Updated: June 19, 2019 8:06:27 am
Facebook has confirmed that its cryptocurrency will be called Libra, though the social media network will not be controlling this currency. Facebook is partnering with 27 other organisations across the world to create the non-profit Libra Association and this new currency, which is aimed at improving access to financial services to those who are out of the banking system.
Libra’s website says that at present 31 per cent of the world’s population is out of the formal banking system. The idea with Libra appears is to “lower barriers to entry, and improve access to financial services”, and there will be a dedicated Libra protocol for this cryptocurrency.
With Libra currency all transactions will be private. The currency will be decentralised and allow seamless payments anywhere without any user fee attached to these transactions.
The Libra currency will be accessible to anyone with an entry-level smartphone and data connectivity, according to the information page. It will also be backed by a reserve in order to keep the value stable.
The global cryptocurrency will be made available around the world. According to the white paper, “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,” for the reserve.
This is being done to ensure that Libra is free from speculation and not subject to the same rise and fall in value, a problem that has plagued other cryptocurrencies. For Facebook and other members of the Libra Association, stability will be crucial if they wish to ensure that more users can rely on Libra.
According to Facebook CEO Mark Zuckerberg’s post, Libra will be powered by blockchain technology and the plans are to launch it by 2020. Other notable names partnering for Libra are Lfyt, Uber, Visa, Mastercard, Spotify, Coinbase and PayPal.
Zuckerberg added that Facebook is hoping to have over 100 cofounding members of the Libra Association by the time the network launches next year. The website for Libra says that the Facebook teams played a key role in the creation of the Libra Association and the Libra Blockchain. “While final decision-making authority rests with the association, Facebook is expected to maintain a leadership role through 2019,” it adds. Overall Facebook will function like any other member, and won’t have controlling powers over how Libra will work.
Further, the reserve will be invested in low-risk assets, which will “yield interest over time”. The revenue from this interest goes to support the operating expenses of the association, according to the description page.
Facebook is also launching a separate subsidiary company called Calibra, which will handle all cryptocurrency payments based on Libra, and the data will be kept separate from Facebook data, presumably to keep all these transactions private.
While Libra will work with other third-party wallet apps as well, there will be a dedicated Calibra app. The Calibra wallet will be built into WhatsApp, Messenger as well and the standalone app will be introduced next year.
In his Facebook post, Zuckerberg has said that like any other payment service, Calibra wallet will be regulated and all information will be kept separate from Facebook. The post reads, “Calibra will let you send Libra to almost anyone with a smartphone at low to no cost. Over time, we hope to offer more services for people and businesses — like paying bills with the push of a button, buying coffee with the scan of a code, or riding local public transit without needing to carry cash or a metro pass.”
Zuckerberg in his post has also said that Calibra will have a dedicated team of experts in risk management to make sure people do not use the app to commit fraud. “We’ll provide fraud protection so if you lose your Libra coins, we’ll offer refunds,” he wrote.
According to TechCrunch, “Facebook won’t fully control Libra currency, but gets a single vote in its governance like other founding members of the Libra Association.” Libra will also have its own Move programming language.
The Move language for Libra is also designed to prevent assets from being cloned and will ensure that a resource has a single owner, it can only be spent once, and the creation of new resources is restricted. All of this is crucial for blockchain-based currencies. The Libra Blockchain is pseudonymous and users will be able to hold one or more address. These will not be linked to the real-world identity of the user.
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