A great deal of speculation has floated around Facebook’s rumored cryptocurrency, which we now learned it’s codenamed Libra later renamed to novi. The debut of Libra could unlock a new era of commerce and payments for the social network along with its many other services like Instagram, WhatsApp, and Messenger. It could offer low or no-fee on payments made between friends. Furthermore, it could be used for remittance of earnings to families from migrant workers abroad who are often ripped off by traditional as well as shady money transfer services.
German magazine WirtschaftsWoche‘s Sebastian Kirsch recently learned that the white paper for Facebook’s cryptocurrency will debut June 18th. Furthermore, a basket of currencies will secure the cryptocurrency instead of a single currency. This strategy will prevent price fluctuations. Another source also claims that Facebook is targeting a 2020 formal launch of the cryptocurrency.
Bypassing traditional payment processing providers and credit card transaction fees would allow Facebook’s cryptocurrency to offer a cheaper way to pay merchants both online and offline. It could also facilitate microtransactions for a la carte news articles as well as compensating content creators for their work. Besides payment convenience, a better understanding of who buys what from which brands, it could aid Facebook in ad measurement, ranking, and targeting to amplify its core business. Facebook’s cryptocurrency could even help prevent fake news and foreign governments buying ads to spread false information.
What else we learned about Facebook’s cryptocurrency
The idea behind the name choice
As mentioned above, Facebook will most likely use the Libra codename as the official name for its cryptocurrency. The Information also reported that the company will not use the name GlobalCoin as BBC had declared. The speculations around the cryptocurrency’s name come also as a result of Facebook’s registered company called Libra Networks in Switzerland for financial services. Libra could be also a wordplay coming from the abbreviation for the London Inter-bank Offered Rate, LIBOR. While LIBOR is used as a benchmark interest rate for borrowing between banks, Facebook’s Libra is meant to be for the ordinary people.
It is a token
Facebook’s cryptocurrency is a token, which is designed to have a stable price. In this way, it could avoid conflicts and complications due to price fluctuations during a payment or negotiation process. Facebook has contacted several financial institutions regarding contributing with capital. That’s because Facebook wants to form a $1 billion basket of multiple international fiat currencies and low-risk securities. The idea behind that is the capital to act as collateral to stabilize the price of the coin.
How it will be used
Transactions of Facebook’s Libra will occur with zero fees via Facebook products including Messenger and WhatsApp. Facebook is negotiating with sellers to approve payments with the new cryptocurrency. The company might also propose sign-up bonuses. According to The Information, Facebook also plans to have physical devices for ATMs. In that way users will be able to exchange traditional assets for the cryptocurrency.
Meet the team
On top of Facebook’s blockchain project is Facebook Messenger’s VP and former PayPal President, David Marcus. His team includes a lot of other business stars such as former Instagram VP of Product Kevin Weil, Facebook’s former corporate Head of Treasury Operations Sunita Parasuraman as well as many elite engineers. In order to keep the project in secret, the team works at a specially dedicated part of Facebook’s headquarters with no reach to other employees. However, the launch of Facebook’s cryptocurrency requires the company to get into partnerships with other companies which leads to many leaks.
Facebook is negotiating to create an independent foundation that will manage the new cryptocurrency. The company is reaching out to companies with a special offer regarding the cryptocurrency network. In other words, companies can pay $10 million to operate a node that can validate transactions. They will in exchange get some governance over the token. In addition, the node operators could benefit financially, as well. With the decentralization to the governance of the project, Facebook wants to avoid regulation and conflicts in regards to it possessing too much power over a global currency.
All in all it is quite exciting for both the blockchain and cryptocurrency community to see a large tech player like Facebook entering the arena. We will make sure to keep you updated when we hear any news from either Facebook or trusted sources.