Facebook’s Libra; A Possible Disruptive Wave in CryptocurrenciesBRIKS ADMIN
Facebook’s Libra; A Possible Disruptive Wave in Cryptocurrencies
Facebook has once again come to rather speculative limelight. After all of its much debated issues on data security and privacy spanning almost a whole year, the social media giant is now getting ready to step foot into an industry that requires even more security; finance.
That’s right. Facebook is set to launch its very own cryptocurrency project; Libra along with its digital wallet called Calibra. If all goes well, users will be “moving money” across the globe as they do messages and emails; at least that’s what the project intends for the people.
The currency will be launched in the first half of 2020. Now we don’t yet know if it will be the booming revolution that the financial world needed. But it will be worthwhile to get up to speed on that the project entails.
So let’s start with the basics.
What is Libra?
Libra is essentially a new form of cryptocurrency backed by Facebook and built on the “Libra Blockchain”. It can be used to make payments or purchase services digitally by consumers.
The currency will be stored in a digital wallet called Calibra which can be a standalone application that users can download on their smartphones or can be incorporated within other Facebook-owned applications such as WhatsApp and Messenger. This works as a subsidiary to Facebook and will be headed by former President of PayPal David Marcus.
Being a type of cryptocurrency, it comes with all the features of the same; it is built on blockchain technology which means that the control is decentralized and all transactions are securely recorded online and encrypted. This creates fewer chances for fraud and increases transparency.
How is Libra different from regular cryptocurrencies?
The thing with other cryptocurrencies is that they are highly volatile. Everyone familiar with BitCoin would know what it feels like to deal with a currency whose value varies drastically by the hour.
Libra, on the other hand, is backed by a reserve of real assets including Govt. securities which essentially gives it actual intrinsic value unlike other virtual currencies. This reserve will be supported by a whole network of exchanges trading with Libra. This means that anyone in possession of Libra can convert it to a flat currency based on an existing exchange rate, making it non-volatile.
The second point of difference has to do with the blockchain technology. The Libra blockchain is specifically designed to facilitate three main requirements; high level of scalability, high level of security for financial data and a sufficient level of flexibility to follow future innovations in the financial sector.
Thus the Libra blockchain will allow billions of users to operate on the network seamlessly and securely.
The third point of difference lies in the governance and control aspect. Usually, all cryptocurrencies work on a decentralized basis, which means that no single body controls the system like real-world finances. While this eliminates the chances of undue invasions into transactions, it also bears the risk of unfair rules, rendering pretty much the whole concept unpopular.
Libra addresses both issues by having features of both centralization and decentralization. Being based on blockchain technology, it serves to be decentralized in operations. However, it is also governed by an independent body called the Libra Association headquartered in Switzerland, which makes its foundation centralized to a certain extent. This will prevent Libra from developing into a Bitcoin-like cryptocurrency.
The Whitepaper on Libra gives further details about this body.
Can we trust Libra?
Considering the fact that Libra is backed by Facebook; a social media channel that has had its fair share of misses and controversies, most of which were related to the security breach, there is a need to be cautious in our approach and use. However, the project has taken care of most of the loopholes in the system from an initial standpoint. As is the case with any system, now any other issues can only be discovered once it is fully implemented.
Now, all that’s left for us to do is wait for the launch and hope for a more reliable and cheaper way to access financial services; which is pretty much what Libra intends to be.