On Tuesday, Facebook officially announced Libra, its long-awaited cryptocurrency project and blockchain ecosystem. Facebook’s announcement has flooded the Internet with information: in addition to publishing a whitepaper and testnet documentation, Facebook has also revealed extensive details through a new website. Here’s what we know about Libra so far:
It’s bigger than Facebook: Facebook will not control Libra single-handedly, and, in fact, the official Libra website barely mentions Facebook at all. Instead, Libra will be operated by a consortium of 27 organizations that have partnered with Facebook. Those partners include big names like Mastercard, VISA, PayPal, Coinbase, Spotify, Uber, and several others. Furthermore, a subsidiary company called Calibra will be tasked with developing Libra tools and wallets for end users.
It’s meant to be spent: Libra’s whitepaper acknowledges that the cryptocurrency can be used for peer-to-peer spending and cross-border remittances, but the official site primarily suggests that Libra is designed to be spent on commerce. Users will be able to spend their Libra tokens at various points of sale, and Facebook hopes that its partners will begin to accept the cryptocurrency. Facebook is also promising near-zero transaction fees, although there will be a small charge to prevent transaction spam.
It works like Bitcoin: Libra is being built on a blockchain that is similar to Bitcoin. Libra’s blockchain is open-source, which means that other developers and companies will be able to build on top of (and adapt) the Libra blockchain. And, like Bitcoin, Libra is designed to act as a pseudonymous currency that will not link users’ purchases to their identity. However, Facebook will practice KYC, so it will require users to verify their identity with a government ID.
It is a stablecoin: Like Tether and many other stablecoins, Libra will be backed by a reserve of real assets, which will be stored in bank accounts. This reserve will consist of bank deposits and short-term securities. This approach will ensure that, unlike Bitcoin, Libra will always maintain a consistent price, which will make it relatively convenient for customers.
It runs on a permissioned blockchain: Whereas anyone can participate in Bitcoin consensus by acting as a miner, only a few validators will have the permissions needed to participate in Libra’s governance. Those participants will consist of members of the Libra Association. Since there will be relatively few participants, Libra will be much more centralized than Bitcoin—which could make the Libra blockchain vulnerable to certain attacks.
It will work with Messenger, WhatsApp, and as a standalone app: Calibra, which is responsible for producing the Libra wallet for end users, says that it will provide a standalone app through the iOS App Store and through Google Play. Calibra also says that users do not need a Facebook, Messenger, or WhatsApp account to use Libra, but that they can spend Libra directly from Messenger and WhatsApp if they wish to do so.
The bigger picture: The end result is a new cryptocurrency that could hold massive appeal for Facebook’s 2 billion users, especially those that are willing to trust Facebook’s newfound pro-privacy stance and its promise of low fees. However, crypto advocates who are devoted to decentralization will be less happy: Libra’s ties to big corporations and its lack of true anonymity mean that it violates some very fundamental crypto principles. Libra’s overall reception will become more clear when it goes live in 2020.
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