Facebook’s ambitious cryptocurrency plan has received a chilly response from a number of politicians, non-profits and regulators all expressing grave concerns on its consequences. President Donald Trump has also stated his allegations against the new currency quoting, “little standing or dependability.”
What is Libra?
Recently, Facebook has announced that it will launch a new cryptocurrency service in 2020. The service will be similar to PayPal as well as Bitcoin and might usher in the next wave of the blockchain revolution. Users will be able to access this upcoming digital currency through applications and can use it to pay for things or money.
Unlike PayPal, this currency will be available to users without credit cards or bank accounts. It will be integrated with WhatsApp and Facebook Messenger initially. Imagine playing awesome casino games in Facebook’s ‘Game section’ with Libra, instead of real money that is used in real online casinos like Omnia Casino. What’s more, Facebook’s reach is so extensive that the new coin might become a new global currency overnight, just like the euro and dollar.
How is it different than Bitcoin? How does it work?
Bitcoin does not have any central authority like the central bank to control its services. Cryptocurrencies such as Bitcoin use blockchain technology to make counterfeiting impossible by keeping a decentralized ledger of transactions that is maintained and shared across a huge network of computers.
Although Libra will use Blockchain technology to provide users with anonymity, its prices won’t fluctuate like Bitcoin which has fluctuated from $1,914 to $12,241 over the past two years. Instead, the value of Libra will be tied to a money pool in Libra Reserve which will get the cash from a new Swiss nonprofit organization (called the Libra Association) in charge of overseeing the cryptocurrency operations. As of now there are 28 initial members, from renowned companies like PayPal, Visa, and Facebook as well as non-profits like Kiva have come together to form the current organization. Every member has to contribute 10 million to the Libra Reserve. Facebook plans on increasing the number of members to 100 by 2020.
Users will be able to exchange Libras for money in the reserve which will be invested in a plethora of government currencies and bonds. The owner of the reserves will get regular interests from the investments. All the user has to do is download a crypto wallet app that lets them turn Libras into real dollars. Facebook is planning on doing that by creating a subsidiary service called Calibra. Calibra will allow users to send Libra to anyone who does not have a smartphone yet. The main reason for forming Calibra is to separate the financial information and social media information from Facebook’s main services.
You should not consider directly investing in the cryptocurrency as it won’t do any good. Keep in mind that Libra is more like a stable coin as it is pegged to the stable values of several global currencies and is not designed to fluctuate much unlike Bitcoin. In theory, Libra has the potential to offer basic financial services to those who don’t have a bank account. People will be able to easily transfer money to their relatives in other countries in seconds. Due to its 2.4 billion users, the company has the capacity to reach a huge audience in a short period of time. But the company is still facing opposition from various government bodies as well as the Congress. Moreover, Facebook has shed very little light on the functioning of the coin and the technology sued behind it. It still has not addressed how it will address the side consequences that this technology may usher.
No matter what, if you are planning on investing in cryptocurrency like Libra, be prepared for the volatility as the technology and the future consequences are still uncertain. But considering the massive users that Facebook has, it is highly plausible that Libra will be adopted widely around the world. You can make money out Libra indirectly though by checking out its backers. Although most of them are major companies, some of them still have room for growth. You can buy equity in one of the backers that own Libra Investment Tokens. You can invest in Bitcoin as well which is also getting a lot of hype thanks to the Libra announcement.