With Libra, Facebook is introducing a crypto currency that will bring financial capabilities to the whole world, including people in Third World countries who currently do not have access to financial services.
With Libra, Facebook thinks it holds the key to a usable digital currency. The social network is introducing Libra as a partial public alternative to Bitcoin, which, unlike other digital currencies, must have a stable rate.
Blockchain
Libra will run on a blockchain just like other digital coins. However, the necklace will not be public. In a traditional blockchain, anyone can participate as a node, keeping a copy of all transactions and contributing to the validation of new transactions. Libra launches as a closed coin managed by a handful of players.
Those players are not the least of them. Paypal, Visa, Mastercard, Uber, eBay and Lyft, among others, have already subscribed to the coin. In total there are 27 founding members. They will manage nodes and also contribute to the currency. That contribution serves as a kind of reserve on which the value of Libra is based. Libra gets its own version of the gold standard. This means that the value of the coin is dissociated from the concept of scarcity, which is the only factor that gives value to other crypto coins. Facebook hopes to launch a stable currency.
The limited number of nodes ensures on the one hand that Libra is not a completely decentralised currency, but on the other hand guarantees stability and above all a higher transaction volume. At launch, Libra should be able to handle 1,000 transactions per second. This is much more than coins like Bitcoin, which become agonizingly slow as they grow and also consume a huge amount of electricity when validating transactions.
Banking alternative
The social network will not participate directly in Libra. The company created a subsidiary with Calibra. It will develop the wallet for managing the digital currency. Calibra gets one of the 27 votes in the management of the currency, Facebook does not take any over.
Libra’s first target group is the Third World, where millions of people still do not have access to traditional financial services. Libra needs to facilitate transactions in a simple way, without incurring high transaction costs. This could greatly stimulate the economic growth of poor regions. In time Facebook hopes that the rest of the world will embrace Libra.
Libra should launch publicly by 2020. The code behind the project will be available under open source licenses and the currency will be open to everyone, but a contribution for those who want to have a say and want to operate a node remains mandatory. Libra’s headquarters will be in Geneva, Switzerland.
This news article was automatically translated from Dutch to give Techzine.eu a head start. All news articles after September 1, 2019 are written in native English and NOT translated. All our background stories are written in native English as well. For more information read our launch article.