Libra: Need Of The Hour?
By Yogesh Agarwal on ALTCOIN MAGAZINE
The past few years have not been so kind to the tech giant Facebook wherein they have been accused of one of the worst privacy breaches in history. This has created a lot of hurdles for the company and also resulted in a fall of the company stocks by billions of dollars. However, with the company’s most recent announcement about the launch of the cryptocurrency called Libra, they have a chance to earn their respect and position back.
What Is Libra?
Libra intends to be a simple global currency that empowers billions of people to access better, cheaper, and open financial services. There are around 1.7 billion people around the world that have no access to financial systems, wherein many of them are found to own a smartphone and even an internet connection. Also, the poor people using the current financial systems lose a huge percentage of their money as a payment for the services being offered.
With the current situation of financial systems in mind and an aim to introduce a global, open, instant, and low-cost movement of money, Facebook announced ‘Libra’. It is a cryptocurrency built on a secure, scalable, and reliable Libra blockchain and is backed by a reserve of assets designed to give it a stable value.
Their goal is to make a more efficient, cheap, and global payment system that can be used to transfer money immediately and directly, which should be as easy and secure as sending a message. By creating such a system, Libra can help people keep their funds safe, secure, and accessible, even without banks.
Is It Really Decentralized?
Libra Blockchain has started as a permissioned blockchain, wherein only the members of the Libra Association are granted the access to become validator nodes. Their goal is to become a permissionless chain eventually. However, currently there is no proven solution to provide the scale, stability, and security needed to support billions of people and transactions across the world through a permissionless network. The Libra Association will be continuously working to implement the transition from permissioned to permissionless state, and plan to begin the process within five years of Libra’s launch.
Permissioned blockchains are no doubts fast and secure, however, they offer less decentralization than their permissionless counterparts. Facebook has opted for a broader industry appeal and has left true decentralization behind. A blockchain’s goal must be to eliminate the need for a central authority and provide a more transparent system. With the Libra Association taking care of the overall network well-being (Representing centralization) and the lack of transparency in the system, the entire concept of Libra as a blockchain becomes questionable.
Libra: A Threat To U.S. Dollar
Libra has the potential to replace the dollar as the currency of choice for legitimate international transactions. The billions of users of Facebook around the world gives Libra an unrivaled boost for an extensive acceptance by the merchants as well as ordinary people.
The values of all national currencies oscillates a lot against one another. With so many goods purchased on global markets, fiscal and trade policies, and recessions, the purchasing power of any of the currencies can be reduced, including the dollar.
The world needs a digital currency that can bring together stability, low inflation, wide global acceptance, and fungibility. Libra has the potential to mitigate these problems as it is designed to be a stable currency that will be fully backed by a reserve of real assets (Libra Reserve). If the government allows Libra to prosper by treating it as an official currency, then ordinary people can enjoy a genuine and stable digital money, and local currencies can easily be replaced.
Banks Of The Digital Age
The traditional banking industry is confronting disruption at an ever-growing pace over the past few years. Big tech firms are nowadays expanding to offer financial services as well, creating Techfin solutions. Techfin firms start working with technology and proceed to use it for commerce and trade. Built on digital platforms, these big technological organizations are efficient and have ways to minimize operational costs and monetize their business models. Companies like Amazon, Alibaba, and Facebook have already entered the financial sectors as Techfins and are disrupting the banking sector at a time when people still find it hard to trust conventional and reputed banks.
Fintech firms are those in which the original financial systems are improved by implementing various technological advancements. Traditional Banks and Fintechs faces huge competition from tech companies trying to act like banks in the digital age, leaving them no other choice but to collaborate. This is the only way forward for the banks to stay relevant. Today, more and more banks are willing to use technology and innovation as a part of their business models to remain in the competition in the digitally-driven economy.
Governments generally don’t have any issues with tech companies to act like banks in the digital age, as long as they have control over the currency being used, i.e. government should be able to regulate the issuance and supply as well as keep a track of the currency.
Conclusion
Libra is a great attempt by Facebook to introduce an instant, secure, stable, reliable, and global currency, replacing the existing financial models to become a bank of the digital age. It does so by utilizing the concept of blockchain and decentralized networks. However, it is not completely decentralized and uses a permissioned blockchain in order to provide better scalability and security. It may also pose a threat to the local currencies due to its stability, low inflation, wide global acceptance, and fungibility.
Libra or not, but digital money/currencies are surely the future of this world. We are living in a digital age where we cannot even imagine our lives without internet and everything has gone digital. In such times, digital currencies which are secure, reliable, and provide a hassle-free experience are a need of the hour.
