Supporters of cryptocurrency like Bitcoin and Ethereum rejoice.
It seems like a major world market player has plans to make cryptocurrency mainstream, and surprise, surprise. It’s none other than Facebook.
Considering that Facebook has a knack for making things REALLY simple to use and adopt… I mean, just think about it. 15 years ago, no one was sharing cat memes and letting everyone in their lives know exactly what they’re having for breakfast. EVERY. SINGLE. DAMN. DAY.
Although now we also have Instagram for that…
But seriously, as of March 31, 2019, there are 2.38 billion monthly active users on Facebook.
To give you some perspective, our world population currently stands at 7.5 billion according to the United States Census Bureau.
So can you imagine what Facebook could do for cryptocurrency if Mark Zuckerberg somehow manages to convince one-third of the world to transact only in Libra?
Yeah.
We wouldn’t only be limited to a pathetic, almost 40-ish businesses in Singapore which accept Bitcoin – according to CoinMap. And we’d probably be saying, “Eh, I Libra you liao” instead of “You accept PayLah or PayNow?” after transferring payment to our friend overseas – with little to no transaction fees involved.
TL;DR: What’s The Fuss About Libra?
- Adoption will be easier with Facebook’s existing 2.38 billion user base and track record with user experience
- Designed to avoid the roller-coaster valuations seen in earlier cryptocurrencies
- Decentralised but regulated by the Libra Association and subjected to local laws in markets regarding fraud and money-laundering
- Own and spend Libra through Facebook’s Calibra or other third-party wallets like PayPal, with nearly zero fees
- Send money or pay for something as easily as sending a Facebook message
What Is Libra?
In May 2019, Facebook registered Libra Networks LLC in Geneva, Switzerland to create a new digital currency: Libra.
In its recently released Libra white paper the Libra Association basically paints it as a “simple global currency and financial infrastructure that empowers billions of people”.
The new currency will be:
- Backed by the Libra Reserve
- Built on the Libra Blockchain
- Decentralised and governed by the Libra Association
- Its value is tied to a basket of assets that consists of a mix of international currencies (more on this in a bit)
For those going, “Damn cheem, please. What does this all mean?”
As always: I gotchu bruv.
Libra Reserve
Whenever you cash in a dollar equivalent of your local currency, that money goes into the Libra Reserve and an equivalent value of Libra (≋, yep that’s the unicode character for Libra) is minted and issued to you.
And if you choose to cash out of the Libra Association, the Libra you return is destroyed and you’ll receive the equivalent value of your local currency back. Plus, there’s always 100% of the value of the Libra in circulation, and it is collateralised with real-world assets and it never runs fractional.
I know. I know. Too cheem.
Here it is in simpler terms. Imagine this:
- There are only ≋5 in circulation
- You somehow own ≋2
- You cash out ≋1 for Singapore dollar
- This DOES NOT mean that your remaining ≋1 is now worth ≋1.25 since there are lesser Libra in circulation. It’s still only worth ≋1.
Governance Of Libra
Unlike other stablecoins – a cryptocurrency that is pegged to a stable asset like gold or arguably, USD – Libra will maintain its own value, which means that it should cash out to roughly the same amount of whatever respective local currency you use, over time.
And they are able to do this because the Libra is tagged to a basket of bank deposits and short-term government securities that consists of a mix of historically stable international currencies (including the dollar, euro, pound, Swiss franc, and yen).
By maintaining the basket of assets, the Libra Association can change the balance of its composition if necessary to offset any major price fluctuations in say… one foreign currency, so that the Libra stays consistent.
This means that your teh o peng (iced tea with sugar but no milk) won’t cost ≋1.30 today, and suddenly cost ≋5 tomorrow because the Singapore dollar depreciated against the US dollar by a landslide. If that happens, I might as well just drink Lipton tea from the pantry sua…
The governance of Libra is all managed by the Libra Association. Think of them as the MAS equivalent of this world’s world currency – except that they’re made of a conglomerate of private businesses, organisations, and institutions (again, more on this in a bit).
Which means that it can go two ways…
One, Libra Association stays true to its vision that “The world truly needs a reliable digital currency and infrastructure that together can deliver on the promise of “the internet of money.”” meaning we’ll truly have a decentralised governance of money which gives people the “inherent right to control the fruit of their legal labour”.
OR…
Libra Association decides to anyhow only because Mark Zuckerberg decides to…
Okay, okay. It won’t lah.
