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Cryptocurrencies and blockchain technology collectively changed the way we look at digital currencies.
Although a lot of advancements were made in the crypto market, the idea of integrating the social media ecosystem with cryptocurrencies became a hot topic.
The social media giant Facebook faced a lot of controversies in recent years. Scandals like The Cambridge Analytica hurt the companies’ reputation, and hefty fines were imposed.
But this doesn’t stop Facebook from making a big decision to work on its cryptocurrency project.
The first hints of the project came in mid of the year 2018 when CEO Mark Zuckerberg posted his New Year resolution on Facebook that said he wanted Facebook to have a detailed look into the positive and negative aspects of cryptocurrencies.
Mark is always keen to adopt new technologies like AI and integrates it with the platform.
Four months later, Facebook officially announced that they are working on establishing a special blockchain division, led by David Marcus, who had previously supervised the Facebook Messenger.
In December 2018, Facebook announced that they are working on a cryptocurrency that will be integrated into WhatsApp to make secure transactions.
It is planned to launch the currency in India as there are millions of users of WhatsApp.
The major drawback faced by cryptocurrencies is their volatile nature.
To make sure Facebook overcomes this problem, they announced the currency would be one of the stablecoins. In June 2019, Facebook finally released the white paper of the cryptocurrency they called Libra.
Libra is planned to be launched in 2020.
There are a lot of cryptocurrencies in the market nowadays.
You must be wondering why the hype is about Libra only? Well, Libra is very few of the crypto projects that already have a strong base for marketing by using the user base that exists on Facebook.
Facebook could potentially use its millions of users to use the Libra currency.
The additional benefit will be of the “Social Media Factor,” as people will likely share their views about the currency that will attract the people around them to use it — thus getting more and more users to sign up for their project by using the social media platform.
Whitepaper definition regards Libra as “simple global currency and financial infrastructure that empowers millions of people.”
The motive behind the creation of Libra is to offer equal financial opportunities globally to everyone and everywhere.
The sending and receiving of money should be as fast as sending a message or a picture across the globe.
The Essential components of Libra include:
Libra aims to overcome the problem that resulted in the failures of previous crypto projects.
One such step towards having active management is taken, as a “Libra Association” is formed to govern the cryptocurrency project.
Facebook will maintain the leadership role, but the major decision regarding the project will be the responsibility of the association.
The same privileges will be offered to all members.
Like other cryptocurrencies, to store and to send or receive Libra currency, a digital wallet will be needed.
The Libra currency will use a wallet known as “Calibra.” Calibra wallet will also be available on smartphones.
The funds could be added using payment methods such as MasterCard, Visa, PayPal, and Stripe.
The facility to convert dollars into the Libra currency will also be provided.
The Libra Blockchain is built, keeping in view four significant issues:
Scalability: To ensure low latency and high efficiency of the system and achieving maximum transaction throughput, the blockchain is designed to be scalable to support a considerable number of the user base.
Security: Security is essential. The blockchain technology used by Libra ensures the safety of funds.
Flexibility: The blockchain offers flexibility and allows the innovations to be integrated into it.
Move Programming Language: Move is a programming language specially designed to write the smart contracts of Libra blockchain. The security incidents of the past had a lot of issues regarding smart contracts. The risk of bugs and security incidents is lessened by developing secure smart contracts. In short, the purpose of move language is to make sure the blockchain is safe and secure.
The blockchain technology is categorized into two types, i.e., Permissionless and Permissioned.
In Permissionless blockchain such as Bitcoin, anybody could become part of the blockchain technology and could join the network.
In the Permissioned blockchain, you need permission by the blockchain to enter the system. Some Permissioned blockchain only allows financial institutions to join the network.
Both of these categories have their pros and cons. A Permissionless blockchain is very much decentralized that makes it slower as it has a lot of nodes connected in the blockchain.
Permissioned blockchain has less number of users, which makes it fast but less decentralized.
The Libra Association has decided to keep the blockchain Permissioned in the start and then later make it Permissionless.
