Another cryptocurrency is coming.
It’s called Libra.
There are over 2500 cryptos up there, why should we be excited about the addition of another one? What’s so unique about this specific new coin? Creators claim that their product is much better than anything else up there (I’ve heard that before). They say it’s fast, secure and very cheap to use. I’m not impressed. NANO and Stellar are very fast, so is Ripple. Do you want to keep your info secure? Use Monero or Gash. If you’re a cheapskate, IOTA is perfect for you – transactions are free.
Can we trust it?
So, who is the creator of that “better” cryptocurrency, you ask? Well, I’m talking about FACEBOOK. Yes, Facebook – the company which somehow caused more than 540 million records about its users to be publicly exposed on Amazon’s cloud computing service (and it’s not the only security problem they had), is venturing into (crypto) financial market, by building Cryptocurrency-Based Payments System with Libra in the center of it.
Libra White Paper. ( You should read this. )
With Facebook security record (much) less than ideal, the head of company’s blockchain division, David Marcus, works hard to make it sure, that it’s clear to everyone, particularly U.S. lawmakers, that the social media giant, will not have access to Libra users private financial data, and that multiple entities will govern new currency.
Facebook won’t fully control Libra, but instead get just 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 $10 million each into the project’s operations.
Founding members of the Libra Association:
Facebook plans to have 100 governing members with a minimum of $10 Million each invested in the Libra system. In exchange, investors will receive Libra investment tokens (not Libra currency token, which will be available to everybody).
- Andreessen Horowitz
- Booking Holdings
- Breakthrough Initiatives
- Creative Destruction Lab
- Facebook (Calibra)
Mastercard Mercado Pago (MercadoLibre)
- Mercy Corps
- Ribbit Capital
- Thrive Capital
- Union Square Ventures
- Women’s World Banking
Facebook works very hard to convince people that Libra is not just another tool they’re going to use to collect data on users.
The Libra Blockchain and Libra Reserve need a governing entity that is comprised of diverse and independent members. This governing entity is the Libra Association, an independent, not-for-profit membership organization, headquartered in Geneva, Switzerland.Libra White Paper
So, Libra is an independent ecosystem governed by an independent association of diverse and independent members registered in a neutral Switzerland with an independent banking system. It’s obvious; Libra is independent. Totally independent. I totally get it.
Libra is a large body of new code.
New and different. Even the concepts of how blocks are built and chained are radically different than what’s already in use and been tested. New and unproven, always equals problems (that includes security problems) because no matter how good the developers are and no matter how hard they try, a new code is always riddled with bugs. It’s nothing unusual, that’s just the way it is, but if developers aren’t able to deal with all those problems promptly, people will soon view the new financial services ecosystem, as just an offshoot of old distrusted Facebook and will start to worry about the possibility of security leaks.
A reserve of real assets backs Libra.
What are the real assets that will be backing each Libra coin?
The actual assets will be a collection of low-volatility assets, including bank deposits and government securities in currencies from stable and reputable central banks.Libra White Paper
The part I don’t like is: “Government securities.”
Let me explain why.
It looks like Libra is backed up by a portfolio of securities, which make entire set up look like a mutual fund or ETF with Libras acting as shares of the fund. If some politician somewhere shares my way of thinking and Libra will end up as securities, it can cause some problems.
For example: Buying 100 Libras, then using 35 Libras to pay for a pair of ultra high-quality hiking socks, could be viewed as a securities transaction and be treated as a taxable event which needs to be reported. The requirement of sending tax forms to the government every time I buy new underwear is not my idea of shopping on the internet.
I have some other concerns.
Social media are known for banning people from using their platforms for posting unpopular political opinions. Unfortunately, Facebook is one of them.
What is going to happen if someone will use Libra to pay for something “unpopular” like oversized sex toys or Rush Limbaugh’s book? Will that Libra-user be punished? For example, by sloooow transaction speed, or maybe not being able to connect to the system for a couple of days.
Somehow I have a strong feeling; the probability of that happening is quite real.
Despite all the potential problems I’ve mentioned above, I think that Libra has a chance to turn out to be very useful for many people and to become popular. As a skeptic, I don’t plan to become an early adopter, but I’ll be watching closely. Although I don’t expect any severe mishap to occur, I’m going to listen to President Reagan advice: “Trust but verify,” and verifying is going to take some time.
11 October, 2019 — EBay, Stripe, Mastercard, Visa and Mercado Pago are all dropping out of Facebook’s libra cryptocurrency project
04 October, 2019 — Payments firm PayPal has become the first company to pull out of an alliance that is trying to launch Facebook’s digital currency Libra.
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