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After a long wait, Facebook disclosed the details of its new venture in the cryptocurrency market, Libra, with which you can buy day-to-day groceries or transact money to friends, family, etc with nearly zero fees.
What is Libra?
One of the most attractive features of Libra is that users can buy or cash out their Libra through online or at local exchange spots like grocery stores, and pay out it using subsidiary wallet apps or Calibra wallet designed by Facebook that will be included into WhatsApp, Messenger and its own app.
Recently, Facebook revealed its white paper discussing Libra and its testnet for finding the peculiarities of its blockchain system before a public disclosure in the first half of 2020.
Despite launching and designing Libra, Facebook won’t have complete control over Libra, like all other stakeholders Facebook also holds a single vote in the governance of Libra. Some renowned organizations which have their vote in Libra are Uber, Paypal, Andreessen, Visa, and various other companies that invested $10 million to make this project alive.
The association will advance the open-sourced Libra Blockchain and developer stage with its new Move programming language additionally tied up businesses to accept Libra as a payment method and shower customers with discounts or rewards.
Facebook also started an ancillary company called Calibra, it controls its crypto commerce and offers security to users’ privacy by never disclosing or exposing your Libra transactions with your Facebook data to keep you away from ad targeting. All these transactions can be done by maintaining your anonymity.
Along with Facebook/Calibra and other companies included in the Libra Association will be profited by Libra user’s cash which is stored in reserve to maintain the value of Libra constant.
Facebook’s daring bid to develop a global digital currency that fosters financial incorporation for the unbanked and Libra succeeded in offering privacy and decentralization than most other cryptocurrencies.
Reward involved in Libra
In the crypto market, Facebook saw both peril and possibility. They kept their word of reinventing an easy way for transactions by removing the transaction charges foisted on common people.
That comes seriously close to Facebook’s ad market that affects what is acquired and traded. If a rival like Google or any other renowned altcoin manages to keep an eye on their transactions, they’d also know what people are searching for and follow a similar strategy.
At the same time, 1.7 billion people who are not fortunate enough to have a bank account might choose any platform that favors them a financial ministration and acts as their online identity source as well. That’s another interesting aspect where Facebook wants to make its mark.
Yet enduring cryptocurrencies like Bitcoin and Ethereum weren’t satisfactorily designed to serve as a medium of exchange. Their unpredictable price was vulnerable to huge and unanchored fluctuations, making it difficult for vendors to accept as payment.
And cryptocurrencies lack on their capabilities beyond conjectures unless there are ample places that will accept cryptocurrencies as a payment mode instead of dollars, and the feel of purchasing and selling them is painless for mainstream users.
But with Facebook it’s a completely different scenario, it already has a connection with 7 million advertisers and 90 million small scale industries plus its user experience expertise, it was well-poised to defend this problem.
Now Facebook is in thoughts to make Libra global. It’s expecting Libra will become easier to set up, more popular as a payment method, more capable with fewer transaction fees, more available to the unbanked, more pliable thanks to people involved in designing such an amazing and long-lasting resource.
In one of its documentation, Facebook tried to explain that, success is when a person working abroad has a faster and easier means to send money to his family, and a student studying in a university can pay his college fees or rent as easily as he buys a meal.
That would be the greatest achievement today, when you’re facing difficulties in paying rent in unguarded checks while exploitative exchange services charge an average of 7% to transfer money abroad, bagging $50 billion from users annually in the name of transaction charges.
Libra also has the potential to execute tiny micro-transactions worth just a few cents that are infeasible with credit card fees imposed or replace your prepaid transfer pass. Or it could be universally snubbed by users who feel it as too much inconvenience for too little benefit, or too unknown and restricted in use to bring them together into the modern financial platform.
How does Libra work?
The basic points to understand Libra is cash in a traditional currency, own your Libra, spend them like other regular currencies without worrying about transaction charges and other transaction issues, transact anonymously, turn your Libra into cash whenever you wish to.
There are a lot more attractive things to know about the technology used in designing Libra, the association that operates and looks after Libra, and also the wallets you can use to access Libra. Facebook has published more than 100 pages of articles on Libra and its app Calibra, and I gave my best to provide important facts and functioning of Libra.
The Libra Association
Facebook is aware of the fact that people will not trust their initiative and intention because of the failures of previous cryptocurrencies, and it also needed encouragement for adoption. So this social biggie brought together all founding members of Libra Association, an organization not hungry for profits and strives hard to steer Libra into people’s day-to-day lives. This organization looks after the reserve and maintains the value of Libra constant.
Each and every founding member present in the organization staked a minimum of $10 million to be a part and voluntarily become a validator node operator, secure one vote in the Libra Association council and be designated to a part(based on their stake) of the dividends from interest earned through the Libra reserve where users pay regular currency to claim Libra.
As mentioned in Libra’s logo, the 28 renowned companies which are a part of the Libra Association are:
- Payments: PayPal, Visa, PayU (Naspers’ fintech arm), Mastercard, Stripe.
