The day has FINALLY come. After months (and even years) of speculation, Facebook (NASDAQ: FB) officially released the whitepaper for their cryptocurrency called “Libra” on Tuesday, June 18, 2019. This is the biggest announcement in the history of cryptocurrency. The 6th largest public company in the world, which has 2.38 billion monthly users on its social media platforms (over 30% of the world’s population!), will be integrating a digital, cryptographic token within their ecosystem. It is essential to follow this project closely, as I believe that Libra will change the crypto industry (and people’s spending habits) forever — it will push digital assets into the mainstream and revolutionize how value is exchanged. Facebook has not divulged all the details regarding Libra, but I think it is important to highlight the most significant information that has been revealed thus far. Here is what you need to know…. Libra is intended to be a “global currency,” facilitating peer-to-peer payments, planning to launch by the first half of 2020.[1] The project aims to deliver a “financial infrastructure that empowers billions of people.”[2] The whitepaper explains that one of the primary purposes of the currency is to provide an alternative to the “1.7 billion adults globally” who are “outside of the financial system with no access to a traditional bank.” [3] It is clear that Facebook has massive plans for Libra… they want to disrupt how the world stores and spends money. The currency will operate on the Libra Blockchain — which is open-source, meaning anyone can create applications on top of it — and it is built to “prioritize scalability, security, efficiency in storage and throughput, and future adaptability.” [4] Facebook also confirmed that their token will be similar to a “stablecoin,” which is defined as a cryptocurrency that is pegged to a “stable” asset like gold or fiat currencies.[5] Libra will be tied to “a reserve of low volatility assets, such as bank deposits and short-term government securities in currencies from stable and reputable central banks.”[6] The first product that will be built on top of the Libra Blockchain is a crypto wallet called Calibra, where you will be able to store and transfer your Libra. The wallet “will be available in Messenger, WhatsApp and as a standalone app.”[7] It is important to note that Calibra is a subsidiary of Facebook. As outlined in the whitepaper, “Calibra will let you send Libra to almost anyone with a smartphone, as easily and instantly as you might send a text message and at low to no cost.”[8]
What is Libra?
How Will You Send and Store Libra?
Facebook hopes to expand the functionality of the wallet in the future, adding the ability to pay bills and spend Libra in physical locations like grocery stores and restaurants.[9]
Perhaps the most interesting announcement related to Calibra is that it “will not share account information or financial data with Facebook or any third party without customer consent.” This means that the data that is gathered on a user’s spending habits within the wallet will not be “used to improve ad targeting on the Facebook family of products.”[10]
How Will Libra Be Governed?
Libra will be overseen by The Libra Association, which will operate as an “independent, not-for-profit membership organization” headquartered in Geneva, Switzerland.[11]
The Libra Association members will “run software to verify transactions that take place” on the Libra Blockchain.[12]
In an effort to encourage decentralization, 100 companies will be part of this governing consortium and will be charged $10 million each for the right to participate.[13]
Only a small number of members have been officially announced as part of The Libra Association, but they include some of the most influential venture funds, payment providers, retail outlets and telecom businesses in the world.
This group is comprised of Andreessen Horowitz, Union Square Ventures, Visa (NYSE: V), Mastercard (NYSE: MA), eBay (NASDAQ: EBAY), and Vodafone (NASDAQ: VOD), to name a few. The full list of participants is pictured above, courtesy of The Block, an online crypto news site.[14]
It has not been confirmed if any of these companies will accept Libra as a form of payment.
Facebook wants to keep an arm’s length relationship with the association, writing in Libra’s whitepaper that “Once the Libra network launches, Facebook and its affiliates will have the same commitments, privileges, and financial obligations as any other Founding Member… Facebook’s role in governance of the association will be equal to that of its peers.”[15]
How will Facebook Profit from Libra?
If Facebook is successful in building up The Libra Association, it “could net [as much as] $1 billion from the 100 companies it hopes to include in the project.” However, as mentioned above, only 28 members have been confirmed.[16]
Selling the right to participate in the Libra Network is currently the only known revenue-generating stream of the project, although there are surely more in the works.
Are There Regulatory Concerns?
Staying within regulatory parameters has been a key concern for Facebook leading up to Libra’s launch.[17]
The social media giant announced that “collaborating and innovating with the financial sector, including regulators and experts across a variety of industries, is the only way to ensure that a sustainable, secure, and trusted framework underpins this new system.”[18]
As they look to address legal and governmental concerns, Facebook has set strict parameters for using Libra within their ecosystem as they “plan to provide more stringent forms of identity verification and fraud detection than do most cryptocurrencies.”[19]
Having a separate foundation managing Libra (The Libra Association), can also be seen as a strategic move to appease regulators since Facebook will not be directly managing the cryptocurrency but will be in partnership with other companies to do so.[20]
How Will Facebook’s Announcement Impact Bitcoin?
