Everything You Need to Know About Libra, Facebook’s New Cryptocurrency
Facebook has just announced it’s releasing its own cryptocurrency known as Libra. After the success of Bitcoin and Ethereum, the social media giant is looking to create a new global payment system with zero transaction fees, helping those without a bank account gain access to financial services.
But Facebook is taking a backseat in the development of Libra, giving multiple parties the chance to vote on the future of this technology and how it should be used. This will undoubtedly give Facebook a leg up in the online payment industry, securing the company’s future as a fountain of online capabilities.
With 1.49 billion daily active users, Facebook is well positioned to connect consumers all over the world.
But the company is going out of its way to protect user data as it gets ready to launch this new feature in 2020. Learn more about this new technology and how it will affect the future of Facebook.
How Libra Works
Libra will make it easy for anyone with an entry-level smartphone to manage their money online. Users can facilitate transactions quickly without facing costly fees. It will be stable, secure and scalable, helping everyone incorporate this new feature into their everyday lives.
As Facebook writes on the Libra website, “Moving money around the world should be as easy and cheap as sending a text message. No matter where you live, what you do, or how much you earn.”
Like other cryptocurrencies, Libra will run on the blockchain, which means it uses a decentralized series of nodes or operators that facilitate and validate new transactions. When processing transactions, validators interact with each other until they reach the consensus of the Libra community. These transactions are known as smart contracts, allowing each party to send or receive money without worrying about fraud.
As the company launches Libra, it will rely on the reputations of existing financial institutions, but the goal is to create a decentralized, open-source system where everyone can trade as they please without having to rely on a single institution.
Users will be able to trade in their native currency for Libra online or at local exchange points like grocery stores. They will also then be able to send and receive payments using a new system called Calibra Wallet, which will be integrated into the Facebook app, Messenger, and WhatsApp.
Who Owns and Manages Libra?
Facebook has come under fire in recent years for its failure to properly manage its users’ data. From the spread of fake information to the ongoing investigation into the 2016 election, the company is going out of its way to convince the world that it values user privacy.
That’s why Facebook won’t be the only organization in charge of Libra. After all, the blockchain and cryptocurrency are supposed to be decentralized, so handing over the keys to a single corporation defeats the purpose.
Instead, the company will be one of several founding members of what’s known as the Libra Association, a non-profit committee that will vote on the future of cryptocurrency. To become a member, companies and organizations will have to pay $10 million, giving them one vote on the committee, the option to become an official validator or node, and a share of the dividends Libra is expected to earn in the future.
Current members of the Libra Association include:
- Payment companies like Visa and Paypal
- Nonprofits like Women’s World Banking
- Service provides like Uber, Spotify and Lyft
- Venture capitalists
- Blockchain companies
- And many more
Facebook ultimately wants to reach 100 members to further decentralize the network, but right now there are only 28. The association is even open to Facebook competitors like Google and Twitter. As Libra gets off the ground, more members will likely take an interest in the cryptocurrency.
Why Does Facebook Need Its Own Cryptocurrency?
Facebook is playing the long game when it comes to cryptocurrency. Clearly the company sees a future in cryptocurrency and wants to get in sooner rather than later. Including payments in the social media infrastructure makes sense, especially when so many consumers are already using apps like Facebook and Instagram to shop for new products.
The last thing Facebook wants is one of its competitors, like Google or Amazon, to rule the cryptocurrency game. If Facebook users start using Google Coin or another cryptocurrency, these companies might gain access to Facebook’s treasure trove of user data, weakening Facebook’s power over time.
We should see Libra hit the market in early 2020, but Congress and other regulators are taking their time vetting this new service. With a decentralized association pulling the strings, more users may cozy up to Libra as opposed to seeing it as a potential threat to their privacy.
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