Facebook Unveils Libra Offering

On June 18, Facebook released the white paper for their cryptocurrency project. The project has been titled “Libra” and it is now known that it will be a large financial infrastructure project based on the blockchain.

The coin will function as a stable coin, and Facebook will hold a reserve of assets that would consist of bank deposits and short-term government securities. This is intended to give it intrinsic value.

The Libra Association

The social giant has established a non-profit organization, the Libra Association, that will hold the on-chain voting rights. The inaugural partners will include mastercard, Paypal, Visa, Stripe, eBay, Spotify, Coinbase, Andressen Horowitz, and Uber. These big names will be required to invest a minimum of $10 million into the network, and will be running validator nodes.  

Ideally, there will be a transition from these larger parties holding all the control over the ecosystem due to their stake to eventually having smaller parties become a part of this.

The project is planned to go live in 2020, and is apparently going to be distributed via WhatsApp and Messenger, two of Facebook’s applications. The core use of the coin will be for e-commerce payments, as all of Facebook’s applications will have payments and transfers available within.

Libra’s core use case seems to be payments and other financial use cases for customers. What people are beginning to realize is Libra is going to help the unbanked the most. They will suddenly have access to the rest of the cryptocurrency world.

The Business Model

If you look at the business case for what Facebook is doing, it seems like they are going after the banks more than after Bitcoin. They have incorporated components and ideas from Ethereum, Bitcoin, Tezos, and many more, but they will be taking direct business out of the banks’ hands.

Stable coins have long been viewed as one of the most interesting sectors within the cryptocurrency world because of their promise to hold a stable value while being completely digital. It isn’t as much of an ask for someone new to cryptocurrency to invest in it, because it is both lower in volatility than Bitcoin, and also associated with one of the biggest and most well-known companies in the world.

Some believe that this may add more fuel to the next big cryptocurrency rally, since $2.6 billion users will be initiated to the world of crypto and Bitcoin is already on a rally. Libra will make it even easier for these users to get on-boarded and buy Bitcoin.

Where This All Goes

The final question that needs to be answered is “what’s in it for Facebook?” With all these high profile investors involved and no indication that there will be shockingly high fees for payments, how are they going to make money?

A likely answer is that they would have access to your financial data and would be able to utilize all your transaction data to better market to you. With Facebook already under investigation for violations of anti-trust laws and their previous privacy scandal, it seems likely that more issues will surface in the future once Libra is in play.

Featured image: By Wit Olszewski | Shutterstock