Unless you’ve been in isolation for the last couple of months, you have certainly heard about Facebook’s Project Libra. The social media’s project which will allow it to enter the cryptocurrency industry has been making headlines since even before it was officially launched. Not all coverage was positive, however, and the project has already hit numerous stumbling blocks, from countries outright banning it, to others, including the US, holding hearings and investigations on it.
Project Libra certainly has a strong fanbase as well as many vocal critics, however, both sides agree that it could have a major impact on the way we interact with each other. Here’s is everything you need to know about Facebook’s Project Libra.
Bitcoin vs Libra
Before diving into the differences between Bitcoin and Libra it is a good idea to first look at their similarities. For starters, Libra is a cryptocurrency and, as with other altcoins, will only exist in digital form. Facebook’s cryptocurrency will also run on a blockchain which will be tasked to verify each ledger. This blockchain won’t be fully decentralized, to begin with, and will instead be managed by Libra’s members, but the ultimate goal is to have a fully open system.
Although similar in some ways, Facebook’s cryptocurrency is considerably different from Bitcoin and other crypto. So how does this cryptocurrency differ from Bitcoin? Let’s take a look:
- Libra will be pegged to a basket of assets which should decrease its volatility and also speculation on its value.
- It is not yet clear what these assets will be, however, the Libra Association has made reference to multiple government securities and bank deposits as possible stable contenders.
- In all likelihood, the cryptocurrency will ultimately be pegged to the dollar or euro, as two of the most stable currencies in the globe.
- Another important aspect of Libra is that it won’t be mined, instead, its supply will grow or shrink depending on its popularity and usage.
- The Libra Association will be tasked with buying or selling the underlying assets and create or remove coins from the market. While the backing of currency with an asset is not new, it is uncommon these days, with the general use of fiat currency.
The Members of the Libra Association
Contrary to popular belief, Project Libra is not owned by Facebook, but by the Libra Association of which the social media giant is a co-founder. The goal of the Association is to “empower billions of people” who do not currently have access to a bank account. Libra aims to facilitate digital payments, making them easier and cheaper.
Project Libra is a registered non-profit organization which includes the following founding members:
- Calibra (Facebook)
- Mercy Corps
The Association has been busy attracting new members and hopes to welcome over 100 new ones, each contributing $10 million to the project. Every member is given an equal vote, so Facebook’s say in the project is fairly limited.
Nevertheless, the social media giant’s ability to instantly communicate with billions of users across the world will certainly allow the company a higher degree of control over other members. In fact, through its subsidiary, Calibra, Facebook is launching a cryptocurrency wallet by the same name. According to Facebook, this was done so as to keep social and financial information separate.
How to Buy Facebook’s Libra
Details on when and how to buy Libra cryptocurrency are still sparse, as the coin is projected to launch in 2020. According to a post by Facebook’s founder, Mark Zuckerberg, the currency will first be available on the company’s WhatsApp and Messenger applications. Therefore, if you don’t already have an account with either messaging system, you should certainly start by downloading one or both.
What Will Happen When Libra is Launched?
Once Libra is launched, these two applications will be updated to include the Calibra wallet. This will not happen, however, to users registered in countries where cryptocurrency is illegal or ones which have been sanctioned by the United States. Currently, China, North Korea, India, and Iran have already declared the outright ban on Facebook’s Project Libra.
How Will Libra Wallet Work?
The Calibra wallet will most probably act as an exchange, and payments will probably be done using debit or credit cards, and possibly PayPal. Payment details are still unclear, but looking at some of the founding members it is most likely that their payment methods will be included.
What Does the Future Hold for Libra?
Eventually, the stablecoin may move into the broader cryptocurrency exchange market. In fact, Binance has begun initial talks with the Libra Association. Similarly, it is expected that wallets beyond Calibra will eventually be able to accept Libra currency. Doing this will help to fulfill the Project’s goal of being available to the masses.
Criticism on Libra
While Libra may very well be responsible for the introduction of cryptocurrencies to the masses, project skeptics have raised several red flags, starting off with Facebook’s track record on privacy. Throughout 2019, Facebook’s founder has had to defend and even admit shortcomings in the way the social media platform used user details. Critics are concerned that through Calibra, Facebook will get access to users’ financial data, which could find its way to unauthorized third parties.
Facebook Disputes Skeptics’ Opinions
Facebook was quick to debunk critics’ reservations, explaining that Calibra was set up as a subsidiary to ensure that such sharing of information is not possible. It will be regulated as a financial institution and would need to comply with strict data protection regulations, in the US, EU, and beyond. Facebook won’t use any data from Calibra to improve ad targeting or for any other revenue exercises.
Does Libra Face a Bumpy Road Ahead?
Without a doubt, Project Libra faces an uphill struggle to convince regulators and the wider community of its positive intentions. Nevertheless, the Libra Association aims to continue growing its member network whilst also winning over the crypto community and harsh critics. 2020 could mark an important year in the transformation of the financial services industry, or it could end up being a hyped-up exercise which falls short of expectations. Time will tell.