Libra – The Good, The Bad & The Ugly

[akhjob]

It’s been a while since I last posted in this forum, so I thought of writing something useful to the community about the latest "Libra" Project as there is not much information in the ANN. In this post, I’ll be sharing my views, information from several sources that I have read and points from the Libra Whitepaper and Website.

Libra
   Libra is aimed to be a stable digital currency built on a secure and stable open-source blockchain, backed by a reserve of real assets, and governed by an independent association. The project has targeted to launch in the first half of 2020. Libra has proposed a Libra Investment Token, for investment purposes and a Libra Currency, to serve as a stable digital currency.

The Libra Reserve –

• Libra is fully backed by a reserve of real assets. A basket of bank deposits and short-term government securities will be held in the Libra Reserve for every Libra that is created.
• The money in the reserve will come from two sources: investors in the separate Investment Token, and users of Libra through authorized resellers.
  
• The reserve will be invested in low-risk assets that will yield interest over time. Interest on the reserve assets will be used to cover the costs of the system, ensure low transaction fees, pay dividends to investors who provided capital to jumpstart the ecosystem and support further growth and adoption.
  
• Users cannot directly interface with the reserve instead through entities authorized by the association to transact large amounts of fiat and Libra in and out of the reserve. These authorized resellers will integrate with exchanges and other institutions that buy and sell cryptocurrencies to users, and will provide with liquidity for users who wish to convert from cash to Libra and back again.
  

The Libra Blockchain –

• The Libra currency is built on an open source Blockchain, “Libra Blockchain”. It will start as a permissioned Blockchain but will work towards a permissionless network.
• “Move” is a new programming language for implementing custom transaction logic and smart contracts on the Libra Blockchain.
• Libra Blockchain adopts a Byzantine Fault Tolerant (BFT) consensus approach using Libra BFT consensus protocol. BFT consensus protocols are designed to function correctly even if some validator nodes — up to one-third of the network — are compromised or fail.
• Data on the Libra Blockchain is protected by Merkle trees. The Libra Blockchain is a single data structure that records the history of transactions and states over time.
• The Libra Blockchain is pseudonymous and allows users to hold one or more addresses that are not linked to their real-world identity.
• It is expected to operate at 1000 tps.

The Libra Association –

• The Libra Association is an independent, not-for-profit membership organization headquartered in Geneva, Switzerland and is the governing entity of the Libra Blockchain and Libra Reserve.
• The association is governed by the Libra Association Council, which is comprised of one representative per validator node. Initially, this group consists of the Founding Members.
• All decisions are brought to the council, and major policy or technical decisions require the consent of two-thirds of the votes.
• The Libra Association is the only party able to create (mint) and destroy (burn) Libra. Coins are only minted when authorized resellers have purchased those coins from the association with fiat assets to fully back the new coins. Coins are only burned when the authorized resellers sell Libra coin to the association in exchange for the underlying assets.

Founding Members –

• Payments: Mastercard, PayPal, PayU (Naspers’ fintech arm), Stripe, Visa
• Technology and marketplaces: Booking Holdings, eBay, Facebook/Calibra, Farfetch, Lyft, Mercado Pago, Spotify AB, Uber Technologies, Inc.
• Telecommunications: Iliad, Vodafone Group
• Blockchain: Anchorage, Bison Trails, Coinbase, Inc., Xapo Holdings Limited
• Venture Capital: Andreessen Horowitz, Breakthrough Initiatives, Ribbit Capital, Thrive Capital, Union Square Ventures
• Nonprofit and multilateral organizations, and academic institutions: Creative Destruction Lab, Kiva, Mercy Corps, Women’s World Banking

Calibra

• Calibra is a regulated subsidiary created by Facebook on top of the Libra network.
• Calibra will be available as a standalone app in the App Store and Google Play. You will also be able to use Calibra directly in your WhatsApp and Messenger apps, so you can send and receive money as easily as you message friends, family, and businesses.
• When Calibra is available, you will need a government-issued ID to sign up for an account. Facebook and WhatsApp account information are also used when available to verify identity and prevent fraud. Calibra also has in-app reporting and dedicated customer service. In the rare event of unauthorized fraud, you will receive a full refund.
• Website: https://calibra.com

The Good

• Facebook has a pretty huge user base. With the announcement of Libra, Facebook has undoubtedly put the word “Crypto” in the minds of almost everyone in the world. Hence, there is a huge chance of increasing crypto adoption in the following years.
• The process of minting and burning of Libra tokens when deposits and withdrawals are made from the reserve is a welcome move for a stable coin which is going to be backed by real assets. This means that Libra will be 100% backed by real assets.
• With the announcement of Libra, US and EU regulators have immediately asked them to stop developing Libra until the governments could review a plan.  Before Libra, the Governments have been mostly ignoring cryptocurrencies. Now that Facebook has upped the stakes, there is a possibility of imposing a new crypto regulation. I believe that regulation of the crypto market will curtail ICO & other scams.

