You’ve probably heard about it:
The Facebook cryptocurrency codenamed Libra coin has been a hot topic in the crypto space for the past two months.
Hardcore bitcoin enthusiasts have dismissed Libra as PayPal on the blockchain. Altcoin enthusiasts, on the other hand, have welcomed the new stable coin citing that Libra heralds a new era for crypto adoption.
And, the debate still rages on:
Some of the questions that arise during discussions about Libra coin include:
Is Libra a threat to Bitcoin? Is it permissioned or permissionless? Is it really decentralized? What will be its effect on the mass adoption of cryptocurrencies?
In this article, we provide answers to these questions and many more. We’ll unpack the 10 must-know facts about Facebook’s Libra coin. This includes a description of what Libra and what it’s not, an explanation of its potential impact on Bitcoin adoption and many more.
So, without further delay, let’s dive in:
Fact 1: Libra Isn’t A New Bitcoin
Any discussion about Libra wouldn’t be complete without comparing it to Bitcoin.
Immediately after its launch, some bloggers were quick to compare the Facebook cryptocurrency to the king of crypto. However, this is not the case, as the two digital currencies are entirely different.
Firstly, the two coins have different approaches to censorship
The Bitcoin whitepaper describes the king of crypto as a peer to peer payment system that people can use to exchange money without going through a centralized financial institution. This feature means that no single entity has control over the network, making it censorship proof. The Libra network, on the other hand, will be governed by a consortium of organizations, putting the digital currency at the risk of censorship.
Another towering difference between Libra coin and Bitcoin is the fact that the Facebook digital currency is not a true cryptocurrency (as per the traditional definition of the word).
On the surface, Libra is a stablecoin, meaning that its value is pegged to real-world assets, including fiat currency. However, as opposed to other stable coins, Libra is backed by short term government securities and a basket of bank deposits. By definition, any security-backed asset is considered a security by itself. If you consider this definition, Libra coin is literally a currency exchange-traded fund (ETF)
Libra coin and Bitcoin also differ in how the supply of each is controlled.
The Bitcoin supply is fixed and does not react to market demand. However, Libra will be continuously created or burned when authorized resellers deposit or withdraw money from the reserve. This makes Libra’s supply prone to control.
The Libra network will also allow the issuing of smart contracts and will not work on a Proof-of-Work consensus algorithm. As opposed to Bitcoin mining, which is energy-intensive. The Libra network won’t require high amounts of energy to validate transactions.
Fact 2: Facebook Will Not Have Full Control of Libra Coin
I’ll be honest:
The first time I heard that Facebook was launching a cryptocurrency, I was scared.
“This is too much power for one organization.”
“Other than having access to our personal data, the social media giant would also have access to our financial data. “
“Facebook also has no experience in the financial industry, how would they survive against other established financial organizations?”
Facebook answered all these questions with the announcement of the Libra Association group, which is a consortium of 28 founding organizations who will act as transaction validators. Facebook targets that the Libra association will have 100 members.
This first-ever crypto oligarchy will govern the Libra blockchain, meaning that control of the Libra coin will not solely be on the hands of the Mark Zuckerberg company. Any decision regarding the coin and the network will have to go through a consensus.
Fact 3: Libra Will be A Permissioned Blockchain (For a While)
Honestly, this is somewhat of a disappointment.
Although Facebook will not have sole control of the Libra network, the network will still be under the supervision of a group of organizations.
As opposed to the Ethereum or Bitcoin blockchains, which are permissionless (meaning nothing prevents you from buying a powerful machine and joining the network), the Libra blockchain will be permissioned. Only members of the Libra association will be able to confirm transactions, making the Libra network partially decentralized.
However, Facebook has stated that they plan to transition the Libra network to a permissionless system. The shift to a permissionless system will depend on whether the organizational and technical issues facing the company can be resolved.
Fact 4: It Will Cost $10 Million to Run a Node
How much does it cost to run a Bitcoin node?
Approximately $ 10000, and you’ll be a small-scale miner.
However, becoming a transaction validator on the Libra Network is only reserved for a selected few organizations.
Organizations wishing to run a Libra node will have to be willing to part with a minimum of $10 million. These companies should also be industry leaders in their respective fields and should have an international customer base.
