Bitcoin vs Libra: 4 major valid differences (A cryptocurrency enthusiast must know)
By Syed Hassnain Fatmi on The Capital
Libra, a cryptocurrency first known as ‘’Global Coin’’ or ‘’Facebook Coin,” when introduced by big guns like Facebook, PayPal and Visa has created a vast debate from the state’s chamber to the community forums.
Although both Bitcoin and Libra came with a properly written white paper and are based on cryptography, they are distinctive.
Below is the answer to your search query, so stick around and jump in.
Difference #1 Bitcoin’s decentralization vs Libra’s centralization
Bitcoin is a ‘’ decentralized peer-to-peer electronic cash system’’ where no single entity or established group of companies control it.
Diversified group of programmers modifies it technologically and a global network of miners creates it.
But when we put our lens on Libra working, there appears something opposite. Libra is governed by Libra Association, a group of 28 companies till now including Facebook, Visa, and PayPal.
In the future, Libra Association will expand to 100 companies where each of them will have one vote. And they will determine the future of Libra through voting.
Difference #2 Volatile Bitcoin vs Stable Libra
Bitcoin is a fully virtual currency which possesses no physical existence and there are no credits to back up it.
That is why the price of a single bitcoin rose from $0.00076 to $1,242 from October 2009 to 29 November 2013.
Are you one of those digital currency enthusiasts who got that lottery? I am not, wistfully.
But here the Libra Reserve comes into play to make a distinction. Libra coins are completely backed up with a reserve of real assets.
Libra Reserve is a compendium of low-volatile assets which includes short term government securities in currencies and bank deposits rather than relying on a single asset as almost all fiat currencies do.
“A geographically distributed network of custodians will hold the Libra Reserve with investment-grade credit rating to provide both security and decentralization of the assets.” Libra white paper says.
Next is their difference of blockchain, let’s dive in.
Difference #3 Permissionless Blockchain vs Permissioned one
Bitcoin runs on a permissionless and open for all blockchain (transaction ledger) where anyone with the required hardware and internet connection can take part to verify the transactions broadcast to the network.
But according to the Libra white paper, unlike other cryptocurrencies, initially, Libra will run on a permissioned blockchain where miners have to first get permission from the Libra Association.
‘’ In the next five years, a system will be developed to make it permissionless with the help of the community,’’ says the white paper.
Difference #4 Fixed Production vs Supply and Demand
One rule of Bitcoin says, “After mining of a set of 210,000 blocks ( approximately it takes four years at the rate of one block per 10 min), the number of new bitcoins mined per block will be halved.”
In 2009, when the first bitcoin was mined, 50 bitcoins were created per block which has decreased to 6.25 bitcoins per block in 2020.
Only 21 million bitcoins will be mined ever and the production of new bitcoins will end in 2140 if block mining rate remains approximately one block per 10 min.
On the contrary, Libra coins production and burning depend on “demand and supply.’’
Here is the statement of its white paper:
“The association is the only party able to create (mint) and destroy (burn) Libra.
Coins are only minted when allowed resellers have purchased those coins
from the association with fiat assets to fully back the new coins.
Coins are only burned when the authorized resellers sell Libra coins to the association in exchange for the underlying assets.’’
Conclusion
Systems always develop and preexisting things are modified.
Libra is an effort to blend some digital currencies features like blockchain with some fiat currencies features such as low volatility.
The future will decide whether this attempt to succeed or fail.
What do you foresee: Zuckerberg’s glowing cheeks or broken heart, and why?
Tell us in the comment box and share if you like.
