Libra: an interesting idea, if only Facebook weren’t involved

Facebook’s white paper on its Libra explains how the new currency works, but leaves a number of important questions unanswered, mainly to do with widespread concerns over the company’s trustworthiness.

The white paper and another targeted at developers explain that while Libra will use blockchain, it doesn’t share the philosophy of other cryptocurrencies such as bitcoin. In the first place, because it is a stablecoin anchored to a basket of funds and deposits held in leading central banks, which should limit, but not completely avoid, exchange rate fluctuations. In the absence of any monetary policy, all that will regulate how many Libras are created or destroyed will be the number that users keep in circulation.

Unlike bitcoin, Libra’s blockchain and the nodes that support and validate transactions will be private: operating a node will require a permit and a $10 million investment, which sets it apart from the most popular cryptocurrencies’ ideal of decentralization. The nodes are part of the association that controls Libra and have one vote each, compared to Facebook’s two. Facebook says it eventually wants to see the network public and decentralized, but has not established any reliable mechanism or timetable for this.