Many experts are convinced that Libra will act as a “trojan horse for acceptance of BTC [Bitcoin].”[21]
Caitlin Long, who has held senior roles at Morgan Stanley and Credit Suisse and now is the head of the Wyoming Blockchain Coalition, expanded on this sentiment in a recent Forbes article.
She suggests that Libra users will eventually “turn to bitcoin for one simple reason — bitcoin is scarce, while Facebook’s cryptocurrency is not. People will migrate over time to the most honest ledger for storing their hard-earned wealth...” [22]
I strongly agree with this assessment, and believe that any user who is concerned about their confidentiality will be encouraged to switch to a more secure means of digital transactions which isn’t connected to a company that has had countless privacy scandals.
Let’s not forget, Facebook has 2.3 billion users! Even if a mere 5% of them start transacting with bitcoin, that’s another 115 million bitcoin buyers …more demand means higher prices.
What’s Next?!
Even with limited information, I am confident that the scale of Libra’s impact will be massive — Facebook has officially entered the financial services sector and is looking to disrupt how billions of people spend their money!
The story is still developing and I will be sure to keep you posted on the major updates as they emerge. Stay tuned and sign-up to the FNN website to follow one of the most monumental global shifts around currency and technology the world has ever seen.
Blake Finucane, Contributor
for Investors News Service
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DISCLAIMER: Investing in any securities is highly speculative. Please be sure to always do your own due diligence before making any investment decisions. Read our full disclaimer here.
Published June 2019
Sources:
[1] https://libra.org/en-US/white-paper/#introducing-libra, https://www.fool.com/investing/2019/06/07/facebook-may-launch-its-new-cryptocurrency-sooner.aspx and https://www.theblockcrypto.com/2019/06/14/facebook-to-launch-libra-blockchain-testnet-next-week-backed-by-libra-reserve/
[2] https://libra.org/en-US/white-paper/#introduction
[3] https://libra.org/en-US/white-paper/#introduction
[4] https://www.theblockcrypto.com/2019/06/14/facebook-to-launch-libra-blockchain-testnet-next-week-backed-by-libra-reserv
[5] https://cryptopotato.com/what-are-stable-coins-the-complete-guide/
[6] https://www.theblockcrypto.com/2019/06/14/facebook-to-launch-libra-blockchain-testnet-next-week-backed-by-libra-reserve/
[7] https://libra.org/en-US/white-paper/#introduction
[8] https://libra.org/en-US/white-paper/#introduction
[9] https://libra.org/en-US/white-paper/#introduction
[10] https://newsroom.fb.com/news/2019/06/coming-in-2020-calibra/
[11] https://www.theblockcrypto.com/2019/06/14/facebook-to-launch-libra-blockchain-testnet-next-week-backed-by-libra-reserve/
[12] https://www.theinformation.com/articles/facebook-plans-outside-foundation-to-govern-cryptocurrency, https://futureperfectventures.com/
[13] https://www.theblockcrypto.com/2019/06/14/facebooks-cryptocurrency-partners-revealed-we-obtained-the-entire-list-of-inaugural-backers/ and https://uk.reuters.com/article/uk-facebook-crypto-facts/facebooks-new-cryptocurrency-libra-and-digital-wallet-calibra-idUKKCN1TJ0U5
[14] https://www.theblockcrypto.com/2019/06/14/facebooks-cryptocurrency-partners-revealed-we-obtained-the-entire-list-of-inaugural-backers/
[15] https://libra.org/en-US/white-paper/#introduction
[16] https://www.theblockcrypto.com/2019/06/14/facebooks-cryptocurrency-partners-revealed-we-obtained-the-entire-list-of-inaugural-backers/
[17] https://www.coindesk.com/report-uber-paypal-visa-to-back-facebooks-globalcoin-cryptocurrency?utm_source=BlockchainBites&utm_medium=Email&utm_campaign=2019-06-14
[18] https://libra.org/en-US/white-paper/#introduction
[19] https://www.theinformation.com/articles/facebook-plans-outside-foundation-to-govern-cryptocurrency
[20] https://www.forbes.com/sites/caitlinlong/2019/06/09/what-facebooks-cryptocurrency-means-6-predictions/#59977ad67022 and https://www.theinformation.com/articles/facebook-plans-outside-foundation-to-govern-cryptocurrency
[21] https://www.forbes.com/sites/caitlinlong/2019/06/09/what-facebooks-cryptocurrency-means-6-predictions/#59977ad67022
[22] https://www.forbes.com/sites/caitlinlong/2019/06/09/what-facebooks-cryptocurrency-means-6-predictions/#59977ad67022
