In recent years, more and more tech giants are showing interest in developing their own payment gateways. Today, we have Apple Pay, Google Pay, Samsung Pay, and most recently we heard rumors about Facebook entering the game. However, the company decided to take it a step further and introduce blockchain in the equation. In fact, Facebook has officially released a white paper for their cryptocurrency, Libra also referred to as novi, which will be supported by Calibra, Facebook’s digital wallet service.
It sure looks like Facebook’s Libra is the company’s next huge thing. That’s why, we gathered the most important takeaways that you need to know:
The Libra currency
Libra is an interesting name for a cryptocurrency. Some speculations indicate that Libra might come from the French “Lib”, which means free, signifying financial freedom. Libra’s logo resembles the three horizontal wavy lines unicode character ≋, like the euro uses the € symbol.
Facebook’s Libra is tied to a basket of bank deposits and short-term government securities in exchange for historically stable international currencies. That includes currencies like the pound, euro, dollar, Swiss franc, and yen. Most importantly, the support from multiple currencies is what makes Libra’s value stay largely stable, also known as a stablecoin, making up a good medium of exchange. Stablecoins are useful because they don’t fluctuate in value compared to fiat currencies, making them riskfree for merchants and consumers to use compared to using Bitcoin or other fluctuating cryptocurrencies.
The exact value for one Libra is still unknown, but it is expected to be close to the value of a dollar, euro or pound. The best part is that users will be able to trade Libra in their local currency with the help of several digital wallet apps and local resellers. That includes Facebook’s own Calibra, the digital wallet that will support the company’s cryptocurrency.
What is Calibra?
According to Facebook’s press release, Calibra will act as the digital wallet for Libra. The social media giant expects to launch in 2020 and make Calibra available in Messenger, WhatsApp and as a standalone app.
The cool part is that everyone can use Calibra. All people will need is an internet connection and a smartphone. One of the objectives for creating Calibra is to make it easier for people that work abroad to send money to their families and friends for little to no cost. In addition to saving, sending and spending Libra.
From its launch, Calibra will allow the users to send Libras to almost anyone who owns a smartphone. It will be as simple as sending a text message. Facebook expects to also add additional services for both single customers and businesses, such as paying bills with the push of a button, buying a cup of coffee with the scan of a code or taking public transportation without the need to carry cash.
Who is in the Libra Association?
Facebook anticipated that, if they own the cryptocurrency alone, people wouldn’t trust it to the fullest. Therefore, the company created a non-profit Libra Association together with other trusted founding organizations. The association manages the development of the Libra token, the blockchain behind it, and the underlying financial assets that support Libra’s stable value.
Anyone who has $10 million is eligible for becoming a member, and they get a share of the dividends and one vote in the Libra Association council. So far, there are 27 members and Facebook wants to rise that number up to 100 before launching. Some of the current members include:
- Payments: Mastercard, PayPal, PayU, Stripe, Visa
- Blockchain: Anchorage, Bison Trails, Coinbase, Inc., Xapo Holdings Limited
- Technology and marketplaces: Booking Holdings, eBay, Facebook/Calibra, Farfetch, Lyft, Mercado Pago, Spotify AB, Uber Technologies, Inc.
- Nonprofit and multilateral organizations, and academic institutions: Creative Destruction Lab, Kiva, Mercy Corps, Women’s World Banking
- Venture Capital: Andreessen Horowitz, Breakthrough Initiatives, Ribbit Capital, Thrive Capital, Union Square Ventures
- Telecommunications: Iliad, Vodafone Group
Facebook promises that they will not import the user’s contacts or any profile information. However, customers have the option of sharing it on their own accord, if that’s what they want. The data from the transactions will also not be shared with Facebook. This way, the social media giant will not be able to directly profit from Libra, through targeted ads or other such methods.
Some anonymous data will only be used in special cases like research, adoption measurement and for tracking down fraudsters. Furthermore, to make the distance from Facebook and WhatsApp even bigger, users will be able to sign up for Calibra and Libra using other accounts, apart from Facebook.
“We realize people don’t want their social data and financial data commingled… The reality is we’ll have plenty of wallets that will compete with us and many of them will not be in social, and if we want to successfully win people’s trust, we have to make sure the data will be separated.”
– Facebook’s VP of blockchain, David Marcus
To satisfy your curiosity even more, you can check the video interview with David Marcus giving a rundown of Facebook’s new cryptocurrency:
Rewarding early businesses
To keep Libra going, The Association will offer incentives for developers and merchants that work with the cryptocurrency. Businesses that earn these rewards – in most cases Libra tokens – have the option of keeping them or share some (or all of them) with their users. In this way, they can attract customers to use Libra on their websites and offer them discounts for doing that. Ironically, this can turn into a competition between businesses and who will attract and retain more customers using Facebook’s cryptocurrency. It wouldn’t come as a surprise if from tomorrow eBay or Spotify start offering discounts for paying in Libra.
The Libra Blockchain is faster
Libra will run on it’s own blockchain, that is designed so that it processes 1000 transactions per second. In comparison, Bitcoin’s blockchain records 7 transactions per second and Ethereum processes 15.
That is possible, because of the Byzantine Fault Tolerance system, where just two-thirds of the nodes are required to confirm that the transaction is legitimate. Furthermore, a Merkle Tree structure in the code makes it easier to detect changes in the Libra Blockchain. It will then be able to run 1000 transactions per second if they have the size of 5KB and if nodes use at least 40Mbps connections as well as 16TB SSD hard drives.
Libra’s coding language
Any developer can build apps that work with Facebook’s Libra by using the Move coding language, as Libra’s Blockchain is open source with an Apache 2.0 license. On the downside, the Move code language is still not ready. But, developers can use Move IR to create modules and transaction scripts for Libra.
The Libra Association is partnering up with HackerOne later this year for the detection of flaws and glitches. Before this however, the Association is incorporating Rust programming language which focuses specifically on safety and especially safe currency.
In the end…
There are always pros and cons when something goes digital. If Facebook succeeds with their Libra cryptocurrency then a lot of people, from single customers to big businesses, will benefit from it. Similarly, a lot of people will lose tons of money if Facebook fails, with Facebook risking shady developers now empowered with an open source platform where they can get creative. All in all, this is a big bet from Facebook, and it’s going to be fascinating to follow what happens with blockchain and cryptocurrency in the coming months.