What is Libra, Facebook's cryptocurrency?

by in Crypto 101

what is libra

What is Libra?

Related: Facebook denies reports about refusing from Libra coin

Libra is a cryptocurrency-based payment system. The project belongs to Facebook, which has been joined by another 27 companies (eBay, Uber, Booking.com, Vodafone, etc.).

The Libra's rate will have to be determined on the basis of a currency basket of the dollar, euro, yen, and pound sterling.

When developing the project in 2019, the attention of the developers was focused on the use of payments and money transfers through WhatsApp and Facebook Messenger. It also has a big advantage over bitcoin, which is subject to large fluctuations in price. In addition, the stability of Libra will be supported by funds in the bank accounts of Facebook. Security must be guaranteed by decentralizing the network.

The economy of the currency will be decentralized and there would be no chance to control it either by Facebook or by investing companies. The initial course and methods of mining are also still unknown. Initially, users from the United States, Great Britain, and the European Union will be able to use the crypt. The stability of the new cryptocurrency should attract users from developing countries, where it has every chance of becoming a supranational payment instrument.

According to some reports, Mark Zuckerberg's company has been developing physical terminals, reminiscent of familiar ATMs, through which users can convert their money to Libra and vice versa. In addition, a special wallet for the new cryptocurrency will be created, which will be called Calibra.

How Libra can affect the global economy

Libra is a revolutionary new form of fiat currency. For the first time in history, we can deal with a currency that is supported and funded not by other states, but by large multi-billion dollar companies. This is the point (not the technology) that makes Libra a revolutionary story.

Facebook cryptocurrency Libra

So, the Bank for International Settlements believes that cryptocurrencies from tech giants can disrupt global financial stability. The great potential of Libra, and at the same time the threat to traditional institutions, in their opinion, lies in the vast user audience of Facebook.

Many are afraid that after the launch of Libra, Facebook will even more actively use users' personal data. And their fears are well-grounded. The fact is that the Calibra wallet requires mandatory authorization, and this is contrary to the philosophy of cryptocurrencies. Thus, in addition to interests, friends, place of residence, and other data, now Facebook knows how much and on what you will spend.

Libra targets 2 large industries at once: the cryptocurrency market and the money transfer industry. The obvious competitors from the money transfer industry are MoneyGram and Western Union. In the field of cryptocurrencies, of course, Bitcoin. Satoshi Nakamoto conceived Bitcoin in such a way that neither monetary policy nor the underlying mathematical formula can influence the price and supply. However, high volatility, susceptibility to price manipulations, and poor scalability do not allow us to consider BTC as an alternative to fiat money.

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Government claims

In the summer of 2019, the US Congress held a two-day hearing with the head of Facebook blockchain David Marcus and voiced claims against Facebook over plans to launch Libra.

The European Commission launched an antitrust investigation against Libra in October 2019. According to European competition commissioner Margaret Vestager, Facebook's plans carry the risks of a new, completely separate economy.

After the dissatisfaction of the European Commission, Visa, MasterCard, PayPal left the Libra project.

As a result, Facebook revised plans to launch the Libra after regulators' claims. The project will move to support the dollar, euro, and Libra when the token is ready for launch. According to The Information, the social network has also postponed the launch of the Calibra wallet, which was supposed to be the basis of the system.

According to Facebook's updated plans, the wallet will support many currencies beside Libra.