One of the big surprises for the financial technology world in 2019 is that Facebook revealed the details of its cryptocurrency, Libra. This is a global financial and monetary infrastructure.
1. What do you know about Libra – Facebook cryptocurrency?
In Facebook’s vision, Libra will become a global currency for billions of people, especially those in developing countries where people have no access to banks or financial services. In other words, you can transfer digital money to others or simply use it to buy goods. Libra will operate on blockchain platform. It is a digital, unchangeable record of all the payments ever happened with a given cryptocurrency.
Libra allows you to buy things or send money to people with almost no fee. You can purchase or withdraw Libra online or at any local exchange points like grocery stores, and spend it using third-party wallets or Facebook’s Calibra wallet integrated in WhatsApp, Messenger and Calibra app. Facebook has no rights or privileges concerning the cryptocurrency; it merely serves as one of many Libra stakeholders. Facebook’s goal is to grow the list of stakeholders to 100 companies, all of which are responsible for making decisions concerning the develpment of Libra. Above all, Libra Association, an independent,non-profit organization, serves as the governing entity of Libra.
Currently, Facebook has released Libra whitepaper explaining Libra and its testnet system in order to clarify the risks in blockchain system before a public launch in the first half of 2020. “Libra is going to be the first major cryptocurrency which is introduced by a major corporate or enterprise,” said Naeem Aslam, Chief Markets Analyst at Thinkmarkets. He says that when comparing Libra with something like Bitcoin, Libra is decentralised and driven by the user community.
When asked for comments about the recent issues, a Facebook speaker said: “The Association is eager to pursue its mission of building a better payment network, broaden the access to essential financial services, and minimize the costs for billions of people who need it.”
2. Outstanding characteristics of Libra cryptocurrency
- The Libra blockchain is not decentralised the way Bitcoin is. With the Bitcoin blockchain, theoretically, anyone can run a node network, even if that is expensive. In contrast, Libra’s nodes are run only from the servers of the Libra Association’s members including Facebook, Uber, Paypal and others.
- In order to minimize the traditional volatility of cryptocurrency, Libra is designed as a “stablecoin”. That means that the value of Libra units in circulation will be backed by a reserve of low-risk assets like bank deposits in various currencies and US Treasuries. The Libra reserve is made up of the U.S. dollar (50{70b45ee78418f42abd3d9f3844ba2e48a8b0129d2b75d7c15f341553206e1abb}), euro (18{70b45ee78418f42abd3d9f3844ba2e48a8b0129d2b75d7c15f341553206e1abb}), Japanese yen (14{70b45ee78418f42abd3d9f3844ba2e48a8b0129d2b75d7c15f341553206e1abb}), British pound (11{70b45ee78418f42abd3d9f3844ba2e48a8b0129d2b75d7c15f341553206e1abb}) and Singapore dollar (7{70b45ee78418f42abd3d9f3844ba2e48a8b0129d2b75d7c15f341553206e1abb}). This move is intended to prevent its value from fluctuating too wildly.
- If Libra is to handle 1.000 transactions per second – compared to Bitcoin’s 7 transactions per second, it is easier when blockchain is operated and constantly verified by the founding members.
The Libra Blockchain is designed to meet three key requirements:
- Highly secured
- Flexible and adaptable to future innovations and governance requirements
- Scalable to billions of accounts, with high capacity and low latency.
Cryptocurrency used by the social network of two billion users could effectively create a new world currency, perhaps even rivalling the dollar, yuan or euro.
