What is Libra? A Guide to the Facebook Coin
Take a closer look the Facebook coin Libra, what it is, how it works, as well as the ongoing controversies around it.
Facebook Coin is here. — Or at least, it soon will be. Over the past two weeks, Facebook’s new Libra cryptocurrency has dominated cryptocurrency news feeds. Some say Libra will be good for existing cryptocurrencies like Bitcoin. Others say that Facebook’s Libra cryptocurrency is cause for concern, and should be approached with caution.
Below, we’ll explain what Libra is. We’ll also look at how Facebook’s so-called ‘Facebook Coin’ might transform the cryptocurrency market as we know it.
What is Libra AKA Facebook Coin?
To understand what Libra is, it is important to understand what Libra isn’t.
First and foremost, Libra is not a cryptocurrency which Kiwis should look to invest in. Libra is a stablecoin like Tether. It is not, therefore, possible for Libra to increase in value like Bitcoin over time.
Instead, the Libra Facebook Coin will stay relatively stable compared to fiat currencies like the New Zealand Dollar.
Learn more: Read our comprehensive guide on Bitcoin.
How Libra Works
To maintain consistent dollar to Libra values, Libra is backed by what Facebook calls a ‘Libra Reserve’. The Liba Reserve itself, is a basket of global fiat currency deposits, government bonds, and securities.
Whenever anyone buys Libra, fiat currency funds will be deposited into the Libra Reserve accordingly. Libra partner banks, companies, and payment processors are also being invited to deposit fiat currencies and securities into the Libra Reserve.
How Libra Transactions Will Work
At present, there is some debate concerning whether or not Libra is a true cryptocurrency. Cryptocurrencies like Bitcoin process transactions via decentralised blockchains. With Libra, this isn’t really the case.
Libra uses what is called a ‘permissioned blockchain.’ Libra is not, therefore, decentralised. Neither are transactions truly immutable.
- Select Facebook Coin partners will pay to operate Libra masternodes which validate Libra transactions.
- Libra transactions are not processed in blocks. Instead, Libra transactions will be added in real-time to a centralized transaction ledger.
- Facebook compliance with regulators and law enforcement, means that Libra transactions can be frozen, reversed, and declined.
Centralised Libra transaction processing, means that Libra is essentially a cryptocurrency in name only. This is causing some controversy in Europe and the U.S. However, it is likely to be possible to exchange Libra for coins like Bitcoin on cryptocurrency exchanges – including Easy Crypto!
What is blockchain technology? Read our guide to get you up to speed.
Facebook Coin Will Benefit Most Traditional Cryptocurrencies
Why many cryptocurrency market watchers are excited about Libra is simple. Facebook is planning to roll out extensive Libra merchant support.
- Libra users will be able to pay using Libra online and in real-world brick and mortar retail stores.
- It is going to be possible to withdraw Libra from supporting ATMs as fiat cash.
- Facebook is planning to give merchants incentives to accept Libra
Libra is, therefore, about to make spending coins like Bitcoin in real-life easier than ever. BTC users will simply exchange BTC to Libra on exchanges. Then users will spend or cash out coins with any retailer who accepts Libra.
Facebook Coin Concerns and Controversies
As well as making it easy to cash out and spend crypto coins like Bitcoin, Libra will make it easier than ever for new-to-market investors to buy BTC. However, not every cryptocurrency is as excited about Libra as Bitcoin.
- Libra will undermine the use case of existing stablecoins like Tether.
- As a payment coin, Libra undermines the use case of existing payment coins like Bitcoin Cash.
Banks and governments also have concerns about Libra. They argue that Libra will eventually undermine traditional sovereign currencies. This could have a detrimental effect on banks and the ability of governments to implement their own monetary policy.
Individuals also have cause for concern about Libra further consolidating power with corporations such as Facebook. Facebook has a patchy track record when it comes to data privacy, and censorship – both of which are worrying when it comes to payments.
When is Libra Launching?
At present, Libra is attempting to allay fears of financial regulators in the U.S. and EU. If successful, Libra will be launching in early 2020.
It is also possible, though, that some Libra technical specifics may change before Libra launches.