There are many hurdles and challenges in this task. As the features of scalability, flexibility, and security demand certain factors to take care of, so deciding between keeping the blockchain Permissionless or Permissioned is a challenging task for The Libra Association.
The final decision could be made later after the launch of the blockchain.
To gain the interest of users and make sure that the users feel secure, the investments made in the project are backed up by real-world assets.
This will allow the secure exchange of Libra with traditional currencies. These assets will be in the form of low-volatility assets such as bank deposits from stable and safe banks. Thus Libra is a type of stable coin.
The volatile nature is one of the significant drawbacks. When it comes to gaining the trust of users and investors. This issue gave rise to “Stablecoins,” as the stable coins are backed up the real-world asset.
So even in case of the value dropping of a cryptocurrency, you could still have your underlying assets.
The significant problems of volatile cryptocurrencies and how stablecoins are better is listed as follows:
A ‘Peg’ is used to keep the currency stable by fixing its value with a predetermined formula to different and stable traditional currencies.
Libra is planned to be released in 2020; as a cryptocurrency, it is difficult to predict what the actual value of it will be. Crypto users are excited and have shown interest in making money with Libra.
Traders and investors are hopeful that Libra will be an excellent opportunity for them to make money as a reputable and experienced team are founding it.
Also, the underlying blockchain provides features of security and scalability. The most concerned issues of underlying assets are also taken into consideration by the Libra team.
So investors are all keen and excited to make their investments if the thing goes as planned.
One of the significant issues, however, will be the involvement of big corporate giants who will be keen to reap maximum profits from the project, and users might be left with very fewer profits.
It is less risky to purchase equity since investing in the Libra directly most likely will not result in earnings since the price will remain stable. In the end, it’s the investors who will be benefited the most if the project is successful.
When it comes to privacy and Facebook, the reputation of the organization is not good.
There were a lot of scandals in the past where the user data was sold or misused by Facebook.
When Libra was announced, there were talks about how Facebook will now get hands-on user personal financial data and could sell it to advertising companies.
Facebook knew about these issues and solved this by announcing that the Calibra wallet data is kept separately from Facebook social data so that they will be both at different places.
Calibra customer’s account information and financial data will not be used to improve ad targeting on Facebook. Customer data will only be applied where required, and it will be done after seeking user permissions.
As the project is ongoing and hasn’t released yet, we could only discuss the pros and cons based on the information we have from media and the Libra whitepaper.
Libra aims to develop a global currency for everyone. A report from Business Insider showed that as of August 2017, 2 Billion people around the globe don’t own a bank account.
The primary user base of Facebook is from India and South Asian countries like Pakistan and Bangladesh. These regions are at the top when it comes to citizens who don’t have a bank account.
Facebook could use this data and target the users who don’t have a bank account and give them opportunities to have an asset in the form of digital currencies.
This will open new ways for them to make online transactions from anywhere in the world, using a fast and secure system.
The blockchain being developed by Libra is advanced and solves the issues faced by previous cryptocurrencies.
If the project succeeds in delivering what is promised, this might be one of the most stable and less volatile cryptocurrency.
Only time will tell how things turn out.
The cons of Libra could be judged once the currency is released. The issue that could raise problems from Libra is that it might fail to meet the high expectations set by the crypto enthusiast.
Although the project has support from big tech giants such as Spotify, Uber, and some others.
Still, there is a lot of criticism faced by the Libra Association. Recently, Twitter CEO Jack Dorsey replied with “Hell no” when asked about if he will join the Libra project.
Critics are also of the view that they say Libra isn’t even a cryptocurrency, and it’s a project that will be used just to market Facebook itself.
In short, the criticism is enormous, but Facebook has hit back and responded to criticism and addressed the issues with sharp points. Only time will tell the future outcome.
As of writing this content, there is a lot of criticism being faced by Facebook and the Libra Association, but the response of the Libra team is good, and they have responded well to the criticism.
The projects are getting both positive and negative criticism from different sides.
Libra aims to become a global cryptocurrency to be used everywhere on the globe. This will take significant challenges and hurdles to achieve.
Only time will show how things turn out in the end, and if Libra succeeds in becoming a cryptocurrency of the future or not!