The Fault in Facebook’s Stars: Libra Edition
~ By Vipriya Anjum
Last year when Facebook released its white paper for Libra, it added a new significance to the word that also represents a zodiac sign. Ever since the announcement, from every corner, it has been one level of scrutiny to another, from analysts to international organizations. As the stars align themselves, one wonders what fate has in store for Facebook's new cryptocurrency venture.
Aiming to be a simple low-fee currency that would be available on your phone and may be used for any purchase which is cryptocurrency supported, the cryptocurrency is handled by Libra Association, an independent not-for-profit organization made up of the coin's founding partners.
The name comes from the basic Roman measurement of weight. The abbreviation lb for pound is derived from the same, and the £ symbol originally comes from an ornate L in Libra.
28 companies and nonprofits, including finance and tech giants like Mastercard, originally backed the virtual currency, however, several withdrew later on.
HOW IT DIFFERS FROM BITCOIN?
Maybe the stark comparison lies in the usage of both cryptocurrencies, while Libra hasn’t been launched yet when it is, it will be used as a digital currency for purchases and trades on WhatsApp, Facebook, and other Facebook Properties. Bitcoin, on the other hand, can be used by anyone, anywhere in the world, entirely independent of any organization or platform. If two people have Bitcoin in their respective wallets, they can send the cryptocurrency to one another with impunity, as long as someone is there to validate the transaction through mining. An important feature of bitcoin has always been that it is decentralized. No single organization can change its transactions nor can they alter wallets or block anyone from utilizing them. Libra, however, is centralized implying the opposite. The original plan was to use a basket of cryptocurrencies to act as a backing that would have stabilized and prevented volatile swings. Comparatively, there is no backing for Bitcoin other than those willing to pay for it.
HOW WILL IT WORK?
When the cryptocurrency launches, users can download Calibra, now Novi, a digital wallet, that will allow them to send it to anyone with a smartphone. It will be available in Messenger, WhatsApp, and as a standalone app. Facebook said that with Novi, sending money will be as easy as sending a message.
IS LIBRA MORE OF A SECURITY THAN A CRYPTOCURRENCY?
Classifying cryptocurrencies has always been subjected to controversies. Several believe that Libra ought to fall under the category of securities because of its degree of centralization. The level of centralization implies that changes can easily be made by the owners which may influence its exchange rate.
Barry Eichengreen, a professor from the University of California Berkeley, believes that the contentious cryptocurrency Libra has too many factors against it to ever launch. He stated that the Facebook-backed cryptocurrency is an interesting concept, but it will ultimately “never see the light of day". He suggested that it poses too many problems which will never find a resolution and that there is too much government resistance for it to launch. He also raised several concerns about its negative repercussions on the economies of countries and that it stands the risk of undermining national financial policies.
STATES AND DIGITAL CURRENCIES
China’s central bank started testing its official digital currency DCEP recently, and the bank will soon roll out the virtual money payment system in a few days. This all has played out after Facebook-backed cryptocurrency lowered its ambitions to become a global currency. With China inching forward in the race, the research and development work of DCEP is proceeding steadily.
Meanwhile, Lithuania’s Central Bank, which will open a pre-sale for the world’s first digital collector coins dubbed "LBCOINs" on July 9 as part of its trial of blockchain technology and digital currencies. The Bank of Lithuania (BoL) has been developing the project since March 2018 and is now entering the final phase of the trial.
With states wary of the digital currencies taking over the economy and state control over the nation's finances, they are developing and coming up with new ways to avoid the same. However, we must let the stars and perhaps Facebook dwell on whether we would be using Libra anytime soon to buy our coffee or initialize online purchases.