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Cover image for Libra: A New Global Currency

Libra: A New Global Currency

crisgarner profile image Cristian Garner ・2 min read

TL;DR

This is a summary of the Libra White paper by Facebook with my personal thoughts included. You can read the full paper here: https://libra.org/en-US/white-paper/


Libra is a blockchain platform being created by Facebook with the mission to enable a simple global currency and financial infrastructure to empower billions of people. The technology is under development and everything mentioned in the white paper is speculative until is tested by real users.

As for the premise, the Libra blockchain is created to reach mainstream adoption through regulation and collaboration of the financial sector. This makes Libra centralized as it's can be censored by regulators and governments also is an indirect competitor of Blockchain systems that bypass regulations and look for mainstream adoption.

The unit currency is named "Libra" and is backed by a basket of currencies that work as collateral making the Libra token stable, it won't be "peg" to a specific currency making it a direct threat to the U.S dollar and multiple currencies since the governments won't have direct control over the money anymore. This basket is called "The Libra Reserve" and allows the users to feel secure that are able to return to their local fiat currency at any time.

The network governance and reserve is managed by the Libra Association, an independent, not-for-profit membership organization headquartered in Geneva, Switzerland. in order for organizations to join, it's needed an investment of $10M with a cost to run nodes approximately at $280,000. Interests generated by the platform will go to the Libra Association which might use it as revenue for investors, keep the transaction fees low or to pay for costs in the network. For the release in 2020 is expected to have 100 "Founding Members". This model makes libra a permissioned blockchain as not everyone can run a node, it's mentioned in the white paper that they have the vision of going permissionless but it's not possible with current technology to have a scalable permissionless blockchain.

Facebook created a new programming language named Move that allows the implementation of transaction logic and smart contracts on the Libra Blockchain. This would allow tech companies to act like banks and create their own implementations of financial services. For sure governments and financial entities will oppose and will do everything they can to stop them. Public blockchains like Bitcoin and Ethereum won't have much trouble since there is no direct "owner" while Libra has an entity (Facebook) which can be and is being currently pressured; The U.S and France governments had started making statements that are no encouraging for Libra. At some point, governments will start banning the currency and that will make impossible for Libra to be a truly global currency.

In conclusion, Libra is an upgrade to the current financial system and digital money, it might be reasonable that the mainstream audience will get onboard to cryptocurrencies thanks to Facebook's network muscle. Soon we will see Facebook services using Libra as a medium of payment, Whatsapp, Instagram, Messenger will definitely integrate cash in a global manner. But in the end, is expected that users that need a more secure and decentralized blockchain will migrate.

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