The Bad

• The initial members of the council are the Founding Members and serve as the network's initial validator node. To be such a node, an entity needs to make an investment of at least $10 million in the network through purchasing Libra Investment Tokens. Each $10 million investment entitles one vote in the council, subject to a cap. So, it’s more like a centralized ecosystem where some big corporates validate the transactions.
• Libra will start as a permissioned Blockchain. In a permissioned Blockchain, access has to be granted to run a validator node ie. Only if invest $10 million, you’ll be granted permission to validate.
• While the interest received from the Reserve is shared among the validators, the Users of Libra do not receive a return from the reserve. As the user base grows and the money starts flowing, the reserve gets bigger and the validators (Corporates) earn interest on the Libra User's funds and the users are left with nothing.

The Ugly

• Since, Libra will be backed by traditional money in a bank to support a stable price, it has to be layered on top of the existing financial system. Thus, the successful version of Libra will be more of a Global Payment System for moving fiat money around the globe with low cross-border transaction fees rather than being a cryptocurrency.
• Though Facebook is expected to maintain a leadership role through 2019 in the Libra Association, once the Network launches, Facebook’s role in the governance of the Libra Association will be equal to that of its peers and important decisions will require two-thirds of the votes. While one may think it as a good thing, it means that Facebook or Calibra or the Libra Association can’t really make any promises about how their technology will work in the future.
• The Whitepaper quotes as "Our ambition is for the Libra network to become permissionless. The challenge is that as of today we do not believe that there is a proven solution that can deliver the scale, stability, and security needed to support billions of people and transactions across the globe through a permissionless network." When Bitcoin, Ethereum & others have already provided a proven solution for a stable, secure, decentralized and permissionless network, I am not sure of what the Libra Association is trying to accomplish.
• While the Libra Blockchain is pseudonymous and allows users to hold one or more addresses that are not linked to their real-world identity, Calibra will need a government-issued ID to sign up for an account claiming that it is required for AML rules. Why does Calibra need users identity when the network itself is pseudonymous? When Facebook's data privacy breach is an ongoing debate, none could trust Facebook with their identity and financial data.

Edits:

1. Libra / Bitcoin / PayPal  -

2. Libra Vs Bitcoin

[key4co.in]

This is a very good article on Libra, I must say. The centralized nature of Libra brings in the disadvantages, but looking at it from a broader perspective, crypto will only go mainstream with some form of regulations (which is an attribute to centralization), hence it's not entirely bad. Facebook user base is the main focus here, if Libra goes live and facebook users adopt it, then it gives more exposure and acceptance for crypto at large.

[princerepon]

Thank you very much for sharing your thought. I was looking for information about Libra but there was not enough i found. This is completely a good article to know about Facebook new blockchain "Libra". I think people can do understand what is Libra and what are they trying to do. I hope you keep posting about Libra's new update. Thank you mate...

[semes]

[...]

Libra Vs Bitcoin Vs PayPal  -

The only thing that I think is this with your article. Bitcoin> Libra > PayPal> FIAT or Bitcoin> Libra > FIAT> Paypal.

But I think Bitcoin is the only important point here. There is nothing that I can compare here with BTC.

[ishirut009]

the only thing that i like about libracoin is the fact that they call it crypto, therefore, people will hear the word crypto and they will become curious about bitcoin and other alts. And if they research well enough, they will found out what libracoin really is. Which is a nice thing to happen.

[akhjob]

@princerepon - Thanks for the kind words. I'll try to keep this post updated with latest updates on Libra.

-skip-
The only thing that I think is this with your article. Bitcoin> Libra > PayPal> FIAT or Bitcoin> Libra > FIAT> Paypal.

But I think Bitcoin is the only important point here. There is nothing that I can compare here with BTC.

I'm not trying to say that Libra is superior than Bitcoin in any way through this post. Believe me, I am not a fan of Libra either and I definitely don't want Facebook to have my identity and financial data. I just believe that Libra has helped Bitcoin in some ways. Since, I didn't find a detailed thread on Libra here, I thought of sharing the info I learned from several sources.

[tsaroz]

A well written and non bias analysis. I had no idea about Facebook being just a node after the release of the blockchain. If that's the case and the nodes are limited just among those enterprise, we as a general crypto enthusiast and users has nothing to hope from the Libra token. It would just be another Paypal that is not based on a fiat currency.

[coloseum]

Libra finished its role to boost bitcoin this year, or at least within the first two quarters, so it's good to stop dicussing about Libra, that has not yet allowed to launch. In coming months, might be next year, Libra might bring other rounds of impacts on bitcoin and crypto market, but not now. The Facebook team need to do something to change Libra's current destiny, and crypto market, includes bitcoin, need some months to re-consolidate.

[qazgroup]

The only negative side to libra for me is the government interference and control that they are demanding and in the end it will not be a surprise to me if libra comes up as a centralized product with probably every transaction taxed which can hinder its free use, otherwise everything about this project is positive and huge in terms of its global impact.

