As promised, here is the Part II of Libra cryptocurrency. Let’s dig right in. (Part I can be found here).
How is Libra similar or different from other cryptocurrencies?
Cryptocurrency by definition is a decentralised digital coin that isn’t governed by any central authority, for example, banks and governments. Each transaction is added to a block and listed in the blockchain.
Unlike banks where there are headquarters and a governing administrative body, cryptocurrency draws strength from its decentralisation. As a counterpart to the faulty traditional banking system, the blockchain gives power and control back to the people. With low transaction fees, fast time, and transparency as its main marketing points, digital coins garnered and still continues to draw a huge following over the years.
Libra as a stablecoin
The prices of most Old URL in the market today are produced by the supply and demand law in economics. Stablecoin is backed by the Libra Reserve which is a basket composed of the world’s biggest currencies such as the US dollar, Euro, Japanese yen, Pound sterling, and Singapore dollar.
It’s also composed of low-volatility assets such as bank deposits and government bonds. This serves as Libra’s store of value that will protect the coin’s price from high volatility. What you can expect from this is Libra’s price will be much more stable than other digital coins.
Making Libra a stablecoin also paves the way for widespread mainstream adoption. Without the risk of prices dropping, people can rest assured that the price of their coin won’t change because it doesn’t rely on supply and demand.
Stablecoins are considered an in-between of cryptocurrency and fiat currency. It retains the stability of fiat currency while utilizing the decentralised nature of cryptocurrencies.
With Facebook’s large user-base, Libra is expected to contribute to the mainstream adoption of digital currencies. Additionally, Libra being a stablecoin poses as a reassuring point to people who are sceptical about cryptocurrencies.
Libra is designed for day-to-day use by everyone. At its core, Libra’s vision is to provide financial services to the billions of people around the world who don’t have access to traditional banking. Winning over the unbanked, Libra is focused on helping the 1.7 billion people around the world who are vulnerable in terms of security and mobility.
How can we use Libra?
To provide a space where Libra transactions can be securely made, Facebook has created a digital wallet subsidiary called ‘Calibra’. It also serves as a cross-currency exchange platform where you can convert your US dollars into Libra.
When creating your Calibra account, you’ll need to provide a government-issued ID to ensure the legitimacy of your account. This serves as a precautionary measure against fraudulent attacks on financial apps.
Can you buy Libra coins now?
Not just yet! Facebook announced their Libra project in June 2019, and plan to have it launched by late 2020. So currently, Libra is not yet operational and there are no Libra coins available for sale or conversion. The Association is still working to develop and improve the Libra network and its global payment system.
How much is Libra?
Right now, Libra does not have a price since it’s not launched yet. The Libra Reserve has ensured once the network goes live, the Libra cryptocurrency price won’t be subject to fluctuations seen on typical crypto markets since it will be backed by fiat currencies.
Concerns about Libra and Facebook
Since the announcement of Libra, numerous governments and regulators have voiced their concerns over Facebook’s venture into the financial system.
The US government has called David Marcus, the co-creator and board member of Libra, to testify before the Senate and answer inquiries about the digital asset. Global regulators have also been vocal in their demand for more information regarding the privacy implications of Libra.
With Facebook’s track record in security and privacy, it’s no wonder the authorities are worried about private financial information being leaked to corporations who can benefit from this.
But more than that, many regulators are worried that with Facebook’s billions of users around the globe, Libra’s massive adoption can cause the deflation of the US dollar. These are claims that Facebook and the Libra Association have debunked again and again.
Facebook CEO Mark Zuckerberg said his company is willing to wait however long it takes for lawmakers to be convinced that Libra should be launched. The COO of the Libra Association, Bertrand Perez, remains unfazed by the criticism and says the project does not pose a threat to monetary stability. Zuckerberg retaliates because Libra can bring accessible financial services to unbanked individuals around the world.
There were also concerns about the Libra Association and its members. Senators have pressured big-time payment companies to reconsider their membership in the Association.
While a number of members have withdrawn their membership, there are still companies and organizations that believe in Libra’s vision of bringing financial services to the world’s unbanked population.
Despite a tirade of criticism and attack towards Libra from governments and central banks across the world, more and more companies are joining the Libra Association. Heifer International, a global non-profit organization, Checkout.com, a payments processor company, Singapore state-owned Temasek and San Francisco-based Paradigm and Slow Ventures are the Association’s latest members, bringing its total membership to 27.
This goes to show that support for Libra remains strong despite its complicated relationship with the authorities.
What’s next for Libra?
Facebook CEO Mark Zuckerberg and David Marcus have made it clear in their senate hearings that they are going to comply with regulatory laws to ensure Libra won’t break any rules.
As an answer to Libra’s so-called attack on monetary sovereignty, the Libra Association altered the project’s white paper to appease global regulators. Instead of multiple currencies backing every Libra coin, each coin will now be backed only by a single currency. For example, one libra coin can only be tied to the US dollar and another coin to the euro, etc.
They still want to issue a stablecoin backed by multiple currencies, but rather than being pegged to different fiat currencies, their multi-currency coin will now be backed by a series of new stablecoins.
Amidst the attacks, Libra Association remains steadfast in its goal of launching this year. They have not mentioned any specific date for the launch since Zuckerberg specifically said that they’ll have to make sure that the project is accepted by global regulators before it becomes officially live.
Again and again, Libra spokespersons insist that the Libra network’s vision is to complement fiat currencies rather than compete with them. What’s next for the Libra cryptocurrency project may be a little unclear, but one thing is for sure, Libra will not back down until its vision comes to life.
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