Questions You Were Shy To Ask About Facebook Cryptocurrency Libra
By ROKKEX on Altcoin Academy
From cryptocurrency ban at the ICO rise to the launch of the test network, Facebook has proved once again that the company is keeping up with the times. On June 18, the fintech world was shaken by the news that Facebook launches a new cryptocurrency — Libra.
According to Facebook, Libra is a project that will allow access to financial instruments of 1.7 billion people in developing countries and will improve rather than destroy the traditional financial system.
Visa, Mastercard, PayPal, eBay are only some of the large backers who supported Facebook in its initiative.
Facebook assures that they won’t make money on Libra: the payment system won’t have commissions, and the users will be paid for operations with cryptocurrency. They will need $1 billion of investments not from the general audience but from the companies that will become members of the association.
Is Libra indeed non-profitable and who stands behind its development, ROKKEX covers all the answers you need to know about Libra.
Where Does The Name Libra Come From?
Initially, the BBC assumed that the cryptocurrency would be called GlobalCoin, but in May 2019, Facebook registered Libra Networks in Switzerland and bought the brand name from a cognominal blockchain-startup which specializes in solutions that convert cryptocurrency transaction data into audit-ready reports for financial regulators.
TechCrunch believes that Libra is a pun with the abbreviation of the London interbank rate LIBOR. Only “LIBOR is for banks, and Libra is for people.”
Who Is Developing Libra?
The team of a new promising cryptocurrency is impressive: a former PayPal president, vice president of Facebook Messenger David Marcus, former Instagram vice president Kevin Vale, a professor at the Massachusetts Institute of Technology Christian Catalini (who is the project’s chief economist), and former Coinbase employees. A total of about 100 people work on the project, while the company regularly hires new people.
The cryptocurrency project staff keep any information secret and work in a separate building, unlike the general open culture in the Facebook company. Libra’s global launch takes place in the first quarter of 2020; testing will begin at the end of 2019, BBC reports.
What Is the Use Of A Token?
Facebook cryptocurrency will be a “stable coin”; it is tied to the currency basket and low-risk securities, but not to a single currency. This will eliminate volatility.
The head of Facebook for financial services and payment partnerships in Northern Europe Laura McCracken confirmed the design of the coin in an interview with WirtschaftsWoche.
The company integrates cryptocurrency not only on Facebook but also in Messenger and WhatsApp, as well as in partner sites. Employees of the company will be allowed to receive part of their salary in cryptocurrency.
Facebook is also negotiating with sellers to accept tokens for payment and is studying the opportunity of paying users for viewing advertisements and online purchases.
Separately, it is noted that Facebook will not use the payment system for advertising targeting.
Will Libra Be Tradable?
In December 2018, the Bloomberg reported that Libra would be used to transfer money between users in instant messengers. In February 2019, The New York Times informed that Facebook changed its plans and now wants to sell coins to users, as well as negotiate with cryptocurrency exchanges.
Besides, the company plans to launch “crypto ATMs” for the sale and purchase of Libra offline.
Will Facebook Manage Libra?
Facebook understands its negative reputation after personal data processing scandals and believes that the ambitions to control Libra may scare users away.
To avoid the influence of its negative reputation as well as to mitigate the issue of centralization, Facebook will transfer control over Libra to the independent fund called Libra Association. The Information reports that the former head of treasury operations on Facebook, Sunita Parasuraman, will lead the fund.
Of the three investment scenarios, Zuckerberg chose the most expensive, and the payment system inside Facebook fits into the statements that all money transfers should be no more difficult than to send a message in the messenger.
The Block Crypto has received Libra’s Facebook marketing materials and found out that there are 29 companies in the consortium. In total, Facebook plans to attract 100 members to the fund and achieve a goal to receive $1 billion of investments. Each investor donates $10 million to gain access to the network and manage its site.
eBay, Uber, Lyft, Spotify, Coinbase, Vodafone, Mastercard, Visa, Paypal, PayU, Stripe have already confirmed their membership in Libra Association.
The Block Crypto also notes that Facebook was not supported by the investment conglomerates Goldman Sachs and JPMorgan. In the case of JPMorgan, this may be due to plans to release JPM own stable cryptocurrency.
Can Facebook Make Profit On Libra?
The company plans to entirely rebuild the infrastructure and combine WhatsApp, Facebook Messenger, and Instagram under one platform. The total audience of potential users of the token is 2.7 billion people!
Libra is also anticipated to reduce the level of negative criticism of Facebook about making money on user data.
The investment director of financial company Blockforce Capital, David Martin, shared his vision of why Facebook can benefit from Libra:
Creating its own cryptocurrency may be Facebook’s attempt to enter the mobile payment market and take a leading position on it. No less attractive for Facebook can be the domestic market, in which only 44% of the population use a smartphone for payment. With its user base, the company can establish itself as a national and then world leader in the field of mobile payments, said David Martin.
Normally, banks and payment systems charge a commission of 2–3% for a transaction. However, Facebook does not plan to take a commission for operations with Libra. In this way, the company will generate an increased interest of sellers online and grow the audience of users before monetizing it.
What Is Regulators Response?
Regulators met the news about the launch of Libra apprehensively if not to say adversely. In May 2019, the US Senate Banking Committee wrote an open letter to Facebook, requiring the details of the project to be uncovered. Senators are worried about how the company will process the personal data of users.
Besides, Facebook representatives are negotiating with the Commodity Futures Trading Commission to arrange the cryptocurrency falls under jurisdiction. The company held various meetings with the US Treasury, Bank of England Governor Mark Carney, and top managers at Western Union.
At this point, the aspirations of Facebook are positive and promising. The blockchain world cannot be any happier that the social media giant has finally converted to the decentralized faith. This is a huge move for the whole industry, which means that the cryptocurrency has a bright and stable future. Wait and see!
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