Facebook claims that it wants to access people without a barrier of any bank account. Facebook wants people to make it easy for them to transfer money just like the way they transfer messages by one click. The goal that Facebook seems to target is reduced fee, with easy Money transfers. Unlike commissions charged by crypto-currency sellers, fee to buy Libra with fiat currency (your country’s local currency) is going to be very low. So for users, one will be able to buy and exchange Libra crypto currency just like normal cash (without worrying about commission payouts).
One has to understand the primary reason for launch of Libra by Facebook.
Facebook has 2.3 billion monthly active users. If you take a look at Facebook’s prime user base geographically, you notice that most of users are from Developing countries like India, Brazil, Indonesia, Mexico, Philippines, Vietnam, etc. And these countries still face majority of 3rd world issues wherein most part of populations are still unbanked. So it is obvious for Facebook to go after this obvious opportunity. The extent Facebook is gonna liaise with the respective Governments remains to be seen.
Libra as a currency is built on Blockchain Technology; will enable a safe encrypted ecosystem for money transfers among the users and between users and Facebook. The claim of keeping transfer fee at a minimal seems possible as Facebook will be flushed with cash in several currencies which entails them to earn interest, when kept with financial institutions or Government instruments.
Libra’s Purpose
Libra doesn’t find its purpose as a crypto currency that aims to replace the typical existing financial system which is actually one of the aims of Bitcoin. Facebook has a totally different motive, their intentions are to extend a digital payment method to everyone, even to those deprived populations which are widely dispersed geographically. Across the world, nearly 2.0 Billion people don’t have access to banks, even though many of them do have an access to internet. Libra targets to meet this gap.
If adopted successfully by Facebook and WhatsApp users, Libra will consequently be launched on Instagram and Messenger platforms later on. This tech currency is expected to be used by other companies including Uber and MasterCard.
Working of Libra
In order to give stability to Libra, it is planned to be backed by government itself. Libra will be backed by certain low-volatility assets like Bank Deposits and Short-Term Government Securities in currencies across the world. This characteristic sets Libra aside from other cryptocurrencies.
Users who currently have cash in their digital wallets will immediately be able to buy and transact using Libra post its launch. The subsequent and obvious question is – What will Libra digital wallet comprise of? Who will have its custody? And will there be Hot and Cold wallets as are in the case of typical cryptocurrencies? And more so, who or what will decide exchange value of Libra against the existing Fiat currencies?
Although Libra claims that the payments are not connected to the data of a user’s Facebook account, rather it will keep everything un-linked and confidential. So far the experience with Facebook handling user privacy has been a popular debate topic. They also claim that Libra will not use any interests (derived from their online activity) of a user to target ads.
Association of Libra
Knowing the fact that people will never trust Libra completely, to use the cryptocurrency, Facebook hired the founding members of Libra association. Members of the association will from Governing Body to setup rules and ensure compliance for Libra transactions. Facebook believes that they will be able to reach a total of about hundred founding members. They aim to attain this number before the official launch. Libra is actually an association based in Geneva, Switzerland. The reason behind choosing it is the neutral status, also the members are the pioneers of strong Blockchain Technology.
What actually is a Libra?
The article uses the buzz word Libra currency many times, but the real question is what actually is meant by this? A Libra is the unit of Libra Cryptocurrency. It is represented by using a ≋ sign, that are three blue waves. It is necessary for Libra to remain stable, the value of Libra is financially bound to the deposits of the banks. So how did the name originate? It actually is a Roman name to measure weight. The quest to determine the exact value of Libra is still going on.
Libra transactions – at a glance
Every time a transaction occurs, the payment done by Libra users is written permanently into the Libra Blockchain. Although the technical details are not fully known, the blockchain is expected to be faster than Bitcoin’s existing benchmark of 7 transactions in a second or Ethereum’s 15 transactions in a second. The founders of Libra Association will constantly keep on verifying (reconciling perhaps) the Blockchain. Every time a transaction block is executed, the nodes will run to solve complex calculations and contribute to the distributed ledger. Nodes are expected to work in consensus to ensure high levels of security. Moreover the transactions made in Libra will be irreversible, so even if the transactions are under hack attack, Libra Blockchain will have full backward traceability. Libra also seems to be working towards the more latest ‘Proof of Stake’ so that it will remain protected against any attack by distributing the control, hence Libra should have a decentralized architecture.
As the Libra Association has an uphill task of being accepted globally, they are planning to give incentives to those who sign up to use Libra. For every transaction being processed, the merchants will be given a percentage of the transaction as pass-back.
If successfully implemented, Libra will be truely the currency of the future. Future that is definitely gonna be completely Digital.
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