Each transaction validator will have a single vote and will be entitled to a share of the dividends earned depending on their investment.
Fact 5: Facebook Won’t Have Access to Your Financial Data
I don’t know about you…
…but I’ll never trust Facebook. Not with my data or with my money.
Facebook has a bad reputation with data privacy and protection. From unethical use of user data to questionable password management policies, Facebook has dropped the ball more than once when it comes to user data protection.
They’ve lost our trust, and if you can’t trust a company with your personal data, how do you trust it with your financial data?
Well, the social media giant read our minds and launched Calibra, a Facebook subsidiary whose sole focus will be financial services.
According to Facebook, Calibra and the parent company will be separate entities. The social media giant has pledged not to use Calibra user data for ad targeting. Data from Calibra will only be shared with Facebook, and third-party companies only with the customer’s consent.
However, in certain circumstances, customer data may be shared with law enforcement
Fact 6: Libra Coin will be a Non-Volatile Digital Currency
Unlike Bitcoin, whose price can drastically change in a short time. Libra coin will be a stablecoin backed by a basket of low volatile assets
Libra’s stability is strengthened by the fact that it is pegged to different currencies. Unlike other stablecoins, whose value depends on the dollar, Libra’s value is not dependent on one currency. Major price fluctuations in the currency markets will have no significant impact on its value.
Although the exact value of a Libra has not been determined, it should be somewhere equal to either a dollar, pound, or euro.
Fact 7: Regulatory Concerns May Hinder Launch
It was expected, wasn’t it?
Facebook’s decision to launch a digital currency that posed a threat to central banks and global financial stability would attract scrutiny from all areas.
Although Facebook expected some regulatory hurdles before launching Libra, the social media giant did not expect regulatory issues to be an insurmountable barrier.
Already, the proposed digital currency has experienced a bad reception in congress, with some leaders calling for the project to be halted entirely. Leaders in other nations, including the United Kingdom, have also called for the immediate halting of the Libra project.
Facebook has introduced various measures to help with regulatory bottlenecks. Examples of the steps include requiring Calibra wallet holders to fill out know your customer forms before using the platform
However, if the Mark Zuckerberg company does not figure a way around the regulatory issues, the crypto coin may never launch.
Fact 8: The Libra Platform is Highly Scalable
What’s Bitcoin’s most significant drawback?
It has some of the lowest transaction per second rates in the crypto space, which has drastically limited its scalability.
In comparison to the Bitcoin’s 7 transactions per second, Libra is looking to average 1000 transactions every second. By being able to handle more transactions per second, the Libra network will have solved the scalability problem which has plagued many old cryptocurrencies.
Fact 9: Facebook Brand Recognition Will Impact Libra’s Adoption
Perhaps one of Libra’s most significant advantages over other crypto projects.
Facebook has over 2.7 billion active monthly users in its family of apps. These users make up the target clientele for Libra coin.
Facebook will use its brand recognition to promote the adoption of the Libra coin. Although people in developed countries may distrust Libra coin, those living in developing countries are more likely to trust a crypto project from a well-known company as compared to other projects from unknown companies.
Fact 10: Libra Coin Could Promote Mass Adoption of Bitcoin
Perhaps one of the biggest questions when it comes to Libra and Bitcoin:
How will Libra affect Bitcoin adoption?
Although altcoin enthusiasts may argue that Libra could be the digital currency that finally dethrones Bitcoin, this may not be the case.
If Libra makes it through the regulatory hurdles, it has a high chance of achieving mass adoption. For some people, Libra may be their gateway to the world of cryptocurrencies. Some of the new Libra users may decide to exchange some Libra for Bitcoin, which will result in more people using bitcoin.
Although it’s not a cryptocurrency as per the traditional definition, Libra will help promote bitcoin and crypto adoption.
Libra Coin: Final Thoughts
There you have it:
Everything you need to know about the Facebook digital currency project.
Although its strays from the traditional definition of cryptocurrencies, it’s still a project that will significantly benefit the crypto space.
Through the project, more people are likely to know about cryptocurrencies and in turn, promote increased adoption.
Keep reading our blog for more news on Libra coin.