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With Libra, Facebook believes that they can help empower the 1.7 billion unbanked people in the world and make access to money and financial services as easy as sending a Facebook or WhatsApp message. To accomplish this, Facebook has developed the Libra blockchain, which is meant to be scalable and able to work with enough of the existing financial authorities and regulators to be adopted by the mainstream.
But can a deeply centralized company join the decentralized revolution? We find out.
What is Libra?
Libra is the primary crypto asset on the Libra blockchain. It is meant to have a stable value because it is backed by a supply of real-world assets held in the Libra Reserve, which makes it similar other stablecoins such Paxos, Gemini Coin, and USDC.
However, unlike most existing stablecoins, Libra will be tied to a basket of fiat currencies instead of being stable to one specific currency like the US Dollar. The Libra Reserve will hold a collection of assets with low volatility such as government securities and currencies from central banks.
Who Invented Libra?
Developed and currently led by Facebook’s subsidiary Calibra, the Libra blockchain is designed to be governed by the Libra Association, which is an independent and non-profit organization headquartered in Geneva, Switzerland. Libra Association members would be responsible for the long-term management and strategy of the Libra blockchain and Libra Reserve as well as running validator nodes that secure the network and validate transactions. Eventually, Facebook plans to be just another member of the Libra Association with the same rights as other members.
Did you know?
The Libra Association’s founding members include MasterCard, PayPal, Visa, Stripe, eBay, Lyft, Uber, Spotify,
Coinbase, Kiva, Andreessen Horowitz, and Union Square Ventures. Each had to pay a $10 million joining fee.
What’s so special about it?
Unlike existing crypto assets or blockchain networks, Libra will be able to utilize and integrate with Facebook’s massive user base and already has the support of some of the biggest companies in the world. Besides the name recognition and capital behind its founding members, the Libra Association is also committed to working with regulators and existing financial institutions, something that fully decentralized blockchains with no official leadership structure like Ethereum or Bitcoin are not able to do.
Did you know?
Libra uses a Byzantine Fault Tolerant (BFT) consensus mechanism to govern its blockchain network, which is similar to Cosmos. However unlike Cosmos and most other blockchains, Libra does not organize transactions in a long chain of blocks. Instead, according to their whitepaper, they use “a single data structure that records the history of transactions and states over time,” which begs the question: is Libra actually a blockchain?
What else is different?
- The Libra stablecoin will be programmable using a specially developed smart contract programming language called Move.
- The Libra Investment Token allows new members to join the Libra Association and own a stake in the network and contribute as a validator node.
- Libra plans to eventually develop an open identity system on the network.
How is Libra produced?
When new Libra coins are created they must be purchased using fiat currency such as US Dollars or Euros, which will eventually go into the Libra Reserve. Only by purchasing more Libra with fiat will more Libra coins be created. If someone wants to sell their Libra coin for fiat, then that coin is burned and money from the Libra Reserve is given to the Libra coin seller.
How do you get hold of Libra?
Though not yet released, Libra will likely be accessible on exchanges like Coinbase and will also be purchasable with fiat from authorized resellers. These authorized resellers will be able to change cash to Libra and vice versa to regulate the supply and demand mechanics of the system. The authorized resellers will interact directly with Libra users and essentially act as middlemen between Libra holders and the Libra Reserve.
What can you do with Libra?
Libra is currently in its testnet or experimental phase, but aims to launch officially in the first half of 2020. The goal of Libra is to make it a currency that is as widely accepted and easy to use as possible.
Though there has been no actual product released, Libra has already generated plenty of attention from both regulators and the crypto community. Many in the crypto community believe that Libra is more of a private database controlled by Facebook than a true blockchain. To address this, Libra claims that it will go from a permissioned blockchain network to a completely permissionless and open network within five years of their public launch. Regulators, central banks, and governments have already accused Facebook of trying to create a global “shadow bank” and legal proceedings will likely follow in the future. As prominent blockchain speaker and author, Andreas Antonopolus sums up:
“While Facebook's Libra doesn't compete against any open, public, permissionless, borderless, neutral, censorship-resistant blockchains, it will compete against both retail banks and central banks. This is going to be fun to watch.”
If you'd like to keep up to date with all things Libra, you can check out our Libra Collection.