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LIBRA: All you need to know about Facebook’s new cryptocurrency

Facebook cryptocurrency Libra allows it’s users to buy/cash out online/ at local exchange points

What is libra?

Facebook cryptocurrency Libra is a digital global currency proposed by Facebook to promote financial inclusion. Like other digital currencies, it will run on a blockchain network(a secure, digital collection of financial accounts)secured at launch by 100 distributed computer servers, or nodes. Unlike other cryptocurrencies, Libra would be backed by a number of real-world currencies which would stabilize its price, protecting it from wild swings seen in the bitcoin market.

How does it work?

Libra will allow its users to pseudonymously buy or cash out their Libra online or at local exchange points like grocery stores, and spend it using interoperable third-party wallet apps or Facebook’s own Calibra wallet that will be built into WhatsApp, Messenger and its own app.The idea is to create a stable, digital currency that people across the globe can use on everyday transactions like buying something online or taking out bank loans. Users will also be able to send money across the world instantly and more cheaply than traditional wire transfers have allowed.

Privacy & Security

From the white paper release, the organization highlighted how the Libra blockchain will be using Byzantine Fault Tolerant consensus approach, meaning faulty behavior by some of the actors in the network will not compromise the security of the broader network. It states,“[The Libra blockchain makes] it extraordinarily difficult for an attacker to compromise 33 separately run nodes that would be required to launch an attack against the system.”

Calibra

Moreover, Facebook is launching a subsidiary company also called Calibra that handles its crypto dealings and protects users’ privacy by never intermingling your Libra payments with your Facebook data so it can’t be used for ad targeting. Your real identity won’t be tied to your publicly visible transactions. But Facebook/Calibra and other founding members of the Libra Association will earn interest on the money users cash in that is held in reserve to keep the value of Libra stable.

            Facebook won’t fully control Libra, but instead get just a single vote in its governance like other megacorps they’re working with, which have invested at least $10 million each into the project’s operations. The association will promote the open-sourced Libra Blockchain and developer platform with its own Move programming language, plus sign up businesses to accept Libra for payment and even give customers discounts or rewards.

Advantages

  1. Financial Inclusion. All over the world, people with less money pay more for financial services. Hard-earned income is eroded by fees, from remittances and wire costs to overdraft and ATM charges. The poor becomes poorer. Payday loans can charge annualized interest rates of 400 percent or more, and finance charges can be as high as $30 just to borrow $100.4 When people are asked why theyremain on the fringe of the existing financial system, those who remain “unbanked” point to not having sufficient funds, high and unpredictable fees, banks being too far away, and lacking the necessary documentation.“Globally, 1.7 billion adults remain unbanked, yet two-thirds of them own a mobile phone that could help them access financial services,” the World Bank concluded last year. Libra aims to provide a digital payment method to under-served populations that don’t currently have access to traditional banking and financial tools
  2. lower cost
  3. close-to-instantaneous transfers worldwide

Criticisms

  • Chairwoman of the House Financial Services Committee Rep. Maxine Waters instructed Facebook to halt their development of this new cryptocurrency citing the company’s poor track record of privacy & security and the lack of clear regulatory framework to provide protection to investors, consumers and the economy.
  • French Finance Minister Bruno Le Maire said the digital currency known as Libra shouldn’t be seen as a replacement for traditional currencies. His concerns include privacy, money laundering and terrorism finance.
  • Andreas Antonopoulos, one of the world’s foremost bitcoin and open blockchain experts, asserted that Libra is not even a real blockchain as it doesn’t stand on the five pillars of open blockchain namely: open, public, neutral, borderless and censorship resistant.
  • Jason Passy, apersonal-finance reporter for MarketWatch, argued that Libra coin could become a huge pain in the wallet for consumers because once consumers adopt mobile payment they’ll become less salient and spend more.
  • Wedbust Analyst Michael Patchtercontended that Facebooks is merely trying to facilitate commercial activity for its massive user base and the end game is to offer links to brand they care about.
  • Some critics also claims that Libra is the ‘most invasive and dangerous form of surveillance ever designed.’  George McDonaugh, co-founder of blockchain investment firm KR1, maintained that the banking the unbanked, revolutionizing payments and connecting the world objectives are merely a façade behind their real endgame which is tapping new wells of data, the modern day oil.

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