This is a summary of the 29 page Libra whitepaper released today (Tuesday18th) by Facebook.
The document starts with Libras' mission:
To enable a simple global currency and financial infrastructure that empowers billions of people.
And outlines the plans for a new decentralized blockchain, a low-volatility cryptocurrency, and a smart contract platform that together aim to create a new opportunity for responsible financial services innovation.
If you are reading this, you probably know why Blockchain and cryptocurrency is a revolutionary technology but for those who don't and to guide the rest of paper, the main motivating factor is that 1.7 billion adults globally remain outside of the financial system even though a billion have a mobile phone and nearly half a billion have internet access. People point out not having enough funds, high and unpredictable fees, and banks being too far away and lacking the necessary documentation as a reason for being "unbanked".
This section is on the beliefs of Libra being able to give more people access to financial services and inherent control of their labor, yadda yadda, I am sorry, I really want to know how this works but if you want to read the opportunity, please see the screenshot below, its the usual benefits of blockchain and a decentralized system, but if you are impatient like me, you can skip to the next section:
Libra is made up of three parts that work together to create a more inclusive financial system:
- It is built on a secure, scalable and reliable blockchain;
- It is backed by a reserve of assets designed to give it intrinsic value;
- It is governed by the independent Libra Association tasked with evolving the ecosystem.
The Libra currency is built on the "Libra Blockchain". Because it is intended to address a global audience, the software that implements the Libra Blockchain is open source. This is pretty cool, it means if you are a blockchain developer you can build on the Libra but the only caveat is, you have to learn "Move", which is the language they used to build the Blockchain, so yep, one more language to learn 😂. But the advantage is, according to the paper, the Blockchain was built ground up and to prioritize scalability, security, efficiency in storage and throughput, and future adaptability so we might end up having a truly reliable blockchain. Btw there is a technical paper on the Libra Blockchain, which is another 29 pages long and I plan to summarize it hopefully in the coming days so keep an eye out.
Now, the answer to my question on how they are going to create a stable coin that doesn't fluctuate like bitcoin, which btw has risen by 146 percent against the U.S. dollar from around $4,000 to $9,150 to date (18th June). And not only Bitcoin but other coins like Ethereum are also on the rise so, it's a good day to do some trading before it obviously crashes or highly unlikely plateaus at this rate after few weeks or so. But hey, I am no financial advisory so, back to Libra. Libra's price will remain stable because it will be backed by a reserve of real assets, a basket of bank deposits and short-term government securities will be held in the Libra Reserve for every Libra that is created.
Now, to the part I was worried about, is Facebook going to be handling all our financial data and the good news is, it's not. Once the Libra network launches in the first half of 2020, Facebook and its affiliates will have the same commitments, privileges, and financial obligations as any other Founding Member, which I think is pretty cool and they have also created Calibra, a regulated subsidiary, to ensure separation between social and financial data and to build and operate services on its behalf on top of the Libra network. But see, I am a very skeptic guy, what kind of services will Calibra offer on the Libra network under Facebook, I mean, how are they going to make money? If you have any thoughts, take it to the comments, would love to hear.
Anyways, the good things is, it boils down to the Libra Association Council, a not-for-profit membership organization headquartered in Geneva, Switzerland to coordinate and provide a framework for the governance of Libra. All decisions are brought to the council, and major policy or technical decisions require the consent of two-thirds of the votes.
Oh and btw, the affiliates, please see below for a breakdown by the industry:
And another good news is that one of the directives of the association is to move towards permissionless Libra blockchain within five years of the launch where anyone who meets the technical requirements can run a validator node. But currently, since there aren't any reliable solutions for a permissionless blockchain, Libra will start as a permissioned blockchain where you need to have access to act as a validator node.
The three requirements the Libra Blockchain was built on:
- Able to scale to billions of accounts, which requires high transaction throughput, low latency, and an efficient, high-capacity storage system.
- Highly secure, to ensure the safety of funds and financial data.
- Flexible, so it can power the Libra ecosystem’s governance as well as future innovation in financial services.
Oh yay, the fun stuff, the actual technology 😍.
The three decisions regarding the Libra Blockchain:
- Designing and using the Move programming language.
- Using a Byzantine Fault Tolerant (BFT) consensus approach.
- Adopting and iterating on widely adopted blockchain data structures.
Move was designed with safety and security as the highest priorities because of Libra's goal to one day serve billions of people. And the paper goes on to detail some of the features of the language as:
- Easier to write smart contracts.
- Prevents cloning of assets by enabling "resource types" that constrain digital assets to the same properties as physical assets.
- Facilitates automatic proofs that transactions satisfy certain properties.
One thing I am not sure is the ability for developers to create contracts, the paper says it will be opened up over time so if you have any idea of when, please let me know in the comments.
Next, the BFT approach, Libra Blockchain is using the LibraBFT consensus protocol because they are designed to function correctly even if some validator nodes — up to one-third of the network — are compromised or fail.
In order to securely store transactions, data on the Libra Blockchain is protected by Merkle trees, a data structure used by other blockchains that enable the detection of any changes to existing data. Unlike previous blockchains, which view the blockchain as a collection of blocks of transactions, the Libra Blockchain is a single data structure that records the history of transactions and states over time. This implementation simplifies the work of applications accessing the blockchain, allowing them to read any data from any point in time and verify the integrity of that data using a unified framework.
Since Libra will be based on real assets, you can convert the digital currency into local fiat currency based on an exchange rate. It is important to mention that Libra will not always be able to convert into the same amount of a given local currency (i.e., Libra is not a “peg” to a single currency). Rather, as the value of the underlying assets moves, the value of one Libra in any local currency may fluctuate. However, the reserve assets are being chosen to minimize volatility, so holders of Libra can trust the currency’s ability to preserve value over time. The assets in the Libra Reserve will be held by a geographically distributed network of custodians with investment-grade credit rating to provide both security and decentralization of the assets.
Interest on the reserve assets will be used to cover the costs of the system, ensure low transaction fees, pay dividends to investors who provided capital to jumpstart the ecosystem, so there you go, that's how they make money.
Over the coming months, the association will work with the community to gather feedback on theLibra Blockchain prototype and bring it to a production-ready state. In particular, this work will focus on ensuring the security, performance, and scalability of the protocol and implementation.
Okay, answer to my second question, third parties can create smart contracts once the language development has stabilized after launch so, long time 🙁.
If you are a researcher or protocol developer, an early preview of the Libra testnet is available under the Apache 2.0 Open Source License, with accompanying documentation.
If your organization is interested in becoming a Founding Member or applying for social impact grants from the Libra Association, read more here.
I mean, I was very skeptical of this, I still am to an extent, but after reading the paper, I have answers to most of my questions and I think it will be a good thing for the crypto community and blockchain. You get free marketing from facebook and a lot of awareness so, hey that's a huge thing blockchain companies and developers lack, awareness of the public.
So, I plan on summarizing the technical Blockchain paper in the coming days, if you can't wait, you can read the whole paper here.
And if I missed anything or if you like to know more about anything I mentioned, please let me know in the comments.
Peace out ✌🏼.
There are only two economical ways to achieve extremely low defect rates in your code. You can learn the Personal Software Process (PSP) or use safer languages and tools. I plan to explore both options to improve my performance as a software developer.