Facebook recently dropped the curtains to its cryptocurrency, Libra and it has taken the blockchain world by storm. As more information about the new decentralized global currency agenda comes to light, the more chaos is unleashed. Will Libra be the cryptocurrency to bring the blockchain technology into mainstream media or will its failure lead to a collapse of what minute trust exists in the system? Here is a conclusion reached about the venture from its whitepaper:
- Libra has ensured that all members of the Libra Association are an amalgamation of tech and finance giants. Those include Mastercard, Visa, Facebook, PayPal, eBay, Bitcoin exchange giant Coinbase, and more. This is done in order to increase the public trust in the governance of the system, although Libra hopes to become decentralized over time.
- Libra is pegged and backed by “low-risk” assets according to the whitepaper, the Libra Association “will only invest in debt from stable governments with low default probability that is unlikely to experience high inflation”. This is done to ensure that Libra remains a stable coin and its value does not fluctuate as much as other cryptocurrencies.
- In order to gain a node and a vote in the Libra Association, one must invest $10 million in terms of Libra Investment Tokens as a security measure. As stated in the whitepaper, “To be such a node, an entity needs to make an investment of at least $10 million in the network through purchasing Libra Investment Tokens… Each $10 million investment entitles one vote in the council, subject to a cap.” This means that with so much at stake, the investors in the system will be forced to make the right decisions and not indulge in personal gain through the project.
- To become a founding member, your business must be worth more than $1 Billion or hold more than $500 million in customer balances. There are other restrictions that they must be recognized as a top-100 industry leader by a respected authority, such as the Fortune 500, S&P Global 1200, etc. This is a measure undertaken to prove their value to the project and to have only the topmost ventures participating in Libra.
- Libra hopes to get completely decentralized slowly over time. Explicitly placed in the white paper: “an important objective of the Libra Association is to move toward increasing decentralization over time”. However, there is only a commitment in the white paper to start this transition within five years — but no clearly defined, or explicit steps to do so beyond consultation with the community.
- Libra coins can be cashed out to any fiat currency. Every national currency integrated into Facebook’s system will be completely interchangeable with Libra, according to the whitepaper. But that doesn’t mean their respective values will be interchangeable. In other words, the value of the Libra will still fluctuate like any other currency when exposed to the open market. The solution posited by Libra is to back the coin with “low-volatility assets” as previously mentioned.
- Libra will be operating on a huge scale, thus it has employed its very own programming language to increase reliability. Facebook built its own blockchain based on the Byzantine Fault Tolerance (BFT) consensus algorithm. Libra could achieve the scalability that the current crop of blockchain projects have sought in vain for years – as per the documentation: “Able to scale to billions of accounts, which requires high transaction throughput, low latency, and an efficient, high-capacity storage system.