What You Need To Know About Facebook’s Cryptocurrency Plans
The Decentralized Nature Of Cryptocurrency Transactions
Over the past decade, cryptocurrencies have gone from obscurity to regularly trending in world news. However, what has remained true throughout the first decade is the commitment of cryptocurrency enthusiasts and blockchain startup founders to the importance the industry plays in providing a decentralized environment for financial transactions.
Many crypto enthusiasts talk about the trading of cryptocurrencies as a way around centralized systems of control, almost as a sort of revolution. This idea all comes down to the concept of trust. Traditional centralized financial systems that use fiat currencies require us to trust them with our funds. That trust has been broken at times, and the concept of storing loads of money in a centralized place that can be hacked or robbed has at times been called into question, but due to the lack of a viable alternative system, has remained the standard.
A Trustless System For Cryptocurrency Transactions
Trusting in large financial banks, corporations, and institutions has become increasingly more difficult for some, and history has shown us that at times (like during the stock market crash, run on the banks, and subsequent Great Depression of the 1930’s, along with other similar situations), the processes of third-party money management and transactions have failed to provide the level of security and protection necessary to prevent harm and maintain a high level of confidence from the public. Although we primarily still use these systems today and their security has improved due to new technologies, blockchain technology and cryptocurrencies represent the arrival of a financial system that does not require third-parties as middle-men for transactions to take place. Safe and secure peer-to-peer transactions have been made possible by the blockchain. Blockchain technology has at times been described as “trustless,” however by trustless we do not mean that it can’t be trusted. Aleksandar Bulkin, co-founder of Coinfund.io, describes the concept of trust in financial systems and what it means to be “trustless” as follows.
There is trust that the entity that holds your account information doesn’t go about randomly subtracting value from it, the trust of safety. There is trust that the entity who ensures circulation doesn’t go about randomly assigning money to itself out of nowhere — trust of issuance. Finally, there is trust that the system in fact ensures consistency of information, that is it performs its main function — trust of correctness.
A trustless system refers to the fact that our ability to trust the system does not depend on what any particular party’s intentions are, and considering that they could be malicious, we can state that trustless systems are more secure.
We do not have to trust in a third-party in a trustless system like blockchain because the information is distributed. Cryptocurrency transactions can take place without the fear of malicious intent from a third party and as a cryptocurrency trader, you deal directly with the other person taking part in the transaction. Trustless systems are made possible by the use of cryptography, so that information is encrypted, thus helping to keep it secure. However, what if the cryptocurrency itself and the system it runs on are designed by a corporation that has repeatedly mismanaged people’s private information and has been the victim of massive data breaches.
A trustless system means that our trust does not depend on what any party’s intentions are and blockchain technology allows for decentralization, but is it possible for a company that has lost the public’s trust and has been so centralized in it’s power structure to create a truly trustless system, or will the trustless system be ruined by constant reminders and memories of their recent failures to keep our information safe and focus on privacy? Even if Facebook succeeds in developing and offering the Libra cryptocurrency, should we be convinced that Facebook can maintain our financial well-being when the company couldn’t maintain our privacy or keep track of our data? Facebook has already proven it’s likely to mismanage our personal information. Since blockchain technology is talked about as being a trustworthy system, could part of Facebook’s reason for entering the crypto space actually be to try to take the focus off of its recent troubles, present itself as a trustworthy corporation, and regain the trust of the public?
Just about as soon as the Libra cryptocurrency was announced, critics started writing articles like this one saying Libra will have all of the same types of problems that Facebook’s social network has had. However, to form an opinion it is necessary to look at the facts about what Facebook plans to offer, and what governments are saying about it.
Facebook’s Libra Cryptocurrency
Bitcoin as a cryptocurrency is permissionless, meaning that anyone can participate. However, Facebook’s Libra cryptocurrency is permissioned, meaning that only a few trusted entities keep track of the ledger. In other words, it is a bit more centralized than a permissionless system because rather than the ledger being completely distributed, it is distributed only to a few, allowing Facebook to have a bit more control. According to the Libra whitepaper, Facebook plans to collaborate and innovate with the financial sector, including regulators and experts across a variety of industries, rather than trying to go around the financial sector as some crypto/blockchain projects recently have. Ultimately, Facebook hopes to bring blockchain technology and cryptocurrencies to the masses and help create a “lower cost, more accessible, and more connected global financial system.”
These are worthy goals, and if any company or individual was going to succeed in bringing cryptocurrency/blockchain technology to the masses, wouldn’t it be Facebook with their more than 2.3 billion monthly active users? Also, isn’t the goal of Libra good for the world, and isn’t the entry of a company as famous as Facebook into the crypto/blockchain space going to create more notoriety for the technology and help promote its benefits? Now that Facebook’s cryptocurrency plans have been revealed to the world, we can start to guess about any difficulties Facebook might face in proceeding with its plans.
What Governments And Privacy Groups Think About The Libra Cryptocurrency
Recently, Democrats in the U.S. House of Representatives have requested that Facebook suspend development of the Libra cryptocurrency and Calibra digital wallet so that Congress and regulators can investigate any possible risks to the global financial system. A collection of privacy and consumer-focused groups also laid out their concerns with Facebook’s Libra cryptocurrency and requested that the U.S. Congress impose a moratorium on the cryptocurrency. However, Russian Ministry of Finance Deputy Minister Alexei Moisseev stated recently that Russia will not issue any special regulations for Facebook’s Libra cryptocurrency. In Russia, Libra will be treated like any other digital asset and will have the same regulations as all others.
Facebook’s Libra Cryptocurrency: What’s The Verdict?
It’s safe to say that there are mixed feelings about Facebook entering the blockchain/cryptocurrency space. Some might have a difficult time trusting Facebook with their financial well-being considering the company’s recent history with privacy issues and data breaches. However, one of the world’s most famous companies with more than 2.3 billion monthly active users entering the crypto space would bring many more individuals into the crypto market and could help it go more mainstream. There are definitely questions that remain unanswered regarding the impact the Libra cryptocurrency could have on the global financial system, but the goals mentioned in the whitepaper, if achieved, could help those who are struggling in the financial system to have more opportunity due to increased affordability.
So what’s your thought on Facebook’s cryptocurrency? Should the social networking giant be encouraged to proceed with its plans? Are the concerns that have been mentioned valid, or do you feel there is nothing to be nervous about? Do you think Facebook’s entry into the cryptocurrency space is a good thing or a bad one overall? Will you buy the Libra cryptocurrency when it becomes available?
If you are too nervous about Facebook’s recent struggles to invest in their cryptocurrency, you could buy AFCT instead. Or, if you are excited about Libra, but AFCT soon and Libra cryptocurrency when it becomes available later. That way, you would own the cryptocurrency from the ecommerce marketplace of the future, and the cryptocurrency from a social network with 2.3+ billion users!
