Facebook has finally taken the wraps off its worst-kept secret: Libra, its global cryptocurrency. After months of leaks, it's formally out in the open and we can take a closer look at the ambitious project. As you might expect from the people in Menlo Park, California, it's pretty smart.
Facebook and its partners have created an organization, the Libra Association, to manage the technical aspects of the project and work with regulators to ensure that everything is on the up and up. Libra also has some built-in safeguards, which have been used in the real world, to make sure the value of the cryptocurrency stays stable
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This isn't actually Facebook's cryptocurrency. It's the project of the Libra Association, which Facebook co-founded. The association, which will serve as a monetary authority for the cryptocurrency, says Libra's purpose is to "empower billions of people," citing 1.7 billion adults without bank accounts who could use the currency.
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Facebook is one of the members of the Libra Association, the nonprofit that will serve as a de facto monetary authority for the currency. (Facebook's membership is through Calibra.) Other founding members include MasterCard, Visa, PayPal, Uber, eBay, Vodafone and Mercy Corps. The association hopes to grow to 100 members, most of which will pony up $10 million to get the project going. Each member has the same vote in the association, which is headquartered in Switzerland.
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Let's start by addressing how Libra is similar to other cryptocurrencies, such as bitcoin and ether. Like them, Libra exists entirely in digital form. You won't be able to get a Libra note or coin. And like other cryptocurrencies, Libra transactions are recorded on a software ledger, known as blockchain, that confirms each transfer. The Libra blockchain will be managed by the founding members in the early stages, but evolve into a fully open system in the future.
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Unlike bitcoin, ether and some other cryptocurrencies, which aren't backed by anything and swing wildly in response to speculation, Libra will be pegged to a basket of assets that will anchor its value. The Libra Association hasn't said what those assets will be but indicated they will include "bank deposits and government securities in currencies from stable and reputable central banks." That suggests major global currencies, like the dollar and the euro, which don't fluctuate violently day to day.
The supply of Libra will grow or shrink based on how popular it is. If people want to use Libra, the association will buy more of the underlying assets and create, or "mint," new Libra. If people want to cash out of Libra, the association will pay them and destroy, or "burn," the proper amount of Libra.
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Facebook doesn't have a great reputation for privacy protection. It's probably going to get some side eye when it starts asking folks to trust it with their financial activities.
Facebook says don't worry, not that you expected it to say anything else. Calibra, the maker of the wallet you'll need to use Libra, is set up as a subsidiary of Facebook. The arrangement allows for Calibra to be regulated by authorities to prevent money laundering and other financial crimes. But it will also keep Calibra's financial data separate from Facebook's social data, according to the company.
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More:
https://www.cnet.com/news/everything-you-need-to-know-about-facebooks-libra-cryptocurrency/
