Libra — Facebook’s Disruptor Cryptocurrency Explained

By Aaron Lewis on ALTCOIN MAGAZINE

Aaron Lewis
Nov 3 · 8 min read

Unless you have been living under a rock for the past year, you have probably heard of Libra — Facebook’s new cryptocurrency. But what makes this cryptocurrency so special? How is it different from the currencies already out there, like Bitcoin and Ethereum? And what problem is Facebook trying to solve by creating Libra?

How The Currency Works

Libra is like other cryptocurrencies in that it is built on blockchain technology. Click here to get an in-depth understanding of blockchain tech:

The blockchain is a digital ledger to store a record of transactions. Key attributes of a blockchain: security, and the peer to peer network (no need for a middle man while making transactions). One attribute that is usually included is the decentralized nature of the blockchain, but Libra is centralized. This brings us to the first difference between Libra and popular cryptos like Bitcoin.

Unlike Bitcoin, Libra is backed by real-world currencies and US Treasury securities. This ensures that Libra will have a stable price and would be easy to convert to other currencies. This would build trust in Libra and allow more people to adopt it. The currency basket is made up of: 50% US Dollar, 18% Euro, 14% Japanese yen, 11% Pound sterling, and 7% Singapore dollar.

Bitcoin Price Chart

Take Bitcoin as our comparison. Bitcoin is not backed by any assets so the market price is based on speculation and investment. People buy Bitcoin to sell later at a higher price. This makes it not viable as a medium of exchange because it is not stable, people are not sure if the value of Bitcoin tomorrow, will be the same as the value of Bitcoin today.

Introducing The Libra Reserve

Infographic on how the money would flow in Libra ecosystem

The Libra Reserve is the organization that keeps the value of Libra stable. When you convert your money into Libra, that money is going to authorized resellers, which then circulates to the Libra Reserve. The Libra Reserve then invests the money into low-volatile assets such as bank deposits (like your saving’s account) and short-term government securities. Interest that is earned on the assets is used for operational costs and to help grow out the network.

The main goal of this is that it makes Libra more stable because it is backed by a set of assets. This makes it more reassuring that someone using Libra would be able to reconvert that money back to fiat currency at a good price.

The Libra Association

The Libra Association is the organization that oversees the Libra Reserve and the Libra Blockchain (we’ll get to that in a little bit). The association has a council that makes decisions for the blockchain and the reserve. The council is comprised of 21 members that range from businesses to non-profits, to academic institutions.

Facebook, even as creators of Libra, have an equal vote in making decisions about the currency. This makes sure that Facebook does not have overwhelming control of the currency. You can also see that some partners are crossed out, that is because they left the association. We will get to that later as well😉 .

Members of the Libra reserve

Using Libra

To buy libra, you need a digital wallet to store the currency. For this, Facebook developed Calibra, a digital wallet specifically designed for Libra. Calibra will be available as it’s own app, and it will be integrated into existing Facebook apps like WhatsApp, and Facebook Messenger. Libra also hopes that 3rd party entities, like PayPal, to develop their wallets for people to us.

Libra Blockchain

As mentioned before, Libra will run on a Blockchain. But there are a few unique properties of Libra’s Blockchain that separate it from other existing coins.

Permissioned Blockchain

As new blocks are added to the chain in a “blockchain” someone has to verify that the transactions on the new block are good. In a permissionless blockchain, this ability to verify transactions is given to anyone using the coin. Libra, however, is a permissioned blockchain. The ability to validate new blocks is only given to members of the Libra Association.

This again adds to the idea that Libra is centralized. The people that are verifying the blockchain is the Association that governs it. This keeps the currency more stable. However, Facebook does say that they want Libra to become public and permissionless blockchain in the future.

Scalable And Efficient

Libra is both scalable and energy-efficient, two problems surrounding existing blockchains. Libra uses a system called proof-of-stake to validate when a block should be added to the chain. This is more efficient than the system Bitcoin uses, which is called proof-of-work because it takes up less computing power and energy.

