What is Libra?
Facebook, finally released information about its much-talked about cryptocurrency recently. Libra is going to be launched next year and the users will be able to access the cryptocurrency through apps like WhatsApp, Messenger to pay for commodities as well as send money to one-another. Libra is mainly aimed for people who don’t have access to a bank account.
The global coin, Libra is working in three parts which will work in collaboration to create a more inclusive financial system:
· secure, scalable and reliable blockchain;
· backed by a basket of assets to give it balanced value;
· governed by an independent Libra association which will work to evolve the ecosystem.
According to Libra’s whitepaper:
“All over the world, people with less money pay more for financial services. Hard-earned income is eroded by fees, from remittances and wire costs to overdraft and ATM charges. Payday loans can charge annualized interest rates of 400 percent or more, and finance charges can be as high as $30 just to borrow $100.”
The initial group of organizations who are working together on finalizing the association’s charter and become “Founding Members” upon its completion are:
· Mastercard, PayPal, PayU, Stripe, Visa from the payments industry.
· eBay, Farfetch, MercadoPago from the e-commerce sector
· Iliad and Vodafone from the telecommunications industry
· Anchorage, Bison Trails, Coinbase, Inc., Xapo Holdings Limited from the blockchain sector
· Andreessen Horowitz, Breakthrough Initiatives, Ribbit Capital, Thrive Capital, Union Square Ventures, Creative Destruction from the investment industry
· Lab, Kiva, Mercy Corps, Women’s World Banking from the nonprofit and multilateral organizations
· Uber and Lyft from the cab industry
· Spotify from the music industry
· Booking Holdings from the travel industry
· Facebook/Calibra from the IT industry
Blockchain so far has been divided into two segments — permissioned and permissionless. Facebook aims Libra to become a permissionless blockchain. However, as of now, it is going to be permissioned. Why is it so? Because the permissionless blockchains are not scalable, stable and secure to support billions of transactions expected on the Libra blockchain. One of the association’s directives going forward will be working with the community to research and help Libra become permissionless. The transition from permissioned to permissionless is going to happen within five years of the public launch of the blockchain and its ecosystem.
Apart from launching a stablecoin and a smart contract platform, Facebook is also targeting to transform the concept of digital identity with Libra.
Calibra: Facebook’s New Subsidiary
Calibra is a freshly formed subsidiary of the social media giant that is going to offer financial services. The participation and accessing of Libra network is also going to be through Calibra. As its first product, the subsidiary is going to launch a digital wallet for the stablecoin, Libra. The wallet (rumored to be launched in 2020) is going to work as an add-on Facebook messaging apps — WhatsApp and Messenger (iOS and Android) and with a standalone app (to be introduced later).
As and when Calibra is launched, people can begin transacting in Facebook’s new digital coin. The sending and receiving of Libra will be as simple as sending a text message. The cost of a transaction is said to be low to none. The digital wallet, Calibra is going to the platform from which Libra could be sent to friends and family, used for paying bills or buy a bus ticket.
How will Calibra work?
When the user’s sign up on the platform for the first time, they will be asked to submit government approved KYC documents for verification. The company will do the due diligence to cross-check information and report suspicious activities to the authorities. The process will be similar to the one which is currently being conducted by banks and credit card companies.
Once the account has been set up, you can send and receive Libra. Now with the merchant partners, the digital coin can be sent through scanning the QR code too. Going forward, the coin is also proposed to be used for in-store payments and point-of-sale systems like Square.
There would be dedicated live support that will help people in case people lose their phone or the password or someone hacks the wallet.
E-commerce payments will also speed up with the use of Libra as it is going to eliminate the transaction fees and speed up the checkout.
“We believe blockchain will benefit the luxury industry by improving IP protection, transparency in the product life cycle and — as in the case of Libra — enable global frictionless e-commerce,” says FarFetch CEO Jose Neves.
Libra and Bitcoin — The Difference
While both are said to be digital coins, Libra and Bitcoin are way different from each other. Bitcoin is developed by unknown entities while Libra is being designed and developed by Facebook. Bitcoin works on a decentralized network which is permissionless and censorship-resistant whereas Libra is going to be operated by a consortium of MNCs. These very well-known faces behind the consortium can be held accountable and targeted with regulation.
Permission — Bitcoin works on an open, permissionless blockchain that is not controlled by any central entity. One can download crypto-wallet or create one to store bitcoins. Any individual can run a node and send Bitcoin to anyone. This is not going to be the case with Libra as it is controlled by a consortium. Libra can only be stored in Calibra wallets, WhatsApp, or Messenger. Libra also comes with the characteristics of a FIAT currency.
Control: As bitcoin works on open-source blockchain, the developers and the crypto-community is free to decide what happens to the crypto-currency. The blockchain has been hard-fork in the past and led to the development of ethereum. With Libra, no such thing is possible as it is going to be monitored and backed by companies like Mastercard, Uber, Paypal. These companies have each bought the node for $10 million and they are likely to decide what happens to it in the future.
Safety and Security: Bitcoin is the most secure computer network running online since 2008. What needs to be protected is the hardware wallet as well as the private key with which one accesses that wallet. Now with Libra working on apps like WhatsApp and Messenger is open to ID attacks as well as DDoS attacks.
Trust: There are no third parties involved in bitcoin, moreover buying and selling bitcoin is also an independent affair. Libra, on the other hand, is going to have third-party involvement like Facebook and these organizations are also going to be responsible for keeping a ledger of the transactions made.
Coin Value: Bitcoin’s value is not dependent on any FIAT currency or government. However, Libra, when launched, can be controlled by factors like inflation, government control or FIAT currencies.
Decentralization: The bitcoin blockchain is open-source and free to download by people who can run a node. However, when it comes to Libra, the blockchain has multiple central nodes and can be controlled by the government.
Know how to set-up Libra blockchain testnet here.