Project Libra set to launch in 2020

Facebook has just released the White Paper for its new cryptocurrency, Libra, and has certainly created quite a stir! Project Libra is designed as a decentralised stablecoin which allows transactions to occur online with almost zero fees. So far, sounds like standard cryptocurrency fare. Facebook is also developing its Third-party digital wallet, Calibra. The cryptocurrency itself will be integrated with Whatsapp and Messenger, allowing for super easy payments for anyone on Facebook and is set to launch in 2020.

What is Libra?

In theory, Project Libra will be able to handle 1000 transactions per second. To put that into perspective, BitCoin can only handle 7 transactions per second and Visa is capable of around 1,700 transactions per second. This means that the cryptocurrency has the potential to be very easily transferable.

Besides procuring some of the world’s leading experts and professionals in the industry, Project Libra also has the backing of a huge cohort, composed of some of the biggest industries including; Uber, Visa, Vodafone and Mastercard amongst others. These backing members, besides having already invested also form part of the systems governance. Facebook itself only has one vote meaning the project promises to be quite democratic.

Combine the lucrative success of cryptocurrencies with a giant like Facebook and it’s no surprise why many banking and financial experts are turning their heads. This is the equivalent of a nation bigger than China (who only has a population of 1.6 billion while Facebook has over 2 billion users) introducing a new currency. However, the initial buzz notwithstanding, some remain cautious while others are down right skeptical of this new cryptocurrency entering the fray.

Is Libra a real Blockchain?

Project Libra itself is a bold move, particularly from a PR perspective as Facebook is working on a project which requires a high level of trust (this is people’s finances after all), whilst simultaneously fighting trust issues aimed at the company over recent privacy scandals. BitCoin educator and promoter Andreas Antonopoulos points out that Libra doesn’t even amount to a real Blockchain. He states that it does not stand on the five pillars of an open blockchain;

  • Open
  • Public
  • Neutral
  • Censorship-resistant
  • Borderless

Given Facebook’s tremulous history with regards to data privacy this skepticism is understandable. He claims that legally, a centralised company such as Facebook could never create something like BitCoin. From a technical standpoint, Project Libra itself is actually a single Merkle tree as opposed to a Blockchain. The reason for utilising a Merkle tree as opposed to a blockchain is due to the inherent inefficiency of Blockchain when having to fetch and process all intermediate ancestors just to verify information in an ancestor block.

Keeping in mind Satoshi Nakamoto’s original dream of BitCoin, a decentralised currency which removes the need for a central banking authority. Project Libra would mark a shift in the financial sector as control over monetary policy would be shifted from central banks (as was Satoshi’s original dream) to private companies (definitely not part of BitCoin’s original scope). This is one of the main reasons why Old School supporters of cryptocurrencies are wary of Project Libra. However it is hard to deny the affect Libra will have on the public’s perspective of cryptocurrencies.

The Bank for International Settlements has also said that while there were potential benefits to be made, the adoption of digital currencies outside the current financial system could reduce competition and create data privacy issues. But to understand these risks we need to take a look at Calibra, a third-party wallet for Libra.

Privacy, Libra and Calibra

Given that Calibra is a third party app means that Facebook itself wouldn’t have access to users data. However, if people were to give their consent by say importing their whatsapp contacts, this would give Facebook access to user’s spending habits. This could completely change the way marketers utilise Facebook ads. As at the end of the day, this is Facebook’s bread and butter, collecting data which can be used to enhance advertising and marketing campaigns. Having these financial insights would allow Facebook to provide greater information to marketers about their users spending habits, how effective each ad campaign was, it might even offer users an incentive to purchase their ads or to purchase through ads using Libra. It is also not difficult to imagine the incentives Facebook might utilise to encourage people to use Libra, encouraging adoption of the cryptocurrency.

While this remains speculative, one thing is definitely for certain, Facebook has made its grand entrance into the world of cryptocurrencies and with it brought cryptocurrencies one step closer to the masses. Whether this will lead to wide-spread integration or not, or if Libra might actually dethrone BitCoin, only time will tell. We can also expect other cryptocurrencies and possibly the biggest giant of all, Google, to react to Facebook’s latest move.

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