What is Libra: Facebook entering the world of Cryptocurrencies
Having been announced last year, the question “What is Libra exactly?” has been on many minds. More than just a constellation, Libra is Facebook’s attempt at creating its own cryptocurrency. The social media giant is the first FAANG company to delve into the world of crypto assets, seeing their potential.
What is Libra?
Libra is a project by Facebook to launch their own cryptocurrency. The social media giant is advertising Libra as an open-source, scalable and secure form of payment. Its name doesn’t come from September’s zodiac sign: instead it appears to originate from the Roman measurement of weight. The abbreviation “lb” for pound is actually derived from this, as is the £ symbol.
Facebook’s Libra coin would be managed by a separate entity: the Libra Association. Headquartered in Geneva, Switzerland, the association is made up of individuals of many different companies. Quite a few of its partners have extensive experience in the field of cryptocurrencies. The content of their site provides more information on the association’s background.
Why is Facebook’s launching its own cryptocurrency?
Banking the unbanked is an issue that many companies have tried to tackle in the past. Indeed Bitcoin and other cryptocurrencies have proven to be easily accessible to billions of people – a notion that interests Facebook. Sure enough, Facebook already has a humongous network on its social media platform with over 2.7 billion monthly users in 2020 that could greatly aid its adoption. This high amount of monthly users is also why Facebook is such a popular place for advertisement to this day.
So what is Libra going to do to change this? The Libra blockchain could reach these billions of world wide users and provide a digital cash system for them. It’d facilitate Facebook users to make simple transactions to one another, making peer-to-peer payments as simple as sending a message through their chat or apps. No bank would be necessary to use its system, just access to Facebook’s website – from a mobile device or via computer.
Proof of Concept: How would Facebook’s Libra coin work?
The Libra crypto asset would be a so-called stablecoin, having its price pegged to several forms of money: the US dollar, the Euro and the Japanese Yen. This means that Libra wouldn’t rapidly change in value, like many other crypto currencies do at times. The purpose would be to let people from all over the world be able to send payments and transactions to each other. This would be done through the Libra blockchain, which will be integrated within Facebook’s services. Much like other crypto assets, Libra would be a peer-to-peer network where everyone can transact with each other without a third party being involved. Its workings would be quite similar to what we’re used to from other crypto currencies.
Many of you might now be wondering how they can get their hands on some Libra coins for themselves. The project is currently still in its infancy, and the cryptocurrency does not exist yet. It’s still a proof of concept for the time being, so it wouldn’t be possible to obtain any Libra just yet. Once it’s live, it’ll likely be purchasable in a similar fashion as other cryptocurrencies: via credit card, PayPal or a bank wire transfer.
More about Libra can be read in its white paper as well, which outlines their plans for Facebook’s cryptocurrency. While Libra is designed with Facebook in mind, it could potentially be managed through many sites – just like cryptocurrencies can be right now.
Skepticism towards Libra and Facebook
The currency that shares its name with a constellation is not free of controversy, however. There are quite some concerns regarding the privacy of its users. With the Cambridge Analytica scandal fresh in everyone’s minds, people aren’t sure if they’d trust their financial data and information to Facebook.
The opinions within the crypto community are also divided. On the one hand there’s those who believe that having Facebook entering the world of cryptocurrencies brings more mainstream adoption, seeing it as a good sign. On the other hand, the aforementioned data and privacy concerns are shared by many people, thinking it has an air of potential misuse.
What is Libra’s Future Looking Like?
The future of the Libra cryptocurrency is not clear as it stands today. The economist mentioned how Libra is “an attempt to undercut existing payment services by re-inventing and improving bitcoin ten years after its launch”. However, the US congress had asked for a halt on Libra’s development to have its respect and implications for policy, regulations and the economy reviewed, equally referring to the Cambridge Analytica scandal.
While its future is currently uncertain, one thing is clear: Libra has made quite an impact before it’s even existing. The life of Libra is already an interesting one, and we at Ledger will keep following its developments.