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- Feb 28, 2020
It's me Karl from Bitcasino. How are you doing?
I have posted a series of cryptocurrency lessons in this forum. Hopefully, these were interesting for you and I would like to thank everyone who left comments and asked me different questions about cryptos and gambling in crypto casinos.
Today, I would like to enlighten you about another cryptocurrency. It is called Libra and it was announced by Facebook in 2019. Since then, it’s been buzzing on the Internet and intriguing everyone.
So what is Libra and how does it work? How will it affect the global financial industry? Should governments be worried? Should you be excited about it?
Here’s everything you need to know about it.
What is Libra?
Libra is ‘a simple global payment system and financial infrastructure that empowers billions of people.’ Its network is built on a secure, scalable and reliable blockchain designed for anyone to participate and build on it.
Backed by the Libra Reserve, a reserve of assets, Libra coins are anticipated to have a stable value, making it a ‘stablecoin’ -a specific type of digital coin that’s backed by one fiat currency or a basket of multiple currencies. This stable value is what differentiates it from other cryptocurrencies such as Old URL and Old URL whose prices are subject to supply and demand.
Tasked to oversee the Libra network is the Switzerland-based non-profit organization called the Libra Association. Comprising global companies, the Libra Association facilitates the operation of the Libra payment system and ensures that everything goes smoothly.
Pioneered by Facebook, Libra’s whitepaper was published last June 2019 and the digital currency is set to be up and running by late 2020.
How does Libra work?
The Libra payment system makes low-cost transactions possible within seconds with the use of blockchain technology. People will be able to send, receive and spend their money instantly without going through tedious and time-consuming banking procedures. Through phone applications, Libra coins can be converted into fiat currencies within a matter of seconds and sent to anyone in the world.
Once it’s up and running, the Libra payment system will be able to support single-currency stablecoins such as USD, EUR, and GBP.
You can instantly convert your currency into Libra coins and vice versa anytime you want through Calibra, the Libra wallet. With Facebook’s wide range of applications, soon enough, you’ll be able to use Facebook Messenger and WhatsApp in sending and receiving money.
What makes Libra work?
There are three main aspects that work hand-in-hand to make Libra an inclusive global payment system:
1. It’s powered by blockchain
2. It’s backed up by the Libra Reserve
3. It’s governed by the Libra Association.
Together, these three aspects make instant and low-cost money transactions possible in the Libra network.
The Libra blockchain
Like all other digital coins, Libra is built on a blockchain, making it secure and reliable. What’s different about Libra is that it aims to move from traditional to liberal: its ‘permissioned blockchain’ will eventually transition to become a ‘permissionless blockchain’.
Libra plans to begin as a permissioned blockchain with the Libra Association overseeing the network’s overall performance. This means that Libra is not as decentralised as other coins such as Bitcoin and Ethereum.
Bitcoin and Ethereum are examples of permissionless blockchains, where anyone can be a part of the network and start mining whenever they want. They won’t have to ask for anyone’s permission to start crunching codes and adding to the blockchain.
An example of a similar permissioned blockchain is Old URLwhereOld URLa company oversees the blockchain and not just anyone can become part of the network. Only banks and financial institutions approved by the company can be part of the network.
After five years, once the network has stabilized, Libra intends to proceed to become a permissionless blockchain where the public can join and contribute to maintaining the network. This gives Libra the opportunity to have faster transactions and bigger scalability of up to 1,000 transactions verified per minute.
The Libra Reserve
Libra Coins are backed by the Libra Reserve, which is made up of a basket of fiat currencies and short-term government bonds. The value of your Libra coin will remain the same from the moment you send it to the moment it is received, so you don’t have to worry about fluctuating prices.
This ensures that your Libra coins will hold water and always be worth real money. Whenever you choose to convert your coins back to your local currency, they won’t shrink in value.
The Libra Association
The Libra Association is an independent non-profit organization based in Geneva, Switzerland. It is a membership group made out of global companies and founding partners, for example, Spotify, Coinbase and Uber, social organizations and academic institutions.
The Libra Association is in charge of the Libra protocol and managing the Libra Reserve.
It has a number of responsibilities, such as:
- Providing a framework of governance decision-making for the whole network
- Overseeing the operation and progress of the Libra payment system
- Facilitating the provision of services on top of the Libra blockchain
- Establishing a social impact grant-making project in support of financial inclusion
- They have to be recognized as top performers in their respective field
- They have to have at least 10 million US dollars in their operating budget
- They need to have a large audience and a wide reach of impact
Spearheading the Association’s tasks is the Libra Association Council, a group that’s made up of one representative per association member. Each member in the Council is entitled to a vote in every matter of discussion brought to the Council for approval. Together, all representatives decide which policies will affect the governance of the Libra network, the Libra payment system, and the Libra Reserve.
Would you like to know even more? In the next part you can find out:
- How is Libra similar or different from other cryptos?
- How can you buy and use Libra?
- The future of Libra