The largest social networking site in the world, Facebook, announced on Tuesday their plans to launch a global cryptocurrency called Libra. The networking website is doing this as part of an effort to expand into digital payments and reach people without access to a bank account.
Following the announcement, the internet went into meltdown with the number one concern being privacy and exploitation of unsuspecting users. No surprise there, seeing as the site was on backlash all through 2018 for its violation of privacy, hackers gaining access to personal accounts and of course fake news accounts. With that being said, here’s what you should know about Libra.
Libra: What It Is And Its Uses
According to the networking giant, Libra is described as a “global currency and financial infrastructure”. In layman’s terms, Libra can become a more convenient way to pay online. Facebook is likely to begin selling products on its site and other subsidiaries like Instagram and Whatsapp but it Libra wouldn’t be exclusive to these sites. Other websites could use the cryptocurrency for e-commerce.
The digital asset known as Libra is built by Facebook and powered by a new Facebook-created version of blockchain. Tech geeks will know this as the same encrypted technology used by bitcoin and other cryptocurrencies. In addition to this, Facebook is hoping Libra will power transactions between established consumers and businesses globally and offer consumers without bank accounts access to financial services.
This isn’t all, for people in developing countries with less than ideal or no banking infrastructure in place, Libra can be used to save and transfer money with the added benefit of little to zero interest rates. Basically, Facebook’s Libra can be used as a bank and a supposed cheaper alternative to MoneyGram and Western Union.
Facebook has also promised that users will be able to trade the cryptocurrency in for cash. Furthermore, the day-to-day value of Libra will be pegged to the average value of a basket of world currencies, made up of U.S. dollars, U.K. pounds, euros, and Swiss francs.
Libra: Partnerships
Facebook has partnered with about 28 partners including Mastercard, PayPal, eBay, Farfetch, Lyft, Mercado Pago, Stripe, Visa, Anchorage, Bison Trails, Uber, Spotify AB, Vodafone Group, Kiva, Mercy Corps and more to form Libra Association. As of today, no banks are yet part of the group.
Libra Association is a Geneva-based entity charged with governing the new digital coin and will meet biannually. Switzerland was chosen due to its neutral status and support for financial innovation. The networking giant says it hopes to reach 100 founding members before Libra’s official launch. They are also open to direct competitors like Twitter and Google, providing they meet member requirements.
For easier transactions, Facebook also created Calibra, which is a subsidiary that will offer digital wallets to save, send and spend Libras.
Calibra will be separate from Libra and is made personally to handle crypto dealings and protects users’ privacy. How will this work? Calibra will not mingle your Libra payments with your Facebook data so you won’t be targeted for ads. To ensure user privacy, your real identity won’t be tied to your publicly visible transactions. But Facebook/Calibra and other founding members of the Libra Association will earn interest on the money users cash in that is held in reserve to keep the value of Libra stable.
Libra vs PayPal & Bitcoin
With the launch of Libra, Facebook intends to take advantage of the growing online cryptocurrency and possibly render PayPal extinct. As mentioned earlier, Libra transactions will be recorded on a blockchain, a ledger that runs across multiple computers and utilised by other cryptocurrencies. So in terms of similarities, there are many, this includes but is not limited to the ease of saving money and making payments online.
Are there differences? Yes, there are. According to Facebook, Libra will be backed by a reserve fund which makes its price more stable than that of Bitcoin, which lacks a fund and fluctuates in price. Bitcoin has records on a public blockchain that allows easy building by just anyone. Libra, on the other hand, asks developers to seek permission from Facebook before its features can be built on.
Techcrunch, in its assessment of Facebook’s Libra documentation, concludes that Libra is hoping to be an evolution of PayPal. They hope to accomplish this by offering a simpler setup, a more efficient way of sending money with fewer fees and a more ubiquitous as a payment method and other uses.
Libra: Privacy Concerns
Perhaps the most important information everyone wants to know is “Will Libra be safe and how about my personal information? Will Facebook know what I’m spending money on? Influential American bitcoin advocate Erik Voorhees simply stated “Libra is clearly not a pure cryptocurrency. Nobody should expect privacy by using it.”
The Johns Hopkins cryptographer Matthew Green tweeted out “I don’t think it’s possible to express what a catastrophic regression this thing is going to be. Say what you want about Visa and the legacy banks, they don’t broadcast your transaction details to the world.” As if this wasn’t enough, regulators both in the United States and Europe and calling for a massive oversight, especially with 2018’s scandals with tampering of personal information and more. Senator. Sherrod Brown said “We cannot allow Facebook to run a risky new cryptocurrency out of a Swiss bank account without oversight. I’m calling on our financial watchdogs to scrutinize this closely to ensure users are protected.”
As for Facebook and it’s investors, there is a readymade plan to combat privacy violations. Recall Calabria mentioned earlier on? This should be the answer to certain privacy concerns skeptics may have. Calibra wallet will be a separate company and will not combine user data with other apps unless given permission to do so. It won’t share any of your transaction data back to Facebook meaning you won’t be targeted with ads and neither will your News Feed be ranked. Therefore, in theory, only Calibra will have a record of your transactions. You won’t need a Facebook or WhatsApp account to sign up for Calibra or to use Libra. But, users can decide to use its integrated Facebook friend-finding feature, and if done, data will be combined.
What if I get hacked, scammed or lose access to my account? In the event any of these happens, Calibra will refund you for lost coins when possible through 24/7 chat support because it’s a custodial wallet. You won’t have to remember long, crypto passwords and get locked out from your money because Calibra will manage all your keys for you. Since Calibra will possibly become the default wallet for many Libra users, this extra protection and smoother user experience is going to be essential.
In a statement released by Facebook confirmed that it will be utilizing the same verification and anti-fraud processes used by banks and credit cards. “We’ll have automated systems that will proactively monitor activity to protect and prevent fraudulent behaviour,” the statement read.
Libra Launch And How To Get It
Facebook hopes to launch the cryptocurrency in 2020. Although it isn’t certain which countries will get it first, though Facebook has said that almost anybody in the world with a smartphone will be able to download the app. Users can download Calibra (a digital wallet), which will be available in Messenger, WhatsApp, and as a standalone app.
The partnerships with firms such as Visa and MasterCard suggests that the company will be perfectly happy to let users simply buy the currency.