- Technology and marketplaces: eBay, Facebook/Calibra, Lyft, Booking Holdings, Mercado Pago, Farfetch, Spotify AB, Uber Technologies, Inc.
- Telecommunication: Iliad, Vodafone Group
- Blockchain: Bison Trails, Xapo Holdings Limited, Coinbase, Inc., Anchorage.
- Venture Capital: Breakthrough Initiatives, Union Square Ventures, Ribbit Capital, Andreessen Horowitz, Thrive Capital.
- Nonprofit and multilateral organizations, and academic institutions: Kiva, Creative Destruction Lab, Women’s World Banking, Mercy Corps.
Facebook anticipates to reach 100 founding members before the ceremonial launch and it’s open to anyone or any firm that is eligible and meets the criteria, including rivals like Google or Twitter.
The Libra Association is located in Geneva, Switzerland and will meet two times a year. And Switzerland is selected because of its neutral stance and a huge encouragement for technical and financial ideas.
Libra governance
To be a part of the association, companies or individuals should have enough space for servers, 100Mbps or more stable internet connection, a full-time dependable and dedicated engineer, and enterprise-grade security.
Consistently your business should touch the mark of $1 billion market value of $500 million in customer balances continuously for three thresholds and also your company should have a customer base of 20 million people a year and should be ranked among the top 100 leading industry in surveys conducted by Interbrand Global or the S&P.
Crypto-focused investors should possess more than $1 billion in assets under their name, while Blockchain businesses that are interested in joining should have at least 1 year of experience in this business with high enterprise-grade security, privacy, and stakes more than $100 million.
Facebook also allows research entities like universities, and nonprofits satisfying three of four qualities, including working on the financial sector for more than five years.
The Libra Association will be accountable for enrolling more founding members to make them serve as validator nodes for the blockchain, fundraising to improve the ecosystem, launching encouragement programs to recognize and embrace early adopters and sharing out social impact concedes.
All the members of the association will form a council of representatives and collectively chooses the association’s managing director, and he will elect an executive team and form a board consisting of 5 to 19 best representatives.
Each existing member, inclusive of Facebook/Calibra, all of them will get only a single share of vote in the Libra Association council. This offers a secured level of decentralization that secures against Facebook or any other individual hijacking or manipulating Libra for its own gain.
The Libra Reserve
Each time an individual cashes Libra in a dollar or their traditional local currency, that money directly paces into the Libra Reserve and an equivalent share or value of Libra is minted and credited it to that person’s wallet.
If someone wants to cash their Libra into their respective currency from the Libra Association, then the Libra which came back is burned or destroyed and an equal value of the traditional currency will be given to them.
This proves that there is 100% value for the Libra out in the market, backed with standard assets in the Libra Reserve. It never operates on baseless illusions or anticipations. And dissimilar to “pegged” constant coins that are limited to a single currency like the USD, Libra preserves its own value.
When the members of Libra Association join and stake their $10 million minimum, they get Libra Investment Tokens. Their part of the total tokens converts into the amount of the share they receive from interest on assets that are present in the reserve.
These shares are paid out to the Association members only after the operating expenditures, investments in the ecosystem, ongoing researches and funds to charities and organizations are kept aside. The amount of interest they get at the end attracted the biggies from silicon valley.
If Libra becomes popular and many people carry a large balance of the currency, the reserve will grow huge and earn significant interest.
The Libra Blockchain
Every Libra transaction is forever written into the Libra Blockchain. It is a cryptographically verified database that serves as a public online ledger developed to manage 1,000 transactions per second.
The transaction speed is much faster and easier than Bitcoin and Ethereum’s transaction speed. The blockchain is controlled and regularly verified by founding members of the Libra Association, which each staked $10 million or more to get their vote in the Libra’s governance and to handle a validator node.
When a transaction is processed, every node runs a calculation based on the present ledger’s overall transactions. This is possible because of the Byzantine Fault Tolerance system, only two-thirds of the nodes are needed to accord that the transaction is fair or transparent for it to be implemented and written to the blockchain.
A formation of Merkle Trees in the code makes it easy to identify the customizations made to the Libra Blockchain.
Move coding language
The Libra Blockchain is open source technology with an Apache 2.0 license, and any designer or developer can create apps that run with the help of Move coding language.
The Association is collaborated with HackerOne to and collectively working start a bug bounty system after this year that will heed security researchers for safely recognizing flaws and glitches.
Meanwhile, the Association is executing the Libra Core with the help of the Rust programming language because it’s developed in a way to prevent security issues, and the Move language is not yet completely ready to perform it’s job.
Move was made to make it painless and smooth to write blockchain code that tracks an author’s purpose without instigating bugs. It’s called Move because its main task is to transfer Libra coins from one user to another user, and never let those properties be unintentionally duplicated.