Also for verifying blocks, Libra uses something called a Byzantine Fault Tolerance. Without going into technical depth the advantage of a BFT(Byzantine Fault Tolerance) is that even if 1/3 of the validators (members of the Libra Association) are compromised then the network will still function. To understand more about BFT click here:

Amazingly, Libra can handle 1,000 transactions per second. In comparison, Bitcoin can handle 7 transactions per second, while Ether can handle 15. One of the biggest problems for crypto was that it was not scalable enough. Libra is an incredible step in the right direction. (Visa handle 1,700 transactions per second and their capacity is said to be much more).

Move Programming Language

Another buzzword in the crypto-world is “smart contracts”. Smart contracts are basically like real-life contracts that declare transactions, written into lines of code and then stored on a blockchain. These transactions are supposed to be more secure than traditional contracts and reduce transaction costs when making contracts. This is a powerful feature because it allows developers to create new applications on top of the blockchain which can be used for a host of different functionalities such as paying insurance premiums, crowdfunding agreements and so on.

What Is Libra’s Goal?

Libra’s main target demographic is the world’s unbanked population — 1.7 billion people. This makes sense. We here in the US and other first-world countries have comparatively easy access to banks than third-world countries. This is why using a cryptocurrency for as our new medium of exchange may seem overkill since didn’t the system we already have in place work well enough?

example of the unbanked population

Places in the world that do not have the same privilege as we do in the US do not have the same luxury. They do not have ready access to banks so they do not have a developed payment system. Libra looks to fill that void.

Interestingly enough, 1.1 of the 1.7 billion unbanked people have a mobile phone and half a billion have internet access. Facebook currently has a user base of 2.4 billion people. If they can tap into that overlapping segment they can create a huge market for themselves. This about it this way, even if only 5% of Facebook users start using Libra, that is still 120 million people using that network 🤯!!

Since Libra could spread to such a large population given Facebook’s userbase, Libra has the real chance of disrupting the world financial system. States are worried that people would switch to using Libra instead of their native currency which would decrease their power.

Chinese cryptocurrencies

Facebook is not the only big new players entering the crypto market. China is planning on releasing its cryptocurrency pegged at the value of its currency the renminbi. Private cryptocurrencies Alipay and WeChat Pay released by Chinese companies Alibaba and Tencent respectively have already caught fire in China. This shows a rapidly evolving crypto market that is very exciting to be a part of.

Problems For Libra

With all of its benefits, Libra has had many roadblocks. The first one, of course, is regulation. We have all seen the infamous tapes of Mark Zuckerburg sipping water while congressmen bombard him with questions.

The main reason the government does not support Libra is the threat that it could pose to the US dollar. If Libra catches on it could potentially challenge the dollar which would weaken the dollar’s influence and sovereignty. These are two things that are in the government’s best interest to keep. It is yet to be seen if Libra will ever pass regulation without changing some fundamental aspects of the currency. Only time will tell.

As a result of a loss of government support, a lot of the members of the Libra Association have recently dropped out. These include Visa, Mastercard, Stripe, and a majority of Libra’s payment partners for the currency. This certainly does not help Libra’s case for getting it passed

Another huge issue is privacy. Facebook has had problems with privacy separate from Libra regarding the 2016 US presidential election so they so don’t have great trust in that regard. If Facebook was able to collect data on people’s payments they could have an overwhelming amount of information on our lives just because of their influence in so many aspects of our lives. Is it too dangerous to give that kind of data to a company that many already do not trust?

Facebook says it will hold the Libra data separate from the data collected on social media platforms. But once again, are they to be trusted is the question.

Lastly, people are concerned about the use cases for Libra. It has been shown that cryptocurrencies are often used for money laundering and terrorism finance. It is appropriate to be regulating something that could be self -damaging?

What’s Next For Libra

Libra had an aspirational release date of early 2020. Since it has not yet been regulated, you can expect that date to be delayed possibly to 2021. We may see changes in Libra’s protocol to get it passed through regulation.

If you want to learn more about Libra here is there White Paper which I derived a lot of the article from

Here is a good video by CNBC explaining Libra:


My name is Aaron Lewis, I am a 15-year-old Innovator at The Knowledge Society and I am extremely passionate about AI and Blockchain technologies. If you would like to connect with me please add me on LinkedIn
And Follow my Monthly Newsletter where I update on projects I’ve been working on


ALTCOIN MAGAZINE

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Aaron Lewis

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15 year-old AI and blockchain enthusiast

ALTCOIN MAGAZINE

The best damn place to read and write about crypto and blockchain.

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