The Debate over Libra
You’ve likely heard the debate over Facebook’s Libra, aka GlobalCoin.
The social media giant has recently announced that it will launch its new cryptocurrency in the first half of 2020.
So what’s it all about?
The Libra Controversy
People have been vocal about their opinions on the pros and cons. It’s been called everything from an attempt to control cryptocurrencies by a big enterprise, to a vehicle that will make cryptocurrencies mainstream and drive adoption.
Senators have been looking into Libra since before its was officially announced on June 18th. For the most part, it has already faced steep opposition in Congress and from governments around the world. The digital coin has come under fire from legislators, regulators and even President Trump.
Cryptocurrency itself has been noted as being problematic as a currency, considering that the price can swing so wildly. Bitcoin, for example, has fluctuated between $1,914 and $19,345 over the past two years.
But how is Libra different, and does it deserve a fair chance? Here’s a breakdown to help further explain and inform.
Facebook and Libra
Firstly, this isn't actually Facebook's cryptocurrency. It's the project of the Libra Association, which Facebook co-founded.
The purpose of Libra is to "empower billions of people," stating that there’s 1.7 billion adults without bank accounts who could use the currency.
Libra’s value will be connected to a pool of money in the Libra Reserve, which gets its cash from the members of the Libra Association, a Swiss nonprofit that will oversee the cryptocurrency. The association to date has 28 founding members, including MasterCard, Visa, Uber PayPal, eBay, Mercy Corps, and Vodafone. The Libra Association is hopefully that it will grow to about 100 members.
That’s not to say that the social network won’t have an outsized role in the initial phases of the Libra project. In fact, Facebook expects to "maintain a leadership role through 2019." However, once Libra is launched and running, Facebook’s role and responsibilities will be the same as the other members.
So, What is Libra?
In essence, through Libra, users will be able to make purchases and send money to other people at a rapid speed, anonymously and with fees of a fraction of a cent. Facebook claims that it’s targeting the unbanked.
How is Libra different from Bitcoin?
Bitcoin is a digital currency that “uses peer-to-peer technology to operate with no central authority or banks.” Users can buy and sell anonymously and make untraceable purchases. Bitcoin uses a blockchain technology that its advocates claim makes counterfeiting impossible.
Blockchain technology so far does have legitimate and promising business use. Companies such as Amazon and Nasdaq are now offering blockchain services.
Like Bitcoin, Libra will use a blockchain technology which allows users to be anonymous… and that’s pretty much where the similarities end.
The Future is Now
In order to use Libras, you’ll need a crypto wallet. While this all may sound like lingo out of a futuristic/sci-fi movie, it isn’t. A crypto wallet is simply an app that lets you turn Libras into dollars (and vice versa). Facebook will offer a wallet through its subsidiary, Calibra, which will allow users to send money to anyone with a smartphone. This may eventually even allow direct purchases.
Issues Concerning Privacy
Calibra says that will ensure the separation of social media information and financial information. However, given Facebook’s history with consumer privacy concerns, there’s some doubt. Although Facebook says that data from those who use Libra won’t be sold or used for targeted ads, there are strong skeptics, and Libra is under high scrutiny. Congressional hearing schedules have been filling up fast, and executives are facing a number of appearances on Capitol Hill.
However, Facebook is looking towards the future with positivity and innovation. The social network says Libra will help provide basic financial services to people who lack bank accounts, and will also make it easier to send money between countries.
With 2.4 billion users to date, Facebook has a huge, ready-made pool of potential Libra users. The biggest question is, will the public be ready to trust Facebook enough to use this service? Facebook says it will refund users if their Calibra accounts are compromised and they lose their Libras, but the details of this have yet to be revealed. It seems as if the public will be slow to accepting this so-called unhackable system.
So what if Libra is successful and becomes popular and accepted? Well, there are over 1,000 cryptocurrencies in the world. In short, it would draw investors away from other cryptocurrencies and push down their prices.
Should I Invest?
In terms of an investment standpoint, Libra is designed not to fluctuate. Investing directly in this cryptocurrency probably won’t do much. Several companies do benefit from cryptocurrencies, but the benefits can be fleeting. With Libra, since it’s tied to real currency, there’s not as much potential for it to rise or fall dramatically.
In other words, while interesting and exciting, the chances of this making you a billionaire are slim.
What are your thoughts on Libra? Sound off in the comment section below.