5 Things to Know About Facebook's Cryptocurrency Libra
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Cryptocurrency has always been a fascinating topic and even Mark Zuckerberg couldn’t resist the virtual currency industry. Yesterday, Facebook along with more than 25 organisations, which included Uber, Visa, eBay, Master, etc announced the launch of a new cryptocurrency called the Libra.
In a Facebook post, Zuckerberg said that Libra's mission is to create a simple global financial infrastructure that empowers millions of people around the world. It's powered by blockchain technology and the plan is to launch it in 2020.
“We aspire to make it easy for everyone to send and receive money just like you use our apps to instantly share messages and photos. To enable this, Facebook is also launching an independent subsidiary called Calibra that will build services that let you send, spend and save Libra,” he added.
The announcement has created a lot of noise, both among the people who have the cryptocurrency community and those who don’t. It is likely to create a major cryptocurrency adoption drive among smartphone users.
Here are the five things you need to know about Facebook’s cryptocurrency Libra:
Calibra – Facebook’s Digital Wallet
Calibra, Facebook’s new subsidiary will allow users to participate in the Libra network. The wallet will be integrated with Messenger, Whatsapp, and a standalone app.
The digital app, which will be launched next year, will allow users to send Libra instantly to any smartphone user with an active internet connection. Facebook on its company blog said that in time the technology company hopes to offer additional services for people and businesses, which includes services paying bills with the push of a button, buying a cup of coffee with the scan of a code or riding your local public transit without needing to carry cash or a metro pass.
The Libra Association
As we all know, Libra is built on a decentralised platform powered by blockchain technology. This means the platform will be managed by many organisations, as against only Facebook. This consortium is called the Libra Association.
The cofounding members of the association include payment service providers Paypal, Visa, Mastercard, Stripe and PayU. Apart from Facebook, technology and marketplaces - Booking Holdings, E-bay, Farfetch, Lyft, Uber, Mercado Pago and Spotify are also a part of this initiative. Telecommunication players Illiad and Vodafone along with blockchain companies – Coinbase, BisonTrails, Xapo and Anchorage have also been looped in.
Lastly, the Libra Association also includes investment firms - Andreessen Horowitz, Union Square Ventures, Creative Destruction, Ribbit Capital and Thrive Capital with a non-profit organisation such as Women’s World Banking, Kiva – 501 and Mercy Corps.
Zuckerberg is hoping that the association will have at least 100 more organisations by the time the cryptocurrency is introduced next year.
Built on a Reserve
Unlike most of the cryptocurrencies, including Bitcoin and Ethereum, Libra is backed by a reserve of real asset which would allow its users to trust the currency.
According to libra.org, a white paper discussing the details of cryptocurrency, “A basket of currencies and assets will be held in the Libra Reserve for every Libra that is created, building trust in its intrinsic value.” This, in return, will avoid speculation and price fluctuation as users will be able to predict its value or its other words, the reserve will help Libra with value preservation.
The reserve will be built from two source - investors and users of Libra. Additionally, in order to encourage adoption among its users, the association will pay out incentives in Libra coin to its founding members.
On the other hand, the reserve will be invested in low-risk assets, such as bank deposits and government securities that will yield interest over time.
In recent time, data privacy has been a key issue among the Facebook user and Libra and Calibra are no doubt under the scanner.
To clear the air around this, Zuckerberg in its post shared privacy and safety will be built into every step and Calibra will have a dedicated team of experts in risk management to avoid frauds.
“We'll provide fraud protection so if you lose your Libra coins, we'll offer refunds. We also believe it's important for people to have choices, so you'll have the option to use many other third-party wallets on the Libra network,” he added.
Can you use it in India?
The currency is yet to be launched. Having said, hypothetically, if the virtual currency was launched or will be launched in the next few months, you still wouldn't be in a position to use it as the RBI has ring-fenced the banks in order stop cryptocurrency trade in the country.
According to several news websites, Subhash Chandra Garg-led committee has recommended a jail term for cryptocurrencies users, including miners, exchanges, traders, etc. But there is no official word on this.
So, what’s next? Let’s hope the new finance minister Nirmala Sitharaman has a different viewpoint from the former FM Arun Jaitley so that there is regulation which would ensure fair trade in the Indian cryptocurrency market, instead of a blanket ban.
Keeping our fingers crossed!