On June 14, Facebook announced their intentions to launch their own cryptocurrency, Libra. This announcement sparked discussion and speculation across the entire space. Today, June 18, the project’s white paper and testnet were published.
What is Libra?
Per the recently released white paper, Libra is a cryptocurrency headed by Facebook and leaders across multiple industries united as the Libra Association. Alongside Facebook, the association includes PayPal, Mastercard, Uber, Coinbase, and many others.
The Libra cryptocurrency will run on its custom Libra blockchain. According to the white paper, it is a permissioned blockchain governed by the members of the Libra Association. By the anticipated release in the first half of 2020, the association expects to grow to at least 200 members. Further in the future, the ultimate goal is for the blockchain to become permissionless- where any individual can operate their own node.
The currency is a stablecoin, like Tether or Maker DAI. According to the white paper, the coin will be fully backed by fiat currency and government securities, which are also managed by the Libra Association. The primary ambitions of the network are to empower and serve the unbanked and underserved worldwide.
Libra vs. Bankers
While the project’s white paper touches on the shortcomings of existing blockchain networks in their inability to aid the unbanked, the majority of the document focuses on different manners in which the banks have historically failed and taken advantage of the most vulnerable.
While Facebook's Libra doesn't compete against any open, public, permissionless, borderless, neutral, censorship-resistant blockchains, it *will* compete against both retail banks and central banks. This is going to be fun to watch.
— Andreas M. Antonopoulos (@aantonop) June 18, 2019
As Antonopoulos and many others have already pointed out, Libra isn’t necessarily designed to compete with Bitcoin and most other cryptocurrencies. Bitcoin has value because it is sovereign, scarce, and decentralized. This does not mirror the core of the Libra project. Instead, Libra aspires to be a highly efficient, highly scalable financial tool that is easily accessible to the global masses.
The founding members of the Libra Association have a responsibility to promote the adoption and infrastructure surrounding Libra. As such, the members of the association are anticipating the use of Libra within their own platforms. It’s not too much of a stretch to argue that Libra very well may be the most widely adopted cryptocurrency project in the space within the next couple of years. If companies like Facebook incorporate it into their services, Libra will be more accessible than the services provided by traditional financial institutions, let alone other crypto initiatives.
As such, a successful Libra launch will manifest as a challenge from tech companies to the banks of the world. Banks must adapt and provide more competitive offerings to their clients, particularly those on the fringe of the system, or risk losing that business completely.
However, a challenge against banks does not necessarily translate to a victory for crypto. As many have pointed out, Libra doesn’t represent a traditional cryptocurrency. While the code for the network is open source, participation is not. Libra is not truly decentralized, and there is no documentation regarding how the founding members of the association plan to incorporate their tech.
A glaring exclusion from the white paper is any mention of the profit model for the project. As they say: when no product is pitched, the user is the product. Facebook, one of the biggest privacy and data abusers in today’s world, surely has plans to monetize the monetary data accompanied by Libra usage. Ideologically, this goes against the core values of cryptocurrency.