By the way, Facebook doesn’t technically own Libra, it’s sharing it as one of the many members that are part of the Libra Association which manages the Libra. Besides, there’ll be way too many rules and regulations put in place by the world government to ensure that this world currency stays decentralised and does not go to the dogs at the whim of one individual or private company.
What Is The Libra Association?
The Libra Association is an independent, not-for-profit membership organisation that is headquartered in Geneva, Switzerland.
According to the Libra website, all members of the Libra Association will consist of “geographically distributed and diverse businesses, nonprofit and multilateral organisations, and academic institutions.”
For now, the founding members include:
- Payments: Mastercard, PayPal, PayU (Naspers’ fintech arm), Stripe, Visa
- Technology and marketplaces: Booking Holdings, eBay, Facebook/Calibra (more on that in a bit), Farfetch, Lyft, MercadoPago, Spotify AB, Uber Technologies, Inc.
- Telecommunications: Iliad, Vodafone Group
- Blockchain: Anchorage, Bison Trails, Coinbase, Inc., Xapo Holdings Limited
- Venture Capital: Andreessen Horowitz, Breakthrough Initiatives, Ribbit Capital, Thrive Capital, Union Square Ventures
- Nonprofit and multilateral organizations, and academic institutions: Creative Destruction Lab, Kiva, Mercy Corps, Women’s World Banking
Note: the members in bold are those that I believe are of interest to Singaporeans. The fact that they’re participating in this endeavour is a testament that if Libra takes off, we’re going to be seeing a lot of changes to the way we can pay for services rendered by these companies.
They are the ones who will figure out the value of the Libra and will manage the Libra Reserve to keep the value of the Libra stable.
Decentralisation Of Libra
One of the biggest advantages of cryptocurrency and blockchain is that there will be no centralised entity to control our finances – be it banks or governments.
And the first thing I can think of with regard to the worldwide adoption of Libra will mean that banks can’t do stuff like charging us cross-border transaction or foreign exchange fees for our overseas transactions!
But will Libra be truly decentralised? After all, it IS a Facebook initiative.
And with the recent Cambridge Analytica scandal, where the personal data of about 50 million Facebook users was misused… you can see why many might suspect that Facebook will use Libra as a means of gathering financial data on its users.
Which is probably why Facebook had the foresight to create the Libra Association as a means to share the control of Libra.
So how much stake do the other members have in Libra?
Well, reports state that each member must invest at least US$10 million to join, and they will be granted their own node in the Libra ecosystem. The Libra Blockchain is managed by nodes, which are servers that help operate the blockchain that makes the Libra currency possible. Oh, and while we’re on this, Libra Blockchain is a cryptographically authenticated database that can handle 1,000 transactions per second.
And that’s faster than Bitcoin’s 7 transactions per second or Ethereum’s 15.
Each member, including Facebook, will only get up to one vote or 1% of the total vote (whichever is larger) in the Libra Association council. Although according to the Libra White Paper, while “final decision-making authority rests with the association, Facebook is expected to maintain a leadership role through 2019”.
It’s also important to note that even though there’s a lot of buzz surrounding cryptocurrency in the past couple of years, the adoption of cryptocurrency in the real world has been slow or almost non-existent.
But with Facebook leading the way with Libra, the problem of adoption is already mitigated through its existing user base of 2.38 billion monthly active users as well as – probably – billions more combined users under the various members in the Libra Association.
Think about it.
Tencent Holding’s WeChat Pay wallet has 900 million active users and we’re already seeing more and more restaurants and businesses in Singapore allow customers to pay via WeChat Pay wallet.
What would happen if 2.38 billion active users around the world switched to Libra?
Using Libra Through Facebook’s Calibra
So, I’ve taken you through the basics of Libra:
- Cash in your local currency
- Get Libra
- Spend Libra without incurring transaction fees
- Cash out Libra whenever you want
And you can do all of this through Calibra, a new subsidiary of Facebook that was launched to build financial services and software on top of the Libra Blockchain. Basically, an e-wallet for Facebook to transact Libra through.
Considering that Facebook already owns Whatsapp, Instagram, and Messenger, it’s not out of the question for users to potentially be able to send and receive Libra payments via Calibra through a simple Whatsapp message, an Instagram DM, or even through a text message via Messenger in the very near future…
What are you most excited about when Libra and Calibra finally goes live? Which local and overseas brands do you hope to see adopt Libra and Calibra?
