Facebook’s New Cryptocurrency ‘Libra’: What You Need to Know
Facebook’s New Cryptocurrency ‘Libra’: What You Need to Know
Are you into Cryptocurrencies? If yes, then, your mailbox and your timeline may have been flooded with news about Facebook’s new cryptocurrency – Libra.
Facebook, the name that is synonymous to social media, officially announced that it would launch a digital currency, called Libra, by the first half of 2020.
This social networking giant is teaming up with several heavyweight multinational companies to boost the financial services. With this platform, billions of users, all across the world, especially the unbanked ones, can make financial transactions swiftly with nearly zero fees.
According to the white paper that describes the Libra project, “Libra’s mission is to enable a simple global currency and a financial infrastructure that empowers billions of people.”
If everything goes well, then this ambitious project of Facebook will revolutionize the scenario of banking.
However, a lot of questions may come to your mind, like What is Libra? Why is Facebook launching it? How is the digital currency different from other cryptocurrencies?
Let us discuss and try to answer them one by one.
What is Libra?
Facebook says, it will be “a stable currency built on a secure and stable open-source blockchain, backed by a reserve of real assets, and governed by an independent association,” and “our hope is to create more access to better, cheaper, and open financial services — no matter who you are, where you live, what you do, or how much you have.”
The name ‘Libra’ comes from the Roman system of measuring weight. It is also an astrological sign that stands for justice, and in French, it means Free.
Three wavy lines (≋) are used to represent this new cryptocurrency.
Why is Facebook developing this Cryptocurrency?
John Freeman, the vice president of stock research at CFRA, says,
“Everyone wants to get into payments, and now it’s Facebook’s turn.”
In a white paper, Facebook declares that the objective behind the debut of this global currency is to reach the 1.7 billion people in the world, who do not have a bank account, and so financial transaction is always a tough row to hoe for them. With Libra, according to Mark Zuckerberg, sending money online will be as easy as sending photos.
Though Facebook has not yet lifted the veil, it may be planning to achieve something big with this cryptocurrency.
Calibra, a new subsidiary, will run a wallet and help to make the transaction. According to the white paper, “Facebook created Calibra, a regulated subsidiary, to ensure separation between social and financial data and to build and operate services on its behalf on top of the Libra network.” Many assume that those services may include games, as well as commerce.
Who will be in charge of Libra?
Facebook will not solely control this global currency. An array of companies called the ‘Libra Association’ which will include Uber, MasterCard, and Andreessen Horowitz and some others will govern the currency.
Following the announcement of Libra, Mark Zuckerberg, the chairman, and CEO of Facebook wrote in a blog post that before the launch of the currency, he wishes to get 100 members on board, and their rivals like Twitter and Google are also welcome to join in it.
The companies which are in the ‘Libra Association’ contributed $10 million for being listed as founding members.
Though Facebook has made both the Libra Association and the Libra Blockchain, the social media behemoth has unraveled the fact that after launching the cryptocurrency in the coming year, it will take out from the leadership role and all the tech companies that are members of the association will get equal rights to govern Libra.
What is the difference between Libra and other Cryptocurrencies?
Before we discuss the differences, let’s talk about the similarities.
Like Bitcoin and other cryptocurrencies, Libra is a virtual currency and allows users to be anonymous. Moreover, the same technology called Blockchain will be used to confer the transfer.
While the price of other cryptocurrencies fluctuates wildly and this fluctuation brings them the tag of ‘problematic currency’, but, with Libra, you’ll never have to worry about such instability, as the value of Libra will be roped up to the money of ‘Libra Reserve’ that will get the cash from the members of the Libra Association.
Unlike other cryptocurrencies, which are not supported by anything, and so, have certain limitations, Libra will be teamed up with a cluster of assets that will contribute to escalating its value.
Though the Libra Association has not mentioned what the assets are going to be, they have indicated that they will add “bank deposits and government securities in currencies from stable and reputable central banks.”
Does Libra have any effect on the rest of the Cryptocurrency Market?
If you learn about cryptocurrencies, you will come to know that there are more than one-thousand cryptocurrencies all across the world with Bitcoin being the most popular one. The other widely traded cryptocurrencies include Ethereum, Litecoin, XRP, and EOS.
As it is predicted that Libra will be launched with some new characteristics, if this global coin is accepted and becomes popular, it will shift the attention of investors from other cryptocurrencies and thus, may ruin their market.
However, according to Joseph Stiglitz, recipient of the Nobel Prize in Economics, Libra will not offer much either. In a syndicated column, he recently wrote:
“Why would anyone give Facebook a zero-interest deposit, when they could put their money in an even-safer U.S. Treasury bill or a money market fund?”
The answer can be to defend the criminal activities as one cannot trace the transactions.
How can you use it?
To use the cryptocurrency, you need to download Calibra, a digital wallet. It will permit you to send this cryptocurrency to anyone around the world with a smartphone. Once Libra launches, users, can download the digital wallet. Moreover, it will be available in WhatsApp, Messenger, and as a standalone app, and users can use it by purchasing Libra.
Facebook has not yet declared in which country it will launch the coin first. However, it has given the assurance that “almost anybody” in the world, who has a smartphone can enjoy the advantage of the global coin.
As the cryptocurrency is still in its development phase, anything can be added or changed before its final launch in 2020. Till then, we have to wait.
What do you think? Feel free to share your thoughts in the comment section below.