Updated: Nov 4, 2020
Last year, Facebook unveiled the details of its digital currency, Libra, which will let the platform of billions of users across the globe make financial transactions online with nearly zero fees.
The currency is expected to be able to be bought or cashed out online or at local exchange points.
This new technology aims to change the landscape of banking and the existing monetary system. Libra is overseen by a multitude of allied businesses, with Facebook only one amongst many associations with a controlling vote.
Now, let's take a closer look at what Libra is and how it is linked to the broader digital assets economy.
What is Facebook Libra coin?
According to Facebook, Libra is (or will be) a “global currency and financial infrastructure."
The coin, whose currency and network do not yet exist, is a permission blockchain digital company set up by the American social media company. The project, currency, and transactions are cryptographically entrusted to the Libra Association, a group of companies including payments, online marketplace, venture capital, telecommunications, and technology. The Libra Association council is a governing body within the Libra Association which will vote on policy and operational decisions. The Association was designed to give Libra an arm’s length distance from Facebook (and possibly to avoid extra scrutiny).
The new currency, whose launch is still planned for some time in 2020, will allow Facebook to accept Libra for almost all payments, and will benefit their users by giving them discounts and rewards. The organizing body understands the pros and cons of the existing monetary policy and are going to unprecedented lengths to ensure the smooth launch of this coin. If the scheme takes off, you will be able to use the currency to pay for your Uber and utility bills at an affordable rate.
How does the Libra currency work?
Facebook Libra coin is quite similar to bitcoin, but is meant to be more sophisticated.
Mark Zuckerberg said, "Libra does not decentralize control over the currency by making use of blockchain structure like bitcoin" (Mark Zuckerberg, 2018). Unlike some other cryptocurrencies, libra is a stable currency; its price tied to that of a stable asset. This means that you will be able to shop online with Libra and pay for things like Uber and subscriptions, etc. However, you won’t have to pay high credit card processing fees since it will be almost free to move libra from one account to another. You will also be able to send, request, and receive money from friends like you would with PayPal and Venom. This means that almost anyone will be able to use libra without any limitations or excessive charges.
To use libra, you will need a crypto wallet. This is an app that lets you turn money into dollars, euros, pounds, etc., and vice versa. You will also be allowed to use other wallets currently on the market to store libras. According to Facebook, "almost anyone in the world who owns a smartphone would be able to download the app’’.
Will the Facebook libra coin take over?
Libra could provide some of the benefits extolled by the Libra Association, which includes a low risk, low fee, and easy way to send money, if it makes its way into widespread use.
For instance in 2018, global remittances were worth $689 billion. Migrants could benefit by sending their remittance with libra as it will allow users to be anonymous by separating transaction data from their real-world identity. The Facebook libra coin will soon be the new world magnet in terms of sophistication. The potential benefits for business owners are tremendous too: the payment system will work seamlessly within Facebook via a digital dashboard that offers real-time customer support and insights to hundreds and millions of customers worldwide.
Another important factor are the benefits that Facebook libra will provide to unbanked people across the globe. Not only does this coin have more built-in privacy and decentralization options than many expected, but we can also see how libra is poised to take over a significant portion of market share from other cryptocurrencies. In the market currently, there are more than 1000 cryptocurrencies, which include bitcoin, ethereum, XRP, litecoin, EOS, and others. If Libra becomes popular and accepted, it would draw investors away from other cryptocurrencies whose prices may drop. If this happens, even the unbanked will be able to use digital assets to store and grow wealth. The population of unbanked people around the globe is enough to threaten other liquid currencies. When it comes to making financial services accessible and fair, decentralization economics is the key.
Of course the massive advantage Libra will have compared to other cryptocurrencies is its access to the over 2.5 billion Facebook users; a ready and enormous market for a new digital currency.
What Libra is Offering:
Source: Hackenoon (link)
But what about the delays...?
However, there have been numerous barriers and snags. The possibility of cross-border payments noted above has chased away eCommerce giants Paypal, Stripe and eBay, along with Mastercard and Visa who have all announced they are no longer involved in the project despite being early partners.
Although the Swiss-based, non-profit Libra Association is supposedly at a distance to Facebook and Mark Zuckerburg himself, there has also been severe regulatory pressure and political pushback. The Libra token – the actual blockchain based cryptocurrency in the process of development – is now not likely to be the centrepiece of the Libra digital payments strategy. Instead, the project is reportedly expecting to support existing government-backed currencies (the US dollar and the Euro) along with the digital tokens. Further, the launch of the associated Calibra digital wallet has been delayed, to enable it to support multiple currencies instead of just the Libra token.
It’s likely that we will continue to see repeated delays and increased measures to appease regulators. As a later-stage entry to the cryptocurrency world, Libra will need to try and convert a good percentage of its facebook membership to crypto to start making an impact.