We’ve had some pretty significant events happen in the crypto world recently and the introduction of Libra has certainly been one of them.
Today we’re taking a different look at it and we’ll not be covering the news, but instead, dig into our own analysis on the subject.
With Bitcoin’s inconsistency when it comes to price and the overall volatility of the few other main cryptocurrencies, Facebook see this as their time to shine, by introducing their very own Libra currency. While the conversation has lately shifted and it’s now thought that it may never launch, what’s interesting is the model it’s going with, as this is the key difference, setting it apart from its competitors.
Libra was initially presented as the perfect currency that would finally solve it all and introduce crypto to the world in a new and regulated way, at the same time promising you freedom in all transactions. Let’s take a look and see if things really are this way, or if we’re just projecting our hopes onto it.
The main thing with Libra is that you can either sell it and buy it on various Libra exchanges around the world or privately from other people. You can sort of think about Libra as the hybrid between crypto and fiat currencies – it’s digital in the sense of crypto, but is controlled by a central authority like the regular ones. Libra is thought of as a safe way to keep money when travelling across the world or for example it could be used to protect yourself from hyperinflation in countries like Venezuela, where it will be 1,000,000% by the end of the year.
Great! Well, at least so far.
So how does Libra come into the world? Glad you asked. Only the Libra Association can issue Libra and they can create or destroy as many units as they wish, giving them the same powers as the central banks when it comes to real money. When selling your Libra back to Facebook, it’s destroyed and you’re given your regular currency. Where things get interesting, and this is following the Central Bank theme, is that they can also decide how much Libra is worth, as they’re in full control of the exchanges.
This is the total opposite to Bitcoin, where each coin has to be mined and there’s a finite amount to farm. Let’s not forget the fact that Bitcoin transactions can also be anonymously validated from anywhere in the world, whereas Libra transactions can only be validated through the Libra association after you’ve passed the identity verification procedures. Once you’ve bought some Libra in exchange for your regular money, it’s Facebook’s idea to then invest that money into various assets that are known to hold their value in time (i.e. Gold, Stocks etc.)
The Libra regulating body is handpicked and approved by Facebook; it consists of large privately held companies like Uber, PayPal, Visa, MasterCard and 24 others. They were founded in Switzerland, further limiting any regulatory powers that would’ve been there in the first place. One can imagine that the Libra paying functionalities will be integrated into all Facebook products and given their track record on privacy, we can’t rule out full payment behaviour analysis, allowing for better ad targeting.
Think of it as: Zero accountability – full control.