Looking at Facebook’s Libra Cryptocurrency From Both Sides

Looking at Facebook’s Libra Cryptocurrency: Positives & Uncertainty

Photo by Joshua Hoehne on Unsplash

Barely 18 months ago, Mark Zuckerberg announced his focus on the year on studying cryptocurrencies and decentralized technologies. He stayed true to those words with the unveiling of Facebook’s Libra blockchain, its native crypto asset Libra, its custodial wallet and subsidiary Calibra, their programming language (Move) and a governing body in the Libra Association.

With so many analysis out there, I just wanted to summarise a few of the more significant points for me:

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The positive perspective

  • The impact of this announcement will be a great push in the direction of general public awareness and mass adoption: one of the leading corporations in the world is going ‘crypto’.
  • Facebook has essentially promised a vision to deliver a digital central bank (the Libra blockchain), a digital bank (Calibra) and an open source smart contract language for developers to build financial applications.
  • This brings new life in Facebook’s strategy, with a digital audience of over 2.4 billion people and without a clear sense of direction in the post Cambridge Analytica era. Now they can change gears and focus on connecting their users with its native financial infrastructure and currency and stay relevant for the next 10 to 15 years.

The uncertainty

  • This is an alarm for governments, regulators and central banks, especially in light of the post Cambridge Analytica debates on privacy and security. The immediate reaction has been an expected push back as authorities from the SEC to the EU finance bodies look unlikely to enable Calibra or other resellers to provide fiat-to-Libra on-boarding services. Going further, the SEC probably cannot prevent the Libra Association from building the infrastructure and creating the chain but what they can do is to ensure no one can buy the currency for fiat. On the flip side, the Bank of England seem to have taken a slightly more supportive stance towards the project, which may be a sign for the possibility for others to follow. Given the above, we expect a sustained time period of lobbying between Facebook and regulators.
  • The composition of the Swiss Association is quite US-centric at present which may need to change as their plans to decentralize progress.
  • From a technical perspective, the Libra blockchain was built on the principle of ‘semi-decentralization’ and leverage a combination of existing approaches, such as the Gas Fees and Account Model of Ethereum, DAI’s Dual Asset Model, Collateralisation of Basis and Consortium of R3 (perhaps utilizing a late mover advantage to their favor)
  • The economics is interesting and the reserved paper is a great recommended read. It seems that Libra will not be pegged to any currency (including the USD) and it will be fully backed.
  • The development blurs the line between finance and technology. Soon enough, perhaps ‘fintech’ will just be known as ‘finance’; just as ‘e-commerce’ has gradually become ‘commerce’.

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Looking at Facebook’s Libra Cryptocurrency From Both Sides was originally published in Data Driven Investor on Medium, where people are continuing the conversation by highlighting and responding to this story.