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Facebook’s New Cryptocurrency – The Libra

Aug 12, 2019
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byOmar Abbas

On Tuesday, Facebook released its white paper that details the use cases and motive behind the social media giant’s new cryptocurrency, Libra. The new digital money will allow you to buy goods and services or send money to friends & family as instantly as you send a text message at nearly zero fees. The company made it clear you can pseudonymously purchase and sell your Libra on the internet or at brick and mortar stores via Facebook’s digital wallet Calibra that will be available as a standalone app, as well as built into WhatsApp and Messenger.

According to the white paper, Facebook will not be in full control of Libra, rather, it will have a single vote in its governance framework that’s equal to other founders of the Libra Association including Visa, MasterCard, PayPal and Uber. Calibra will be launched as a subsidiary company that exclusively deals with cryptocurrency and “asides from limited cases, Calibra will not share account information or financial data with Facebook or any third party without customer consent.” This means clients’ financial data will not be used to improve targeted advertising, but rather, each founding member of the Libra Association will be entitled to a share of the dividends from the interest earned on the Libra reserve (proportionate to their investment).

Libra Association is a not-for-profit organization that is independently owned by its members and headquartered in Geneva, Switzerland. The organization’s goal is to “provide a framework for governance for the network and reserve and lead social impact grant-making in support of financial inclusion.” The association’s purpose Members of the Libra Association consist of diverse businesses in geographically distributed regions, with the hopes of having approximately 100 members by their launch in 2020. Current members of the Libra Association include:

  • Payments: Mastercard, Paypal, Visa
  • Technology and Online Marketplaces: eBay, Facebook, Uber, Lyft, Spotify
  • Telecommunications: Vodafone Group
  • Blockchain and Crypto: Coinbase Inc., Xapo
  • Venture Capital: Andreessen Horowitz, Union Square Ventures
  • Non-Profit: Creative Destruction Lab, Women’s World Banking

The Libra currency is built on the Libra Blockchain – an open sourced software that allows anyone to build on it. Like Bitcoin, the currency’s blockchain ecosystem is a global currency that reduces the barriers associated with accessing capital and facilitates a frictionless payments network – without needing a bank account or another intermediary. The value of a Libra unit is meant to serve as a stable currency that’s tied to a basket of sound international currencies, including the US Dollar, Swiss Francs, Japanese Yen and Euro. The currency will not be “pegged” to one single currency like USD or CAD, rather, Libra will maintain its own value. The value of each Libra is still unclear, as the Libra Association hasn’t provided details on the exact start value for the Libra currency. Once launched, however, you will also be able to instantly convert Libra into your local currency and vice versa.

Another important piece of this is the Libra Reserve. Rather than running fractional, there will always be 100% of the value of Libra in circulation, collateralized and backed by fiat currencies.

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