Facebook has just released its new cryptocurrency known as ‘Libra’. The Company has also formed Libra Association, which will deal with all the affairs of the currency. Facebook has taken inspiration from many cryptocurrencies. However, it seems right now that Libra is more like banks, than Bitcoin.
The main plan is to launch Libra in 2020. A Swiss-based non-profit organization, containing over 100 private sector companies, will launch Libra. According to Facebook, the design of Libra will allow people to store and transfer money with no transaction fees. Libra’s main area of focus will be the cross border remittances.
Facebook released a statement, which said, “People use phones to message any person anywhere in the world. Libra will do the same thing with money, instantly and securely, at a low cost.”
Libra blockchain:
The apparent design of Libra Blockchain is like a true blockchain. Facebook has used Merkel trees to ensure the quality of the nodes network. However, you won’t be able to launch a node in your background, which happens in bitcoin. The luxury to run a node is only for the founding members right now. There are around 28 founding members, which include MasterCard, Stripe, Spotify, Visa, and Vodafone.
Therefore, the cryptocurrency looks like a blockchain, but it isn’t a real blockchain. It is not truly open because only the founding members have access to the nodes in transactions. However, these members can make a public API for other users.
Facebook is aware of this. Therefore, the Company issued a statement in which they said that anyone would be able to use a node in the next five to ten years.
“Our main aim is to make Libra accessible to all our users by making it permissionless. We think that presently there is no solution to provide stability and security for billions of people around the world, with a permissionless network. The Libra association’s main goal will be to develop a system, which will begin in the next five years, to make nodes available to every individual. We will make Libra Blockchain public in the future.”
Resellers:
Libra cryptocurrency is quite stable because it is connected to many fiat currencies and securities. The Company makes sure that every time Libra Association mints a coin, they buy an equal amount of fiat currencies in a bank account. So, every time a person converts his cryptocurrency into USD, the association issues an equal order in fiat currencies.
This is the reason that Libra Association works with authorized resellers. It makes the Association a security system for the Libra echo system.
However, this process is against decentralization. Only the partners will be able to become authorized resellers. Small institution and other individuals will have to work with the authorized resellers in order to make transactions. All founding members will act as a 21st Century MasterCard.
The project seems quite promising. However, the French Finance Minister, Bruno Le Marie, said that it wouldn’t become a sovereign currency. Still, Libra could boost transactions and businesses in countries with high inflation rates.
However, central banks that issue currencies are part of the International Monetary Fund (IMF). Their goals are also different from private groups. So, the currency could become apparently sovereign in countries like South Africa, Turkey or Venezuela. However, private companies will control it, which don’t care about monetary policies.
The European Union is also moving towards a single market, but they can’t agree on budget and taxation. China has recently cracked down against the banking system. The point is that the Governments will watch Libra closely because the Company could change their goals at any time. For example, what happens if they remove fiat currency?
The Libra Association is controlling the fiat currency right now. However, it will face many challenges in the coming years. Libra’s success will depend upon its basic structure and technical implementation.
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