Facebook's Libra - how Beneficial is it?

Discussing Libra has become peculiar in the news in recent times, starting from when rumors and speculations surrounding facebook's plans to launch a 'global coin'. Last month, Facebook, known for its social media networking platform, finally unveiled the Libra coin and released its white paper. Keeping in mind Facebook’s plagued credibility owing to political manipulation, fake accounts, and privacy in time past, a lot of rancor has been caused since the announcement was made. Consequently, many financial regulators have backlashed their project and  U.S. lawmakers made a call to halt its development because of concerns about them possibly mishandling user data. Added to that is that the Libra is gunning to be a part of an unregulated realm of cryptocurrency; for some, Facebook may be building a 'Central Bank' in the guise of their global currency. Amid all the ongoing issues surrounding Libra, the coin is however not functional or in use yet till its official launch. 

The Libra coin falls under the umbrella of cryptocurrencies just like Bitcoin. For readers without foreknowledge of the crypto industry, Cryptocurrency is a type of digital or virtual currency that can already do almost as much as fiat money can. It exists via the blockchain technology and cannot be seen physically. This technology being used is powered by a series of computers, which means it is not controlled by one central authority and therefore offers users more privacy.  According to popular news platform, The Guardian, the Libra name comes directly from “the basic Roman measurement of weight”. “The abbreviation lb for pound is derived from Libra, and the £ symbol originally comes from an ornate L in Libra”, the newspaper says.

Being that cryptos are built on blockchain technology, the value of a cryptocurrency depends on the type of blockchain it is built on amongst other factors. The recent launch of the Libra coin is definitely a part of Facebook's drive to expand beyond social networking since, in the past, the company had expressed plans to build a payment platform but didn't follow through at the time.

How the Libra project is expected to work?

According to Facebook, Libra is a global cryptocurrency that is fully backed by the Libra Reserve, a collection of currencies and other assets used as collateral for every Libra that is created, building trust in its intrinsic value. Like other cryptos, Libra will be used for transactions like the transfer of money between users on the social media giant’s messaging platforms. It is notable that Calibra operates independently from Facebook i.e. the Calibra company is a subsidiary of Facebook Inc. 

Also developed by Facebook is the app to enable users of Libra, "Calibra is designed for Libra, a new cryptocurrency that will make money work better for all of us." Calibra will be available as a standalone app in select stores and added to that Facebook says Calibra will be accessible directly from WhatsApp and Messenger apps "so you can send and receive money as easily as you message friends, family, and businesses."

The Guardian, explains that  “the encrypted technology used by bitcoin and other cryptocurrencies”, will enable the functionality of Libra. For this, Facebook-created an open-source blockchain version; the Libra Blockchain. This blockchain is said to feature its own proof-of-stake protocol and it will be governed by the independent Libra Association tasked with evolving the ecosystem. The Libra Association has its members spanned across various geographical locations and diverse businesses, nonprofit and multilateral organizations, and academic institutions. Already they have renowned brands on board the Libra project as founding members. The Libra Association’s group of almost 30 founding members include Andreessen Horowitz, eBay, Mercy Corps, Facebook, Uber, Women's World Banking, Mastercard, Stripe, Visa,  Lyft, PayPal, Spotify, Vodafone Group, Kiva, and more.

In the creation of the Libra Association and the Libra Blockchain, Facebook teams played a major role joined with the efforts of the other Founding Members. Facebook has noted that it will maintain a leadership role through 2019 but final decision-making authority rests with the association. 

How Beneficial will it be to users?

The Libra mission is quite an over-ambitious one but it hasn't stopped the social media giant. Libra is purportedly created to "reinvent money and transform the global economy so people everywhere can live better lives."  “The goal of this new project … is to build a financial ecosystem that can plug in and empower billions of people,” Dante Disparte, head of policy and communications for the Libra Association said.

The BBC reported that Facebook says the virtual currency is aimed particularly at the 1.7 billion people worldwide who are unbanked (adults who don’t have access to a bank account.) Most of these people include women in developing nations, according to Facebook and they want to offer financial services for as many as those and the world at large. “For many people around the world, even basic financial services are still out of reach: almost half of the adults in the world don’t have an active bank account, and those numbers are worse in developing countries and even worse for women,” Calibra (the wallet app) wrote in company literature.

Upon the recent unveiling of Libra, an official website was created as well and has become functional for users to start signing up in anticipation as well as displaying useful information about the initiative. The website first affirms that the global coin is "For everyone". The company has explained that the Calibra wallet app that was created for Libra will offer different payment avenues with increasing capacity over time. Money can be transferred between people via the wallet and/or saved in Libra. 

"The first version of Calibra will support peer-to-peer payments and a few other ways to pay such as QR codes which small merchants can use to accept payments in Libra. Over time there will be many others including in-store payments, integrations into Point-of-Sale systems, and more. Calibra is designed for Libra, so when you send, spend, or save your money, you'll be using Libra. You can convert your local currency into Libra to add money to your wallet, and convert it back when you want to withdraw. When converting your local currency to or from Libra, the app will show you the exchange rate so you know exactly what you'll get." according to the website.

These moves, offers, features and strategies from the Libra Project are pretty much similar to other popular crypto exchange activities. Crypto exchanges like Coinbase facilitate crypto transactions as Calibra would but Facebook is not exactly going to be running a crypto exchange. Some Facebook officials added that "Other wallet providers will be able to build products on the Libra protocol when the network launches in early 2020," painting the picture of Libra fostering altcoins at some point. So perhaps, Libra is intended to help make cryptos go mainstream and may become a modern 'central bank' spawned into the crypto space as some opinions have raised.

Their initiative is so far centered on one currency, Libra, which promises the following:

• "Transaction fees will be low-cost and transparent, especially if you're sending money internationally. Calibra will cut fees to help people keep more of their money."
• "Accounts are verified with government-issued ID so you know people are who they say they are."
• "Built-in fraud protections, in-app reporting, and dedicated customer service. In the rare event of fraud, you will receive a full refund."
• "Transaction activity is private and we will never post it publicly. Calibra is a subsidiary of Facebook that has been set up to be separate to help protect your financial and account information."
• Value Stability "Because the value of Libra is stable, you can also save your money in Calibra and use it to pay for everyday transactions, like buying a coffee, buying groceries, or taking public transportation."
• “The Libra protocol does not link accounts to a real-world identity,” the white paper states. “A user is free to create multiple accounts by generating multiple key-pairs.”

Facebook's Libra has not become functional as earlier noted, hence information surrounding the coin is based on official statements from the company as well as the white paper released. One cannot really tell if the "global coin" would deliver on promises or accomplish its mission of empowering users financially till it is up and running in 2020.

Here is infographic by Mrbtc

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Credits- Zack Seward, Nikhilesh De, Euro news, Wikipedia.