Facebook has announced its most ambitious product yet: a digital currency, Libra.
What is Project Libra?
Project Libra is about creating a currency that users can use online instead of the usual means such as bank transfers or existing digital payment platforms such as PayPal or Venmo.
It’s basically Facebook’s answer to Bitcoin.
Facebook has also created a digital wallet called Calibra that will help users spend as well as store Libra currency.
The company has also create a new programming Language called Move that will be used to program the currency’s blockchange. Other firms could also build blockchain-based services as well as smart contracts to leverage Libra’s network.
Who is this for?
While Facebook is trying to target users who do not have easy access to traditional banking instruments such as bank accounts, it is also trying to capitalise on how its current userbase already sends money through alternate channels such as WhatsApp.
How is it different from Bitcoin?
While Bitcoin, the well-known cryptocurrency, is fully open-source, only Facebook’s Project Libra partners will be allowed to manage the currency network’s nodes.
Facebook’s partners on this project, who will co-manage the currency through a Swiss foundation, include non-profits organisations as well as companies.
Collectively they will be known as the Libra foundation and each corporate member will contribute a minimum of US$10 million.
Who are these partners?
So far PayPal, MasterCard, Visa, Conibase and venture capital firms such as Union Square Ventures have been mentioned. David Marcus, a former PayPal executive who is leading Project Libra says Facebook is hoping that there will be as many as 100 partners on board once the currency goes live.
What about the currency’s value and volatility?
Unlike Bitcoin, Libra will not be as volatile as it will be backed one-to-one in a currency basket that will include dollars, euros, pounds and the Swiss franc.
A reserve fund will also be established to keep the currency’s value stable.
What about security and privacy?
Facebook has recently come under scrutiny for security leaks as well as a poor approach to user privacy.
The company has made assurances that it would not pull data from its other sites, such as Facebook but it comes with a caveat – the data won’t be pulled unless a user gives the company permission. This implies that Facebook might still request it.
Twitter users have even called Libra a “Panopticoin” or just another means for Facebook to track users online.
As to the security aspect, Facebook says it will use banking standards of verification and analysis.
How will it affect me?
If Project Libra takes off, it could mean a new era for cryptocurrency and making remittances faster and simpler, without needing to go through traditional financial institutions.
For businesses, it means widening its customer pool online to include those who don’t have bank accounts or credit cards.
In the foreseeable future, it wouldn’t be surprising for loans to also be disbursed via Libra.
How likely is Libra to take off?
In the end, it’s all about whether Facebook will be able to convince its huge userbase to jump onto the cryptocurrency wagon. It’s also likely the company might give out small amounts of Libra to entice users to begin making transactions.
I’m keen, when can I start?
Project Libra is set to debut mid-2020 with no fixed date as of yet. Until then, you might be wise to keep abreast of Facebook’s announcements.
Written by Erin Gray