What Is Libra Cryptocurrency?
Libra is the digital currency proposed by Facebook. The cryptocurrency has not been launched. Although the experimental code of the currency has been released, Libra is to be officially launched in 2020.
The cryptocurrency is to be managed by the Libra association which is an organization of several companies from different areas in the industry.
How Did Libra Start?
In 2017, Morgan Beller commenced work on cryptocurrency and blockchain. At the time, Beller was the only person working on the project. David A. Marcus moved Facebook Messenger to a new blockchain division in May 2018 and news of Facebook developing a cryptocurrency came out a few days later. As of February 2019, there were already over 50 engineers on the project.
The news was, however, confirmed when Facebook made the announcement official in June 2019. Before then, it was simply regarded as ‘Facebook Coin’ or ‘GlobalCoin’. The currency was formally announced as Libra in June 2019 with its creators being David Marcus, Morgan Beller, and Kevin Weil.
How does Libra work?
When released, the cryptocurrency would have the backing of typical currencies and treasury security of the United States. This would help the volatility of the currency. Facebook also announced that all partners will invest $10 million initially. This would help Libra get full asset backing on the day it is launched.
The Libra service partners in the Libra Association are responsible for the creation of new Libra currency units on demand. Once converted to the regular currency, Libra units would be retired.
Unlike Bitcoin and some other cryptocurrencies that exist on permissionless blockchains, Libra is not decentralized and the Libra association plays the role of a de facto central bank. The Libra association was founded in Geneva, Switzerland, and consists of several fintech companies. Although some companies like Visa have claimed that they would only join in once the currency satisfies all regulatory requirements.
The Libra association is expected to grow to 100 members all with an equal vote with Facebook maintaining its leadership role through 2019.
How will the Libra Blockchain work?
Unlike some other cryptocurrencies, Libra would not depend on the mining process. Only members of the Association can process transactions on the permissioned blockchain. However, Facebook has already indicated interest in moving to a permissionless proof-of-stake system in five years.
Facebook would also be releasing a digital wallet called Calibra. The wallet would be made available in WhatsApp and Messenger and would also exist as an app by itself. The source code of Libra is written in Rust and was published as an open-source in June 2019. The source code was released under the Apache License.
The Facebook cryptocurrency project has faced notable criticism, especially from central banks. The utilization of a cryptocurrency in its implementation has been greatly questioned.
Regulators and politicians in the United States have shown concerns following the announcement of the cryptocurrency. The Chairperson of the United States House Committee on Financial Services, Maxine Waters, asked Facebook to stop the development and launch of Libra, citing recent financial scandals involving cryptocurrencies. Waters claimed the crypto market currently lacked a clear regulatory framework.
The Chairman of the Federal Reserve, Jerome Powell, in his testimony before Congress also stated that there were also serious concerns on how the cryptocurrency would handle consumer protection, money laundering, and financial stability.
In France, the finance minister of the country stated that the nation would not permit the adoption of the cryptocurrency in the European region as it was a serious threat to the monetary sovereignty of countries. He also commented on the high potential of the cryptocurrency to be abused as the major reason for not supporting the cryptocurrency in the European region. Several other countries have shown skeptical reactions to Libra and some have begun the investigation of the cryptocurrency.
Privacy Concerns of Libra
Some observers in the industry have also expressed concerns about the security policy of Libra. Facebook currently plans to allow Calibra, a subsidiary of the company, to manage Libra for Facebook users. Executives have, however, come out to reassure Facebook users that no account holder’s purchase information would be shared without due authorization.
There are also plans to have a friend-finder search function, this function would allow Calibra to combine an account holder’s transaction history with their Facebook account.
Another major concern expressed was fake Libra websites. However, Facebook has put in some mechanisms to police false information and fake Libra websites on its platform.
An opinion writer at Bloomberg News, Elaine Ou, compiled and tried the Libra code that was released publicly and found that most of the features outlined in the white paper had not been implemented. Ou expressed concerns that Facebook released the software in that state.