Facebook Reveals Cryptocurrency ‘Libra’
(United States - 18 June 2019) Facebook has finally revealed the details of its cryptocurrency Libra (≋). The digital currency allows consumers to buy things or send money to people with almost zero fees. Facebook users will be able to buy or cash out Libra online or at local exchange points like shopping centres, and spend it using interoperable third-party wallet apps or Facebook’s own Calibra wallet that will be built into WhatsApp, Messenger and its own app. Facebook released its white paper explaining Libra and its testing process for working out the kinks of its blockchain system before a public launch in H1 2020.
Facebook will not have compelte control over Libra but instead receive a single vote in its governance like other founding members of the Libra Association including Visa, Uber and Andreessen Horowitz,which have invested at least US$10 million each into the project’s operations. The association will promote the open-sourced Libra Blockchain and developer platform with its own Move programming language, plus sign up businesses to accept Libra for payment and even give customers discounts or rewards.
Every Libra payment is permanently written into the Libra Blockchain, a cryptographically authenticated database that acts as a public online ledger designed to handle 1,000 transactions per second. That makes it significantly faster than Bitcoin’s seven transactions per second or Ethereum’s 15. The blockchain is operated and constantly verified by founding members of the Libra Association.
Facebook’s ambitious bid to create a global digital currency that promotes financial inclusion for the unbanked actually has more privacy and decentralisation built in than many expected. Facebook wants to make Libra the evolution of PayPal and is hoping Libra will become simpler to set up, more ubiquitous as a payment method, more efficient with fewer fees, more accessible to the unbanked, more flexible thanks to developers and more long-lasting through decentralization. The name
Libra comes from the word for a Roman unit of weight measure. It’s trying to invoke a sense of financial freedom by playing on the French stem “Lib,” meaning free.
Each time someone cashes in a dollar or their respective local currency, that money goes into the Libra Reserve and an equivalent value of Libra is minted and doled out to that person. If someone cashes out from the Libra Association, the Libra they give back are destroyed/burned and they receive the equivalent value in their local currency back. That means there’s always 100 percent of the value of the Libra in circulation, collateralized with real-world assets in the Libra Reserve. It never runs fractional. And unliked “pegged” stable coins that are tied to a single currency like the USD, Libra maintains its own value — though that should cash out to roughly the same amount of a given currency over time.
When Libra Association members join and pay their US$10 million minimum, they receive Libra Investment Tokens. Their share of the total tokens translates into the proportion of the dividend they earn off of interest on assets in the reserve. Those dividends are only paid out after Libra Association uses interest to pay for operating expenses, investments in the ecosystem, engineering research and grants to nonprofits and other organizations. This interest is part of what attracted the Libra Association’s members. If Libra becomes popular and many people carry a large balance of the currency, the reserve will grow huge and earn significant interest.