we should not forget that Facebook has made the internet access to its app on mobile phones free in many countries. For millions of people in developing countries the social network is the only connection with the outer world. This way, Libra becomes the unique opportunity for them to make online payments;
  • there are many unbanked people even in the USA, who have no chance to enjoy the privileges of using credit card, or international transactions. With Libra, their financial opportunities will increase. Eventually, it can lead to the increased number of people who can run their business, improve their living conditions, and become successful in social and economic life without banks or governments;
  • the founding investors that are going to maintain the emerging network and currency are mostly tech and financial giants, or companies with a huge experience of running a business based on hi-tech and online transactions. Which means they know what they do;
  • Libra can be the instrument to protect people’s earnings from inflation in the countries where the national currency dips critically. Imagine that you get a salary, which today lets you buy some meat and bread for your family, and tomorrow — is not worth a bean. This is not a metaphor. If those people could invest their money in an asset that will not devalue in a couple of hours, and will be accepted in their country simply because most people use Facebook, I think they would do that.
In any case, Libra offers an additional choice to those who are limited in their financial opportunities.
What Risks Face Facebook Libra?

The risks are really close to overtaking the benefits. See for yourself:
  • first of all, the one that I’ve cursorily outlined in the previous paragraph — if something really bad happens to government currencies, Bitcoin and altcoins still have a chance to stand the ground, while Libra has not;
  • another risk is that Libra coins will not be 100% backed by the association, and reserves won’t be enough to recover all of them. The results of this are hard to predict, most probably, nothing serious will happen, as we’ve known the much more dangerous crises. However, as Facebook will become a huge shadow financial institution with billions of clients, and on top of that — unregulated, it can really cause panic on the financial markets;
  • Facebook is known for tracking and even selling the personal information, as well as the correspondence, of its users. Which brings me to the biggest threat of the Libra project — what if they will also track all financial operations? Imagine that all two and a half billions of FB users will buy with Libra, send it to each other and use it as investment. The corporation will be able to turn off, reverse, censor the transactions, or simply give out the information about your activities to the local authorities on their demand. 
The simplest example is the possibility to freeze your FB account for a comment or inappropriate photo. This is not freedom at all, don’t you agree? In the world where Libra is the common and major payment system, where everyone keeps savings and purchases goods and services, this will be a disaster. And a very effective instrument for some organizations to control citizens. Sounds like a post apocalyptic fiction movie, but this is a very possible post-Libra backlash, isn’t it?

Is Libra Superior to Bitcoin?

There is a popular prediction that Libra will eventually substitute traditional money, and even kick Bitcoin out of its leading position in the chart of cryptocurrencies. However, I would not be so optimistic. First of all, I want to say that Libra will never make fiat money disappear — simply because it will disappear with them. Remember, it has the fiat basket to support its price? Overtaking and replacing regular money is not the goal of Facebook, I think, it will cooperate with governments and banks instead. 
As for the opportunity for Libra to come out on top among cryptos, the reality is far from that no matter what the founders and Facebook fans say. You know all my arguments already, let’s see them in further details:
  • Bitcoin is truly independent, it gives freedom to all its participants, freedom to do what you want without any restrictions and control from the side of governments and banks. Libra cannot offer this, and you know why — because of the reserve. Fiat currencies in the basket, which are meant to be the strong point of the new stablecoin, can become the tool to control it;
  • Bitcoin is really decentralized, while Libra is not. This way or another, this currency and blockchain are ruled by the central entity — the Libra Association. It does not matter that this organization is supposedly independent of Facebook or governments, it is still the certain company of people that makes final decisions. Moreover, the same organization maintains the reserve, which makes them even more powerful;
  • which brings us to my final and most significant advantage of Bitcoin for regular users — it is the cryptocurrency of people, while Libra is the currency of companies. You will not become the node of the Libra network just because you want it. Only permitted and validated partners can maintain the blockchain, moreover, only those ones that have the funds to invest, starting from $10 mln, and a necessary computing power. You see, the organization chooses who can become its member. Some say that the team of founders plan to change this, but I did not find this in their roadmap for the next couple of years. Only in five years they plan to transit to the permissionless blockchain. 
In summary, Bitcoin will remain the main cryptocurrency for those who want freedom and equality in managing the network. Let’s take mining — everyone can mine Bitcoin. But only the permitted members of Libra can control the supply of the coins. The Association even makes decisions who can be a reseller when a user wants to convert Libra coins into USD and vice versa. This will not work for those who want to deal with real cryptos, where no one can control your transactions, or issue any kind of permissions.

Beware of Scams

Any popular and new product that attracts the attention of the community, is the honeypot for various kinds of criminals. So, you have to be careful, for instance when you see the offerings to take part in investing in the Initial Coin Offering (ICO) or Libra coin pre sale. The tokens will be presented on the market not earlier 2020, and all other claims and “lucrative offers” are no more just a scam.
Be aware of any rumors about the hard forks of Libra, too. There were some on the net, and they also targeted naive users to simply steal their money. There is a site that looks like the official page of Calibra, with one symbol changes in the web address. They will sell you Libra coins for Ether or BTC, but you must understand that you won’t get anything for your money. Some activists have even issued the so-called, zuckbucks or ZBUX, an absolutely useless cryptocurrency that speculates on the name of Mark Zuckerberg.

Last Few Words

To finish this review, I want to say that Libra is a good thing for those who use Facebook services and will be glad to include financial services into the list of their capacities. The good this is also that with the increasing number of FB users and its services, Libra will make more people move from regular money and traditional payment methods to modern digital transactions, online shopping, etc. This will definitely make the future much closer.
However, this is all I can say about the positive influence of the Facebook token. It does not bring more freedom, it does not make global transactions more independent, and it does not develop the blockchain concept in the terms of decentralization and transparency. Moreover, you have no reason to invest in it unless you are a resident of some bankrupt country, because the coin is backed by the fiat money, and investing in it is the same as investing in USD or euros. 
I realize why Facebook has decided to start this project — they perfectly know how popular cryptocurrencies are, and just wanted some hype to make some good money. The FB stocks soared markedly right when they declared about the soon launch of their crypto. I am sure, Mark Zuckerberg will earn even more when the coin will be listed on the exchanges. But you cannot fool people around for a long time, we see the difference. I believe, Libra will remain the token to be used strictly in the limits of Facebook and its apps, no more.

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Comments

August 19th, 2019

Let’s not even try to compare bitcoin and libra. Libra is only as valuable as fiats, so, how does it even qualify as a true crypto?

I have no doubts that libra will live to the benefits outlined in its whitepaper, but what happens when the dollar falls?

As you said, it is mere business and nothing else. They are simply using their already famous business to grow another business and create a monopoly. I just hope that it doesn’t work out the way they want it to.

August 19th, 2019

Haha. Libra will soon become a joke and we’ll have a great laugh when that happens.

but i’m glad Libra is happening. People need to know more about cryptocurrencies. I’d be forever grateful to Zuck for bringing the concept of cryptos to half the world in one go.

August 20th, 2019

The one good thing that Libra would do is introduce cryptos to a bigger population.
As they say, Libra would be initially focusing on making remittances cheaper and faster. Well, they can very well do that. but on any random day, I’d happily choose other stablecoins over Libra.

But again, considering people’s familiarity with Facebook and its products and the lack of it with the general crypto companies and products will lead them to choose Libra over others.

Time would tell us better what is to happen with Libra.

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