After much anticipation Facebook yesterday unveiled its plans related to Libra cryptocurrency. For the first time we got to hear from the social media giant itself what it’s planning to put its feet in the crypto space. And believe me, what we’ve learned is quite surprising. Here I’m going to explain to you everything that you should know about this upcoming stablecoin of Facebook. Let’s begin!
How will Libra work?
In order to make Libra work Facebook has established two new entities:
- Libra Association, which aims to govern the project. This association has got many members including Visa, MasterCard, Uber, PayPal, Lyft, eBay, Spotify, Facebook itself, Andreessen Horowitz and 19 other companies.
- Calibra Inc., a subsidiary of Facebook that will handle the transactions and other operational aspects of LIbra cryptocurrency.
Calibra Inc. has launched a new cryptocurrency wallet called Calibra, and this wallet will be linked with WhatsApp, Messenger, Instagram and a variety of other applications. Users will be able to purchase Calibra either from an online exchange or from offline selling points like grocery stores, newspaper stands, etc. Once purchased, the token can be used for both remittances as well as buy/selling something. The cryptocurrency can also be stored and used in some of the other interoperable third-party wallets besides Calibra, and Coinbase wallet is one of them.
Also, Libra is a stablecoin and its value will be maintained by keeping it pegged to a basket of fiat currencies. Libra Association and its members will earn interest on the money that people cash-in, and that interest will also be used to keep the value of Libra stable.
How much control Facebook will have on Libra?
Now this is where some crucial surprises are hidden. Contrary to the expectations Facebook has built Libra in such a way that its governance model will be much more decentralized than most of us might have imagined. Facebook has the voting power of only one vote in Libra Association, the governance body that will be managing the project, just like its other peers. The Libra blockchain, however, is a permissioned blockchain in which only certain entities that fulfill particular criteria are allowed to participate. This thing certainly doesn’t fall in-line with the theory of true decentralization, but Facebook said that it couldn’t find a better permissionless structure that can scale reliably to process the large number of transactions that Libra will need to process.
However, Libra also plans to fix this little thing by moving to a permissionless proof-of-stake algorithm eventually. By ensuring that its cryptocurrency project is as decentralized as possible the company wants to avoid unnecessary scrutiny by regulators around the globe.
How private will Libra be?
Besides decentralization privacy has been another major point of concern regarding Libra. Facebook and Google both are known for harvesting user data from as many places as possible, and by doing so they make billions in ad revenue with help of relevant ad targeting. So the concerns of crypto community regarding privacy offered by Libra were not unfounded, and when Facebook disclosed its plans regarding this new cryptocurrency for the first time it also tried to address those concerns. Facebook said that Calibra Inc. will never share its data with Facebook, so it won’t be used for ad targeting. The decentralized nature of Libra Association will ensure it.
Then how will Facebook benefit from it?
Now, a question that may be coming to your mind is… if Facebook wants to keep Libra decentralized and private, then how will it reap the fruits of this new tree? The answer was also provided by Facebook’s head of blockchain efforts David Marcus himself. He said:
“If more commerce happens, then more small businesses will sell more on and off platform, and they’ll want to buy more ads on the platform so it will be good for our ads business.”
So there you have it – Facebook wants Libra to support its ad-based revenue model in a complementary manner. However, plans and motives change with times, so we need to take this answer with a grain of salt.
So that is Facebook’s Libra, Calibra and everything that you should know about the project. It’s looking much more decentralized and private than we expected it to be, and that’s looking good so far for the entire cryptocurrency space. It’s also yet another sign of the fact that cryptocurrencies are here to stay, despite the various efforts of governments to curb them. Now let’s see when is it rolled out in its first few markets under testnet, as India is also among those few markets where company wants to try it first of all. The company is targeting a testnet launch in 2020, so let’s see how far they go in the next year to launch it.