The announcement that Facebook is planning to launch its own cryptocurrency in 2020 has already achieved its stated aim of shaking up the financial world.
The move has excited speculation as well as concerns, and seems to foreshadow major changes in the way that we do business, pay for transactions, and ultimately think about money itself. But what can we really expect from Libra, and how soon are these changes likely to take place?
Libra is due in 2020 and has been described by Facebook as a new “global currency and financial infrastructure”. Although Facebook is responsible for the currency’s conception and launch, it will be supported and managed by a collective of 28 corporate investors known as the Libra Association.
These initial investors include some of the biggest players in the financial, communications and e-commerce world: Vodafone, Visa, Mastercard, PayPal, Spotify, eBay and Uber among others.
Independent organisation
The Libra Association itself will be an independent, non-profit organisation based in Switzerland, and will be responsible for validating transactions and managing funds. Facebook has said that surplus profits will be given to social causes selected by the Association.
All the investing companies will have an equal say in how Libra is run, via the Libra Association Council, which will vote on policy. Facebook has said that in the long term, it will not control Libra to any greater degree than other investing companies.
A stable currency
Facebook’s proposed entry into the growing market of cryptocurrencies will have several significant differences from competitors such as Bitcoin. For a start, it will be what is known as a “stablecoin”.
Most cryptocurrencies are notoriously volatile – something that is seen as both an advantage and a disadvantage. This is the result of them not being tied to any national banks or government monetary policy – a fact that gives them a much-prized independence.
Libra on the other hand will apparently be pegged with the value of “real-world assets” that offer the greatest possibility of stability. This could be a major currency such as the dollar or the euro, or a commodity such as gold. Basically, Facebook wants to have the best of both worlds, offering the stability of a physical currency along with the flexibility and security of digital transactions.
Central blockchain
Libra transactions will be validated and recorded on a new kind of blockchain that differs from existing versions in at least one crucial aspect. While one of the great strengths of blockchain is that it is decentralised and stored on an unlimited number of different servers simultaneously, Libra’s blockchain will be centralised and solely maintained by the Libra Association.
An immediate advantage of this for users is that transactions will likely be processed much faster than with other cryptocurrencies, allowing Libra to compete with mainstream digital payment solutions such as credit cards and PayPal. However, if Libra is tied to a major currency and maintained via a central database, then the transparency and independence that users prize in other cryptocurrencies will be lost.
Financial inclusion
Facebook intends Libra to reach the 1.7 billion people around the world who have access to a mobile phone but no bank account. The financial inclusion of the underbanked is seen as a pressing social concern.
Libra will let them transfer money safely and securely around the world and make and accept digital payments. Ultimately, this is seen as a way to provide greater social mobility and to improve the economic situation of individuals and communities by facilitating the creation of small businesses and access to digital service providers worldwide.
Initial rollout
Upload Files Libra will use the Calibra digital wallet and will allow funds to be sent to anyone with a smartphone. Calibra will be available as a standalone app or via Facebook messenger or WhatsApp.
Users will initially be able to send money to each other, but Facebook hopes to get major retailers and vendors on board, and it’s expected that the companies that make up the Libra Association will accept the currency sooner rather than later.
It’s also expected that Facebook may give away small amounts of the currency to its users at the launch in order to kick start the system. Libra companies may pay a percentage of their employees’ wages in the cryptocurrency, or give them the option of accepting it at an advantageous rate.
There are, of course, many important concerns around Libra, involving privacy, security and trust. It remains to be seen whether the announcement will prompt stricter financial regulation around cryptocurrencies.
In the long term, Libra has the potential to completely transform the financial landscape.
In the short term, it is at least another option for flexible digital transactions.
…………………………….
Should companies plug the leak or keep filling the bucket? – TheMarketingblog https://t.co/gkurOmk9pC pic.twitter.com/dlsuHVfghM
— Will Corry (@slievemore) March 5, 2019
……………………………
10.000 Email Sends/month unlimited Subscribers | for free https://t.co/QgYXtUdlX2 pic.twitter.com/bLy2wi1zWq
— Will Corry (@slievemore) February 15, 2019