What is Libra by Facebook?
There are 180 currencies used in 195 countries across the world. Libra, a currency created at Facebook, is different from them all. It is a digital currency which aspires to become a global currency that standardised payments and is backed by the government. Will it see the light of the day?
What is Libra?
Libra is built on an open-blockchain platform called Libra Blockchain. It follows its own protocols and guidelines with the main goal to reinvent money and transform the global economy which will eventually lead to people leading a better life. It is basically a stablecoin backed by government currency. There will be a Facebook wallet, Calibra, where you’ll store your Libra.
It is governed by an independent organisation, Libra Association, working towards evolving the entire ecosystem. There are up to a dozen members of the Libra Association, working in diverse areas. However, Facebook is expected to maintain leadership throughout 2019. Some other members include Mastercard, PayPal, Stripe, Visa, eBay, Facebook, Lyft, Uber, Spotify, Andreessen Horowitz, Vodafone Group, Kiva, Mercy Corps, Women’s World Banking and more. Although Facebook played a key role in the making of Libra Association and Libra Blockchain, the final decision-making authority rests with the association.
Since it is a private currency, you can transact in Libra across sites that accept it (like Facebook and Instagram commerce). Libra can also be transferred from person to person across geographies, bypassing the banking system and global currency transfer fees.
Why the world needs Libra?
A white paper released by the Libra Association says it aims to enable a simple global currency and financial infrastructure that empowers billions of people. It is aiming to target people who are outside the current financial system which is a huge number, 1.7 billion, and make them a part of the system. As the data and smartphones are quite affordable, Libra might just do the necessary. Moving money around globally should be as easy and cost-effective as, and even more safe and secure than, sending a text message or sharing a photo, no matter where you live, what you do, or how much you earn. It will eventually lead to financial inclusion on a global scale. You can expect to access Calibra Wallet from your Messenger or WhatsApp.
Libra vs Bitcoin
Bitcoin and Libra are based on the same technology, Blockchain. Which is basically distributed ledger technology where the data is stored in a block and each block is encrypted. Blockchain Technology is safe, secure and reliable. To know more about it you can read our previous article, ‘Will Blockchain Transform India?’ it will help you understand the concept more thoroughly. But except this, there is very little in common between Libra and Bitcoin.
The value of Bitcoin fluctuates widely, whereas the value of Libra will be stabilised by a private sector mechanism called ‘Currency Board’.
“Libra is an initiative of 28 influential corporate entities. Bitcoin, which the world first came to know of in 2008, is seen as a product of libertarian values. Its founder, whose identity remains a mystery to this day, is referred to as Satoshi Nakamoto.”, according to The Hindu.
Libra, unlike Bitcoin, is backed by Swiss Banks and there are many things officials are concerned about when it comes to Libra, they include privacy, money laundering and terrorism finance. It might turn Facebook to a ‘shadow bank’, which is a thing to worry about. And due to the latest buzz about Libra, people have started investing in Bitcoin again. It is hitting the news after its arrival and in a way it has resurrected Bitcoins, though they are still volatile.
Right now, there’s no guarantee of Libra’s success. Even Bitcoin is used at a very low-scale and it is not energy efficient as mining Bitcoins is a very energy-intensive process. Many other similar cryptocurrencies have come and gone. However, there are high chances of Facebook aborting the launch of Libra in India as the current regulations by RBI don’t allow banking network to be used for cryptocurrency transactions.
Even if it does launch in our country, it won’t make a lot of difference as for the customer it doesn’t do much different than the other services like Paytm, Mobikwik or PayPal, all of which have already been in the Indian market for a while. What Libra does offer as an extra when compared with these other services is the capability of converting Libra money to hard cash, now that we can dig.
