That announcement is here. It has been anticipated massively, both publicly as well as by the media. Facebook has today unveiled plans about its own ‘global’ currency, the Libra. Essentially a cryptocurrency developed entirely by the social networking giant, the currency is expected to go live 2020. Facebook says, it is “reinventing money” and aiming to “transform the global economy”.
So what exactly is Libra? It is, what we now know as, a stablecoin — a digital currency that’s supported by established government-backed currencies and securities. What is the goal? Facebook wants to bring 31% of global un-banked population on the financial scene, and wants Libra to be stable, so as to make it useful for conducting daily transactions. These are things Bitcoin or similar currencies have been unable to achieve.
The currency has some of the top financial institutions as its backers. Visa, Mastercard, Stripe, PayPal are some of the names from the digital finance space, that are backing this venture. That basically covers almost the entire digital payments infrastructure that exists globally, both directly as well in directly. Venture capital firms like Andreessen Horowitz are also backing it.
The social media giant plans to onboard over 100 members in the Libra Association by the target launch in the first half of 2020.
Building Trust with real assets
Now when you are introducing an entire new currency, you ought to ensure enough trust build-up for people to use it in their daily transactions. And to do that, Facebook has put in place a reserve of real assets. A basket of bank deposits and short-term government securities will be held in the Libra Reserve for every Libra that is created, building trust in its intrinsic value. The Libra Reserve will be administered with the objective of preserving the value of Libra over time.
In terms of governance, the currency will be governed by “Libra Association”, an independent, not-for-profit membership organization, headquartered in Geneva, Switzerland. The association is designed to facilitate the operation of the Libra Blockchain; to coordinate the agreement among its stakeholders — the network’s validator nodes — in their pursuit to promote, develop, and expand the network, and to manage the reserve.
The association is governed by the Libra Association Council, which is comprised of one representative per validator node. Together, they make decisions on the governance of the network and reserve. Initially, this group consists of the Founding Members. All decisions are brought to the council, and major policy or technical decisions require the consent of two-thirds of the votes, the same supermajority of the network required in the BFT consensus protocol.
Once the Libra network launches, Facebook, and its affiliates, will have the same commitments, privileges, and financial obligations as any other Founding Member. As one member among many, Facebook’s role in governance of the association will be equal to that of its peers.
Now, in order to build an entire ecosystem of payment solutions around Libra, Facebook has formed a separate subsidiary called ‘Calibra’. Marcus, who used to run Facebook Messenger, said Facebook plans to build a new digital wallet that will exist inside Messenger and its other standalone messaging service, WhatsApp.
Calibra wallet will have strong protections in place. Facebook says that it will be using all the same verification and anti-fraud processes that banks and credit cards use. It will deploy automated systems that will proactively monitor activity to detect and prevent fraudulent behavior. Privacy has been a big scrutiny for the company. For Calibra, the company says, that aside from “limited cases”, Calibra will not share account information or financial data with Facebook or any third party without customer consent.
Being built as an open-source product, developers can also build upon Libra. The currency will launch in 2020.
Firoz joins The Tech Portal to report on all stuff that relates to developers and their community. He is actively involved in multiple startups, helping them build and develop modern web products.