On Tuesday June 18, Facebook announced it’s ambitious plan to dominate the global cryptocurrency market by launching its own digital currency called Libra.
According to Facebook, Libra’s mission is to enable “A simple global currency and financial infrastructure that empowers billions of people.”
Here are the 10 facts you need to know about Libra:
1. It is Cryptocurrency.
You knew that already. But what does that mean? It simply means that like many other cryptocurrencies, Libra is a decentralized digital currency that transcends local boundaries and is directly and immediately accessible to the global audience. Facebook’s goal is to create a truly global currency that has the following four attributes:
- Wide global acceptance
- Low inflation
2. It is built on The Libra Blockchain
Like many other cryptocurrencies, Libra is built on the blockchain technology called “The Libra Blockchain”. The Libra Blockchain is a “decentralized, programmable database designed to support a low-volatility cryptocurrency that will have the ability to serve as an efficient medium of exchange for billions of people around the world. ” The blockchain technology allows Facebook to scale Libra to billions of accounts, ensures high security of funds and financial data, and, gives flexibility so that it can power the future innovation in fintech space.
3. It is backed by a reserve of real assets.
In order to stabilize Libra in the volatile economy of cryptocurrencies, Libra is backed by a reserve of real assets called “The Libra Reserve“. That means you will be able to convert Libra into your local fiat currency based on current exchange rate. However, do keep in mind that since the value of Libra is tied to the underlying assets, as the value of the underlying assets fluctuate, so does the value of Libra in that local currency.
4. It is open-source.
The Libra Blockchain is powered by open-source software. That means anyone can use, inspect and modify the software. This is especially beneficial to developers who can use the Libra Blockchain in creative ways to build new applications for a variety of devices.
5. It is governed by an independent non-profit organization – The Libra Association.
The Libra Blockchain and Libra Reserve are governed by an independent, not-for-profit organization called The Libra Association. The organization is headquartered in Geneva, Switzerland signifying its goal to be a neutral, international organization. The governing body of the organization is called the Libra Association Council. All decisions regarding the network and reserve is brought to the council and has to be approved by at least two-thirds of the vote of the founding members of the council. The Libra Association is the only entity able to create (mint) and destroy (burn) Libra.
Having been aware of its privacy fallouts over the past couple of years, it is important to note that Facebook has strategically announced that it will be overseeing Libra indirectly, via a subsidiary called called Calibra. Facebook controls only one of the board seats.
6. It has ‘heavyweight’ supporters.
Facebook has partnered with finance, technology and non-profit giants to make its currency a reality. Some key partners include Mastercard, VISA, Kiva, PayPal, Coinbase, Spotify, eBay, Stripe, Andreessen Horowitz, and Uber.
7. It can be used by millions without access to banks.
Facebook designed Libra to be accessible by more than half of the world’s population who do not have an active bank account – especially in the underdeveloped and developing countries. According to The Gates Foundation, this situation is even worse for women.
8. It can be used by millions of small businesses without access to credit.
According to Facebook, about 70% of small businesses do not have access to credit, especially in developing countries. Facebook hopes to help these businesses meet their financial goals through access to Libra.
9. It can be used by millions of migrants to send and receive money.
There are millions of migrants around the world who send money every year to their friends and families abroad. According to UNESDOC, over $25 billion is lost to remittance fees every year for these money transfers. Libra can make these transactions possible at a fraction of the cost.
10. It is designed to be very easy-to-use.
When it launches in 2020, you will be able to send Libra to almost anyone with a smartphone at little to no cost. It’s designed to be as easy and instant as sending a text message. After the launch, Facebook wants to offer additional services such as paying a bill or riding your metro without having to carry cash.
If Libra works, Facebook can transform the face of the world as we know it by truly globalizing the financial transaction. If it can overcome the regulatory hurdles, it is uniquely positioned to make this a reality – simply by the sheer scale of its current and potential user base throughout the world.
Pete is a huge cryptocurrency fan and loves to keep tab on how digital currency is transforming the world. A proud father to a son, he loves exploring nature in his downtime.