A few years ago, Facebook informed the world about its plans for creating a new cryptocurrency called Libra. Although it was scheduled to be unveiled in 2020, the current situation suggests that its unveiling might get delayed until 2021. However, whenever it is released, it will be a stablecoin.
Even though Facebook has released a twelve-page white paper on its upcoming cryptocurrency, there are still several questions that are yet to be answered. After a month of scrutinizing, I’ve finally compiled a set of things that we know and a set of key things we don’t know yet!
What We Know:
- Since Libra is being promoted as an incredibly powerful cryptocurrency, it is completely fine to use some of the current cryptocurrencies like Ethereum and Bitcoin as models for what it would be like. However, it would be wiser to think about mainstream peer-to-peer payment gateways instead. It doesn’t matter if you’re talking about Western Union, WeChat, Square, Venmo or PayPal, all the mentioned payment gateways are placed on top of the mainstream financial system to facilitate several types of transactions such as remittances, check-splitting, and e-commerce. The major issue is that the above-mentioned gateways’ fees can be ridiculously high in most of the cases. Similar to all these gateways, Libra will also be placed on top of the current mainstream financial system, because every single coin will be supported by mainstream money in the bank to back a stable price. However, contrary to these gateways, there lies an excellent opportunity to develop payments unification worldwide, at an extremely cheaper rate. With the help of this, everyone will possess the power to develop payment applications on top of Libra. A lot of people might concentrate on friends splitting the bill of lunch. While some people might concentrate on remittance payments to creating markets.
- The launch of Libra coin by Facebook wasn’t far from a massive disaster in Washington. The not-so-positive responses in D.C. might force its enthusiastic plan to unveil the digital coins as soon as the middle of next year–and strengthen the notion that Silicon Valley firms have no idea whatsoever on how to operate in the country’s capital. Democrats quickly jumped to berate the social media giants for diving into the crypto world while so many doubts persist about Facebook’s guarantee to user privacy, alleged Russian-sponsored attacks in the election year of 2016, and its digital market power. Citizens were particularly more silenced in the response.
- The only way Facebook can gain traction in payments and win customer’s trust is by getting unconditional support from financial institutions. Even though this mega project has the support of unarguably the greatest payment gateways like Mastercard, Visa, etc., Banks’ absence was visible. To acquire the help needed for Libra, they also hired some of PayPal’s ex-employees.
What We Don’t Know:
- So, basically, there are only 2 ways to keep cryptocurrency. One is obviously in a custodian wallet or with a custodian. In case you buy, let’s say, Bitcoin from a reputed site like Coinbase, you are provided with an option to just let it be there, and they’ll hold it for you. But the problem is that you’re showing complete trust in Coinbase, which is a regulated entity, in case you didn’t know already. So, if for some reason a law enforcement agent comes looking for you and says that you’re a suspect in some criminal or illegal activity case, Coinbase could well and truly freeze your cryptocurrency, lock you out of your account and take your Bitcoin as well. The second way of holding your BTC or cryptocurrency is in your very own non-custodial wallet. This method requires you to keep the cryptographic keys that are used to unlock your coins in your own safe place. This could either be on your personal USB, HDD, your laptop, your mobile phone, or even on a paper that you keep in your safe. The problem is, in case you lose or forget your keys, your BTC cannot be retrieved, and hence, it is gone forever. On the other hand, the biggest advantage of this method is that you can do whatever you wish to do with your cryptocurrency, and there’s not much a law enforcement agent can do to your cryptocurrency. But this is where a question arises for Libra: Would a user be able to hold their digital tokens in a completely non-custodial wallet? Would the user be able to gain access to the tokens on a mere piece of paper? If yes, then how does Libra plan to stop an anonymous person from sending that particular piece of paper to a gangster, or someone in particular that has a criminal record? According to Facebook, it’s cryptocurrency Libra would possess several features to beat illegal activity. However, it’s still unclear how would Libra stop the keys from getting transferred to a criminal, if the users are allowed to have keys in their own hands.
- With Facebook’s 2.5 billion approx. users potentially joining the crypto world with the launch of Libra, most certainly the government will have to confront some of its policies. The federal supervision of digital money might just get boosted and streamlined. Around six regulators have some kind of authority over cryptocurrency and they will most probably be asked to take more conspicuous roles.
- After everything, how many mega-companies and firms would really consider working in collaboration with Libra to make it a global hit? Previously, Mastercard and Visa have been pretty solid on their stance to only allow fiat currencies on their networks. Moreover, Banks haven’t held back as well, they’ve also voiced their perspective regarding the fact that they cannot indulge in cryptocurrencies because of the potential money laundering risks it possesses. And It’s still pretty much unclear as to who will join hands with Libra. Facebook has repeatedly said that it’s hoping to have around at least 100 members join Libra’s governing body by 2020. It has also confirmed the rumours of the Libra Association teaming up with some of the greatest U.S. banks.
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