Libra & Facebook’s Tangled Past With Security and Decentralization
Delving into what the global implications will be with Facebook’s newly introduced cryptocurrency, Libra.
What is Libra?
If you’ve been following along with Facebook’s presence in the news, you’ve probably heard of Libra, the tech conglomerate’s attempt at cashing in on the cryptocurrency craze. This coin is created using Move, a “new programming language for implementing custom transaction logic and “smart contracts” on the Libra Blockchain,” and will allow users to send money to each other using the wallet Calibra. A decentralized currency! Cash me in!! Or wait…
One of the fundamental pillars of cryptocurrency is the idea that your transactions are private, safe, and not overseen by a middleman, like a bank. Unfortunately, Facebook has had problems with this over and over again. It’s hard to forget the Cambridge Analytica scandal, or the fact that Facebook stored millions of user passwords in plain text — which, for the record, not hashing passwords in a university software development class can literally make you fail the project — or the $5 billion fine they had to pay to the FTC, which although it was the largest ever in the history of the commission, still only makes up one month’s worth of the company’s revenue… the list could go on. Point blank, Facebook is irresponsible with user data and has a complete disregard for user privacy, so despite the fact that blockchain is supposed to inherently be secure and protect user’s identities, getting people to participate in the cryptocurrency would be a huge feat. Even the Libra blockchain, which the Libra coin is built on, is a “permissioned blockchain,” meaning that instead of a public ledger, this cryptocurrency is managed by the Libra Association in Europe. This cryptocurrency is not even fully decentralized, and if you talk to anybody passionate about cryptocurrencies, being decentralized is generally a main driver for people to use them. In fact, cryptocurrencies like Bitcoin really began to rise in 2009, almost as a response to the 2008 financial crisis in the United States. The public distrust in large corporations and banks managing and gambling away their own hard earned money meant that people were looking for an alternative, for a way out, for something that wasn’t the norm… and here goes Facebook, bringing it all back in. While “assets in the Libra Reserve will be held by a geographically distributed network of custodians with investment-grade credit rating to provide both security and decentralization of the assets” and Facebook claims “important objective of the Libra Association is to move toward increasing decentralization over time,” historically, every project Facebook has created has had the ultimate objective of benefitting Facebook or its subsidiaries, and with no clear timeline of when Libra will actually be decentralized, I will assume what the present tells me — that it won’t be.
What does this mean for the U.S. dollar?
Despite all the hate I just doled out to Facebook, the company still has an extremely large user base. Their access to so many people, and their ability to manipulate the masses into using their products, is impressive, and means that while only 2% of people trust Libra more than Bitcoin, the likelihood of users actually abiding by that is low. CivicScience, the consumer insights provider that conducted that study, also found that 77% of people did not trust Facebook with their personal data, yet Facebook continues to get more users, and every user account in Facebook necessitates you entering your name, gender, date of birth, and email or mobile number. Additionally, they track users’ IP address, their location, the ads they click on, and monitor basically every activity they do on the site, so while users might “feel” like they don’t trust Facebook, they are trusting Facebook with their actions. If enough people adopt Libra, the currency could be a serious threat to the U.S. dollar. Twitter user Marco Santori captured Libra’s position with other issues pretty well:
“At these hearings, Libra is in an impossible position: It must be centralized enough to prevent illicit activity by freezing funds, but decentralized enough not to discriminate against participants based on the use of the funds.”
It’s decentralized but not decentralized enough, it has to prevent illegal activity, it has to be accessible by people, all while dealing with the entanglement of the law.
What does this mean for the future of digital currencies?
Honestly, I have no idea. What will really matter is whether or not the EU and the United States will allow Libra to flourish, and whether Facebook can convince people that Libra is something they should actually invest in. If Libra is allowed to flourish, then maybe we’ll see a wider adoption of cryptocurrencies as a whole. Maybe people will think “Oh, Libra is like Ether, maybe I’ll try out Ether!” and we’ll see the golden age of cryptocurrencies.
Or maybe we’ll just move into another sort of banking. Maybe the whole point of decentralizing currencies was so lost among large corporations and governments that we just reverted to a sort of online banking. I’m an optimist, so I choose not to believe this, but you never know!
Disclaimer: I’m a student who just likes to write and learn about crypto news and historically disagrees with Facebook’s corporate actions, so I completely and fully acknowledge that this article is heavily biased. If there are any factual inaccuracies, feel free to leave a comment below and I will gladly update accordingly.
Disclaimer: The views expressed by the author above do not necessarily represent the views of the Ethereum Foundation.