Facebook has finally revealed the white paper for its long-awaited dive into the cryptocurrency realm with the introduction of the Libra.
On Tuesday morning, Facebook released the details of its cryptocurrency Libra, which will allow individuals to buy things or send money to others with almost zero fees. Users will be able to purchase or cash out Libra online or at local exchange points like grocery stores or banks, and invest it utilizing interoperable third-party wallet apps or Facebook’s own Calibra wallet which will be built into WhatsApp, Messenger, and other applications.
Libra is part of a bigger picture, however. Backed by a bucket of currencies and federal government bonds, Libra will be part of a more complete community, new monetary facilities Facebook expects will play a role in lives of billions of people who may not have access to traditional banking services. Libra itself, and the network behind it, are set to launch in 2020.
There are 28 companies already on board, including household names such as Mastercard, Visa, Spotify, PayPal, eBay, Uber and Vodafone, in addition to equity capital companies. These companies will also add to what currently referred to as the Libra Reserve, the asset pool swimming pool that will ensure every unit of Libra currency is backed by something of intrinsic value rather than blockchain technology and scarcity alone, like Bitcoin and other cryptocurrencies.
As part of the announcement, Facebook introduced a test version of its blockchain, the innovation upon which cryptocurrencies like bitcoin are built. It is an open-source software application, meaning developers can experiment with structure applications on the platform and send feedback on the code.
Facebook has engaged with regulators in the United States and abroad about the proposed cryptocurrency, business executives said.
Is the world ready for the Libra?
Cryptocurrencies are mostly unregulated and investors have lost millions through hacks and breaches, while the space itself faces money-laundering and terrorist financing accusations.
Another issue is that Bitcoin and Ethereum weren’t exactly crafted to scale to be a legal tender, though a lot of progress has been made on this front. But because the market gives these cryptos value, they have been prone to big and unforeseeable swings, making it hard for merchants to accept them as payment. Cryptocurrencies miss out on much of their potential beyond speculation unless there are enough places that will take them instead of fiat currencies.
In many instances, Libra’s blockchain takes inspiration from others, using Ethereum’s account, gas, and smart contract model. The Facebook Libra will also be open-source under an Apache 2.0 license, enabling programmers to read, construct, offer feedback, and participate in a bug bounty program. Libra also brings its own innovations to the table in the way of its proprietary programming language and virtual machine, Move.
Libra will also be fully backed 1:1 by a bundle of financial properties most likely to include bank deposits and short-term federal government securities from the US Treasury, to name a few. This will help the Libra to avoid many of the dramatic swings experienced in other cryptos.
David Marcus, a former PayPal executive who is heading up the task explained, “Freedom, justice and money, which is exactly what we’re trying to do here.”
Facebook still in hot water over privacy concerns
Facebook has 2.4 billion users across the globe, an audience that could assist it to introduce a wider mainstream adoption of cryptocurrency than others have yet to generate. At the exact same time, the statement comes at a controversial moment in the company’s history.
Facebook, whose stock rose around 1% in early trading, is currently dealing with a barrage of scandals, and its new endeavor into finance might face opposition from privacy advocates, customer groups, regulators and legislators.
Additionally, the business is under regulatory and political scrutiny for its massive influence, and its mishandling of user data, even as it works to extend its reach further into users’ lives.
Some have actually pushed for Facebook to be charged for mishandling user data, permitting fake news and malicious content to appear on its website, not to mention the fallout following the 2016 election scandal.