Libra, is a cryptocurrency developed by Facebook, was announced on Tuesday and will roll out in 2020.
The platform will allow billions of its users to perform financial transactions using ‘Libra’.
Cryptocurrency is always under speculation, as there is no regulatory authority and is always a subject of scrutiny. Hence, Facebook faces increasing calls for regulation and antitrust measures.
What is Libra?
Facebook says Libra is a “Global Currency and financial infrastructure”, which means its a digital asset built by Facebook and powered by a state of the art New version of Block-chain created by them. Block-Chain is an encrypted technology which bitcoin and other cryptocurrencies use. The name Libra is derived from the basic Roman measurement of weight ‘lb’.
Facebook claims that they want to reach out to the 1.7 billion users of the platform who do not have access to a bank account. But, Facebook is always a matter of privacy issues and other security issues. Hence, now they are likely to run into regulatory and antitrust concerns after the announcement of their Cryptocurrency.
Libra will monitor a collective of companies called the “Libra Association”. It functions like any other currency which denotes as a ‘Stablecoin’. Also, the currency is similar to the existing assets like the dollar or euro, in the aim of making it less subject to the inconsistency that many cryptocurrencies experience.
The Libra Association is based in Switzerland. In addition, Facebook claims its an independent and not-for-profit organisation.
Two main functions of the Association are :
To validate transactions on the Libra blockchain protocol and to manage the reserves and allocate funds to social causes. Within the organization, there will be a governing body, ‘Libra Association Council’. Which comprises of a representative of each member of the association, which will vote on policies and operating decisions.
Although Facebook created the Libra Association and Libra blockchain, after its launch in 2020, it claims that it will withdraw from the leadership role and all members of the association will have equal votes in governance. The companies who have invested a minimum of $10m to be listed as the founding members of the Libra Association. Some tech companies such as PayPal, eBay, Spotify, Uber and venture capital firms such as Andreessen Horowitz, Thrive Capital, Visa and Mastercard are the major members of the Association.
Facebook is likely to carry out ‘Airdrop’. Which means handing out small amounts of currency for free to push start the market. Furthermore, this might be crucial as its main target market are people who don’t have bank accounts.
In association with Libra, Calibra a digital wallet app by Facebook will allow users to transact Libra from their smartphones. It will be available in Messenger, Whatsapp and as well the main app. Similarly, it is not clear which countries the currency will launch first, though Facebook said: “almost anybody” in the world with a smartphone will be able to download the app.
Calibra, the Libra digital wallet, allows you to to send money to and from each other.
Apart from that, they want to facilitate the use of Libra at various vendors for day-to-day transactions. Furthermore, Uber and Lyft the investors for Libra might associate the service in their apps as a payment method.
Privacy and Sustenance
Cryptocurrency is always subjected to privacy concerns. At the same time, Facebook is always in the centre of a lot of issues which relates to their privacy policies. But, Facebook claims they will implement technologies to prevent money laundering and fraud.
“We will be using all the same verification and anti-fraud processes that a bank and credit card companies use, and we’ll have automated systems that will proactively monitor activity to protect and prevent fraudulent behaviour,” Facebook says.
They claim it will provide “live support” to help users who lose access to accounts. In addition, if a user loses money through fraud, Facebook will offer refunds.
Libra will sustain themselves by charing a small charge per transaction on the blockchain. Further, many of these charges will be transferred to vendors who will use it to absorb the costs.
The cryptocurrency market is very unstable at the moment and isn’t legally functioning in most of the countries. Hence, we just have to wait and see after the official release of Libra in 2020.
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