No to Facebook. No to Libra.
They say people eventually grow to change for the better, especially when under as much public scrutiny as a company like Facebook has been. But time and time again this simply isn’t the case. And now we find ourselves in a watershed moment not only for cryptocurrency and blockchain, but for the inevitable meeting of two society-changing pieces of technology. The result won’t be what we’re hoping for.
Social media brought out the best and the worst in us as humans. Our need to satisfy a deep seeded narcissism and to show off only the best parts of our life in a pseudo-competition with our friends and complete strangers has led to one of the most polarizing platforms in history. It’s given us a centralized platform on which news and information can spread globally under an hour, and where those same people we’re connected to have created audiences for the horrific and terrifying. We can watch birthdays and mass shootings in real time in the same place with the same group of people. It is a breeding ground for intolerance but also a means of showcasing how people can act in the better interests of society as a whole. It also created the biggest duopoly in advertising between them and Google, consolidating and controlling so much ad inventory and revenue which in turn began and continues to raise all sorts of red flags of anti-trust, truly free and open access to information, and how much of a user’s data is effectively being used to not only target ads, but manipulate emotions.
Cryptocurrency was supposed to be the antithesis to this type of centralized control, so to be quite frank I’ve been a bit surprised to see so many people fawning over the debut of this coin. There is something to be said about this level of potential mass adoption, but that’s all it is. Potential. There is no guarantee that this will be the type of coin that somehow makes the masses educated on the topic of blockchain or cryptocurrency, nor there is an unknown level of impact it will have on changing people’s attitudes and views towards big banking, especially when we’ve seen the likes of Visa and Mastercard jump on board. While they may act independently of banks, they are still a part of the same system. They still charge fees to end users on both sides of the transaction and still don’t offer the best rates possible when traveling abroad. The devil is always in the details, but so far there have been few to truly point to, which is another reason I’m wondering as to why everyone is so hyped about this.
From a technical standpoint, you have a built audience of ~2bn people who are signed up for Facebook and use it daily. How many of those are conducting financial transactions is nothing that’s ever made public, but the foundation of their “blockchain” and “coin” has been laid. The question now is the validation and incentive. Bitcoin gives an incentive for the validation of transactions through transaction fees and the issuing of coins to the validators, hence mining. So will users be mining Libra Coins? Will Facebook make you install a piece of software to partake in mining? And if so what will that look like? What information is Facebook going to mine from the machines that this piece of mining software installed on? Furthermore, what information is going to be gleaned from the wallets and transactions between users? Will these coins be usable on the Visa network, and if so what will it mean for processing fees paid for by businesses who accept the coin? And lastly what kind of security can one expect from this type of service? Given the data hacks, breaches, and manipulation of data that’s already led to a litany of lawsuits, hearings, and general dissatisfaction with the arrogance of Facebook and its leadership, it’s hard to believe that this will be good for the consumer, and is rather just another money grab by Facebook to create another revenue channel. From a crypto industry standpoint, will this coin be tradeable? Is it a security or utility token? What’s its true fungibility?
I’ve talked about this on LinkedIn in a much more condensed format, but my biggest fear about this is the fact that without any true barrier to entry, a company with big ethical issues, data management, privacy, and compliance issues is now out of nowhere about to be the biggest face of the blockchain and cryptocurrency industries. The word cryptocurrency will be associated with that of Facebook as much as it is with Bitcoin, and that’s a big deal and potential problem for any project out there that’s trying to do better.
This is an excerpt of the Libra Coin whitepaper, which seems like a poorly copy/pasted mission statement that wasn’t even thought through enough to have any sort of impact. The basis of this is simply a restating of the original Bitcoin whitepaper, but using the Stellar blockchain architecture rather than any type of consensus mechanism. The issue is the purchasing of nodes in order to act as a validator on the network. With major payment processors signing up to become validators, what does this ultimately mean for the end consumer? How will there be any sort of transparency into the fee structure for both end users and businesses?
I find it hard to believe that Facebook will be independent of the Libra group and that Calibra won’t be full of tracking software. This is a social media behemoth having way too much insight into the financial transaction of its users, and any notion that the two won’t co-mingle in any shape or form is hogwash. It wouldn’t be in the interest of Facebook to allow these transactions occurring within their apps and platforms and not have any insight into what the movement of this money looks like.
In any case, the currency isn’t launching until 2020. Maybe I’ll be wrong, but given the growing sentiment against using Facebook, this might be a currency used in the developing world and nothing else, which could potentially have darker consequences and implications when it comes to the freedom of information and movement of money.
