TL;DR: Despite the unprecedented fierce wave of criticism to Facebook’s new cryptocurrency Libra, I argue Libra and near future Alt-Libras will go mainstream.
I came across dozens of blogs that criticized Facebook’s new maneuver on Libra—look them up. Although the criticism is partially justified and expected, I wanted to be fair and cover the filled half of the glass. Honestly, my opinion here predated the release of Libra, and the moment I’ve read their white paper, it made a lot of sense to me given what they promise and their argument. I would say if you understand how technology evolves and how business works, you will find this Libra direction a natural one — assuming you leave subjectivity away.
Let’s go back to 2008. You’ve got classical banking systems together with VISA, MasterCard, Paypal, WU, etc. At that time, international transactions were (and are still) really expensive and miserably slow, although other Internet-based services like e-commerce and VoIP are almost free of charge and work like a charm. Why shall a bank transfer take several days? Why fees are as if money is transferred via ships?
What was really needed at the time was a digital virtual currency, not necessarily a cryptocurrency, where a transaction takes place at the spot and its fee is reasonable, i.e., consistent with the communication cost over the communication medium — the Internet.
Therefore, the “virtual currency” was the natural evolution of what we had before 2008. Satoshi’s innovation of cryptocurrencies and blockchains was disrupting to Fintech, but it burned some evolution steps in technology. The natural evolution is FIAT paper currencies, e-banking, virtual currencies, some other things…, then cryptocurrencies. The latter is an extreme case that is important to a minority of people, but not for the general masses, I believe. In this sense, Libra is bridging that gap, one of the burned steps.
You may disagree why shall we take a step back if we are already ahead, i.e., we’ve got the blessing cryptocurrencies? Let me answer this by digging in to the main two critiques of Libra: it is (1) centralized and (2) not private.
The first critique is correct, and I won’t call a BFT-based blockchain decentralized; but who said that decentralization is really the desired feature for “average” users? As long as you can maintain an available and secure service — similar to VISA or Paypal — it is OK. Even considering the most decentralized blockchains, i.e., Bitcoin, as such is a bold claim due to the centralization of miners, manufacturer, and core developers. Even worse, this decentralization lead to hitting the wall given the really bad scalability and high transaction fees, contrary to the original premise. It is because of this Facebook delayed the decentralized version up to five years, hoping that this technology becomes mature enough for production without risking their conventional Facebook customers.
The second critique is privacy. Facebook reputation is not shiny here; who forgot the Cambridge Analytica scandal? But this doesn’t make the concept of Libra wrong. Indeed, many people nowadays still trust their banks, VISA, Mastercard, etc., and they have little problems, although concerns exist, with them despite their consent to see their records and balances! I would argue these people would favor that their banks release a virtual currency to use more than trusting a decentralized cryptocurrency that is run by unknowns. Remember that Facebook is a traditional service provider that must think safe and address “the majority” which is not the case of current cryptocurrency authorities who had nothing to lose. Having all these partners in the Libra Association will make things easier in practice.
I think most Facebook and Whatsapp users will not be very reluctant to use Libra as a better alternative to available currencies like VISA, Paypal, WU, as well as to the mysterious world of cryptocurrencies. I also believe that we will soon see other virtual currencies — I won’t call them Cryptos — that belong to this Libra family, and these will get more adoption than cryptocurrencies. Most people are OK with this, this model is easier to implement, bankers will like this model to preserve their customers and develop their business, cryptocurrencies are yet to be stable…, these are only few reasons that support this vision.
Disclaimer. I’m not paid by Facebook, and I don’t even use Facebook. I hail from the BFT research world, but I am a fan PoW like blockchains as well, despite their limitations. These are simply some honest thoughts and observations that may likely be very true, IMHO.