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What is Libra?
Libra is Facebook’s cryptocurrency. Libra is a financial infrastructure that was first announced by the Libra association which is situated in Geneva Switzerland. According to a 12-page white paper, published by Facebook, it is stipulated that libra will facilitate payment and other financial transaction free of charge. This, according to the whitepaper will be beneficial for people without bank accounts.
It is set to be rolled out next year but that is another topic discussion altogether thanks to the “anti-Libra” advocates.
Who owns Libra?
Libra is governed by the independent Libra Association. The founding members include:
- Mastercard, PayPal, PayU (Naspers’ fintech arm), Stripe, Visa
- Booking Holdings, eBay, Facebook/Calibra, Farfetch, Lyft, Mercado Pago, Spotify AB, Uber Technologies, Inc.
- Iliad, Vodafone Group
- Anchorage, Bison Trails, Coinbase, Inc., Xapo Holdings Limited
- Andreessen Horowitz, Breakthrough Initiatives, Ribbit Capital, Thrive Capital,
- Union Square Ventures
- Creative Destruction Lab, Kiva,
- Mercy Corps, Women’s World Banking
How does Libra work?
Basically, people will buy Libra with existing currencies such as the pound and dollar and this money will be stored in the Libra Reserve. These will be real assets backing the Libra currency making it less volatile in comparison to other cryptos such as bitcoin.
To understand how libra works in terms of the underlying technology, you will need to first understand what blockchain technology is. However, that is beyond the scope of this article.
How can libra be used?
Libra, like any other currencies, will be used for financial transactions. Facebook puts it that, “a college student can pay their rent as easily as they buy coffee.” What this implies is that the uses of Libra will be limitless. People will be able to use Libra to pay for taxi rides, do shopping, transfer money to other people and a bunch of other things.
But that raises the question on what advantage this would have over the existing methods of payment? As we already know, most transactions can already be performed using credit/debit cards. Come to think of it, what is it that you can’t buy using your visa in this age and time?
Who can use Libra?
The question of who can use Libra depends on a number of pressing issues. First, we have the money regulators who operate independently in different countries and then there are the ‘crypto-bros’ who advocate for an economy that has no regulations. These are the people who uphaul the likes of bitcoin and other financial infrastructure that are non-traceable in nature.
Also, the use of Libra cryptocurrency will highly depend on whether your government i.e. your country will adopt Libra. In their white paper, Libras Association says, “We believe that collaborating and innovating with the financial sector, including regulators and experts across a variety of industries, is the only way to ensure that a sustainable, secure, and trusted framework underpins this new system.” From this statement, it is evident that Libra bets on collaborating with regulators from all around the globe to make the currency a success.
It has also been heard though not confirmed, that Facebook would be paying their workers with Libra currency and encourage purchases using Libra by offering discounts and other offers on popular online and offline market places.
Advantages of Libra
Compared to other crypto-currencies, Libra cryptocurrency will have an edge in terms of stability because as stated in the white paper, it will be backed by real assets and tied to other currencies as well.
Additionally, unlike other crypto-currencies, Libra will work in close relation with regulators to prevent money laundering and financing criminal activities.
Also, Libra will come in handy in facilitating smart contracts, although this is already being achieved without the help of blockchain technology. However, with blockchain as an intermediate, it will be possible to trust untrustworthy parties if it’s used to implement smart contracts.
Disadvantages of Libra
If libra is embraced and backed efficiently such that it gains stability and becomes less volatile, some currencies especially the weak ones will feel the impact. This is so because people will prefer Libra over their own currency and this will leave the country at a disadvantage.
Final Take Away
If you have read the book “How an Economy grows and why it crashes.” By Peter D. Schiff and Andrew J. Schiff, then you will relate the story of Usonia and Sinopia to what Libra intends to do. How Usonia came up with fish notes and made Sinopia work on manufacturing goods and trading them with Usonia for exchange of the fish notes. Usonia outsourced the work/labor while Sinopia outsourced the consumption.
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