After years of ruling the social media, Facebook is planning to venture into the cryptocurrency market. Libra is the newly announced digital currency (represented by ≋ Unicode character) that could launch in 2020. The company has partnered with 27 other stakeholders including Visa, PayPal, Uber, eBay, and Spotify. It would apparently become the digital payment medium within its platform.
Libra: How does it work?
The first thing that comes to the mind when we talk of cryptocurrency would be Bitcoin. Well, Libra is distinct from Bitcoin. As Brian Kelly, CNBC expert in cryptocurrency puts it:
“This is really the main difference: what Libra is doing is creating a digital version of the U.S. dollar, yen, euro. It’s like a stable coin, but you still have all the characteristics of a fiat currency, Bitcoin is … digital gold. And, in my opinion, it’s probably a lot better than gold, but there is no trusted third party involved, and that’s a huge difference.”
As Kelly puts it, in case of Libra, you could exchange your dollar for it and the investment is entrusted by Facebook and its fellow backers with building a reliable ledger of all transactions. That said, you should be aware of whom you’re entrusting your money with.
While Bitcoin’s peer-to-peer transactions don’t involve any third party intermediary, Libra would be managed by a Facebook subsidiary. Calibra is the name of this non-profit organization that is tasked to ensure the privacy of your data and crypto transactions. Facebook assures that your Facebook account and personal identity won’t be used for ad targetting.
On a side note, the Facebook wallet to transact Libra is also christened Calibra.
Facebook’s new digital payment system is still in the development phase and the arrival is slated for 2020. However, it might not surface in India.
Is Facebook Libra a win-win for all?
As a user, you will be paying a fraction of the transaction fees that you pay while using the traditional cards. Even those without a bank account could hop on to this and enjoy digital transactions.
Further, as stated, it would be backed by Facebook and various other companies. Facebook is already in a close tie with advertisers and business across the globe. Ergo, unlike Bitcoin and other altcoins, Libra would be less susceptible to speculatory seesaw.
While Bitcoin’s surge and slump depend on the economy, Libra would be backed by Facebook and other founding members. Their incentive would be the interest that they would earn on the money users invest in Libra reserve. This would, in turn, stabilize the value of Libra.
The Libra’s value is backed by several bank deposits and short-term government securities as collateral. These include historically stable international currencies, including the dollar, pound, euro, Swiss franc, and yen.
Facebook’s VP of blockchain, David Marcus shared, “If more commerce happens, then more small businesses will sell more on and off the platform, and they’ll want to buy more ads on the platform so it will be good for our ads business.” So, the social media giant seems to be far-sighted with their new venture.