The documentation for Facebook’s new cryptocurrency, Libra, was freshly released this week, and we break it down to explain what it means for you.
Facebook’s subsidiary Calibra Wallet will allow users to trade in the currency Libras, and aims to reach 1.7 billion people without credit lines or bank accounts by 2020.
Though they engineered the concept and the codebase behind Libra, Facebook is just one of many members of the Libra Association who have funded the project. Each member has one vote and no one company has a higher stake than others.
The idea behind the digital wallet stems from the fact that almost half of the adult population do not have active bank accounts, and that many customers face high remittance fees with transactions.
Facebook aims to tackle these challenges.
For those of us not quite fluent in crypto-language just yet, a very rudimentary explanation of the way it works is that you convert money in and out of Libra to use it.
You can buy whatever amount you prefer using real currency, such as dollars, and then can buy and sell online in Libras with no additional fees.
By transferring money in this way, Facebook offers a more efficient, accessible, flexible and hopefully long-lasting method.
Starting with peer-to-peer transfers, the Libra Association aims for transaction to extend to bill payments and even early forms of commerce.
In terms of safety, Facebook outlines that they will incorporate the same anti-fraud and verification techniques implemented by banks and will have automated fraud detecting systems in place.
Is Libra the new Bitcoin? It does certainly offer a few more advantages, for example, the value of Libra will be much more stable than that of Bitcoin.
This is because you can ‘mine’ for more Bitcoin whereas Libra has a relatively secure ‘reserve’ meaning that it safeguards against volatile fluctuations of price.
As discussed on Financial Times, some have voiced concerns that Libra is not truly decentralized like Bitcoin so may still have some third-party and government interests influencing the cryptocurrency.
However, this may be a wise move as having some kind of institution(s) backing the project to give ease customers into being comfortable with the online currency.
Facebook also promises to keep users’ financial data entirely separate from their personal data, as well as retaining privacy from third-party organisations without consent. So they cannot monitor users spending history and show ads and recommend products based on this.
According to TechCrunch Facebook has said they hope to generate profit from small business through increased use of Libra; they will be able to sell more on such a platform, and will want to buy more ad space on Facebook.
Given Facebook’s not-so-stellar past with privacy issues, it is understandable for there to be concerns about their new project. However, so far they seem to be putting in all security measures possible, and we can only look to 2020 to see what Libra will bring.
Are you looking forward to Libra? Let us know in the comments below.
Written by Anushé Samee. Photo credit: TechCrunch and Facebook