Bringing banking to the masses. That’s the goal of Facebook’s new Libra cryptocurrency which will be rolled out in 2020. Libra is a stable coin pegged to a basket of stable existing currencies such as the dollar or euro. The cryptocurrency is designed to be used globally and targets people in developing countries that lack banking infrastructure or face unstable currencies and inflation. An individual will conveniently be the ability to process transactions without the need for infrastructure or a viable national currency. Thus, the name “Libra” is meant to invoke a sense of financial freedom by playing on the French stem “Lib,” meaning free.
The Libra Association
The coin itself will not be governed by an independent foundation. Instead, the currency will be controlled by the Libra Association, which will hopefully incorporate 100 founding members for its launch in 2020( including PayPal and Uber). To join the association, members must meet a plethora of requirements to ensure stability. Some of these requirements include the ability to reach 20 million people a year and/or be recognized as a top 100 industry leader by a group like Interbrand Global or the S&P. Each founding member will also be given a vote to control the governance of the coin. This provides a level of decentralization that protects against Facebook or any other player hijacking Libra for its own benefit. By avoiding sole ownership over Libra, Facebook could avoid additional scrutiny from regulators who are already investigating the company for privacy abuses.
The Libra Blockchain
The blockchain is a cryptographically authenticated database that is designed to handle 1,000 transactions per second. To put that into perspective, Ethereum is currently able to process 15 transactions per second while Bitcoin is only able to handle 7 per second. When a transaction is submitted, each node runs a calculation to prove the legitimacy of that transaction.
What Are The Benefits?
Facebook has announced that the currency will be accessible to anyone in the world with an entry-level smartphone and data connection upon installing the Collibra Application, a Facebook subsidiary which will provide the virtual wallet for the Libra coin. Transaction will be made quick and can be transferred across multiple social media platforms. Additionally, it will foster an ecosystem of products and services to empower individuals and grow businesses.
Facebook aims to make Libra the evolution of PayPal. It’s hoping Libra will become simpler to set up, more omnipresent as a payment method, more efficient with fever fees, more accessible to the unbanked, more flexible and longer-lasting through decentralization.
With over 1.7 billion of Facebook’s current users not having bank accounts, Libra could be the solution Facebook needs. In theory, billions of users will be able to buy products online using their Libra wallet. This will encourage more businesses to advertise on Facebook to increase their bottom line.