[coloseum]

The only negative side to libra for me is the government interference and control that they are demanding and in the end it will not be a surprise to me if libra comes up as a centralized product with probably every transaction taxed which can hinder its free use, otherwise everything about this project is positive and huge in terms of its global impact.

Interference and control or management from governments occur not only with Libra, but also with bitcoin, and other altcoins or tokens, especially with crypto currencies that focus on user privacy. Because governments basically don't want crypto currencies to be used and compromised as good tools for money launderings.

[eternalgloom]

Great job on presenting all the information like this!
It's definitely interesting to see that they will need to tie people's real-world identity to accounts, especially since it's Facebook we're talking about.

I mean, even Paypal doesn't require you to give up your government issued ID for accounts with low limits.
I'm guessing this will be something that's going to stop many people from using Libra.

[akhjob]

@eternalgloom Thanks for the merits(my first)

I see a lot of hate towards Libra in this forum and I understand the reasons behind it. So, let's compare Libra and Bitcoin and see which is better.

+/-	Libra	Bitcoin	+/-
-1	More  of a centralised ecosystem. Validators being big corporates	Decentalized ecosystem. Anyone with the right tools can validate.	+1
-1	Permissioned network	Permissionless Network	+1
0	Stable coin pegged to a basket of currencies	Store Value - Digital Gold. (Other Cryptos will be pegged to BTC in future)	+1
+1	Will trigger mass adoption of Crypto	If Libra triggers mass adoption, Bitcoin is the one that’s going to benefit.	+1
-1	Being a stable coin, it is not a investment material.	Best to invest and HODL	+1
-1	Prone to inflation	Not prone to inflation, because of the limited supply	+1
+1	Might become a major cross border Gobal Payment System	Can be used for payment	+1
-1	Might not even launch as promised, considering the recent Libra hearings	Working as it is meant to be.	+1
-1	Facebook leading the Libra Association till its launch and acting as a validator	Privacy and security assured	+1
-1	Minimum investment to earn from Libra is $10 Million	No minimum investment	+1
-5			+10

So clearly, Bitcoin is the winner and we can see why most hate Libra.

Feel free to comment your thoughts on the table.

[coloseum]

I mean, even Paypal doesn't require you to give up your government issued ID for accounts with low limits.
I'm guessing this will be something that's going to stop many people from using Libra.

I don't think Facebook will be allowed to launch Libra soon, or will never have chance to launch it. Furthermore, I agreed with you that Libra, if launched, will destroy privacy of its users, based on some basics relate to USA's local law managements, and core approach of Facebook.

[akhjob]

So, France's Finance Minister, Bruno Le Maire has commented that Libra threatens the "monetary soverignity" of Governments and would not authorise the development of the Libra Project.

Source: https://www.theblockcrypto.com/post/39465/france-to-block-development-of-facebooks-libra-crypto-says-minister/

[SquallLeonhart]

So, France's Finance Minister, Bruno Le Maire has commented that Libra threatens the "monetary soverignity" of Governments and would not authorise the development of the Libra Project.

Source: https://www.theblockcrypto.com/post/39465/france-to-block-development-of-facebooks-libra-crypto-says-minister/

Wow, that means that Facebook would not be getting much support and may not succeed in releasing the coin because if they do, they would declare it illegal, this is still one of the advantage of centralized cryptocurrency to the decentralized one, they know that when they say things like this about bitcoin, it will really not have any effect because they cannot even trace the transaction.

One more reason why they are being threatened by Facebook coin is that while it may take more than 3 decades for bitcoin to really get to one billion users in terms of awareness, it may not take Facebook more than 1 year to get their coin to their users because they still have the largest users database in the whole world, so I was not expecting anything less form them.

[tranduong123]

Many governments are concerned about Libra, they think that Libra is threatening their Fiat money, and the Government is afraid that they will not control the economy if Libra is popularized.

[Brunus]

I haven't read much about Libra, but I am wary on principle: Bitcoin was born precisely to be outside the control of traditional political and financial institutions. It is a contradiction in terms and a scam that the institutions themselves promote a cryptocurrency.

[cahbagus555]

Many governments are concerned about Libra, they think that Libra is threatening their Fiat money, and the Government is afraid that they will not control the economy if Libra is popularized.

Of course the Government or the central bank will feel threatened because financial transactions that use Libra Coin will not be tracked and can interfere with the function of the central bank. In addition, the Government will find it difficult to collect taxes from every transaction that uses Libra Coin.

[Alisha FR]

there are a few points I can take from your article:
1. Libra like banking which distinguishes it from commercial banks is the use of blockchain.
this point will be a problem for a country because libra can kill state banks.
2. a centralized system (the policymaker is the founding council), even though the username is anonymous, and the user will still be tracked, because libra users must register AML through facebook or Calibra.
this second point, libra will never be the same as bitcoin or altcoin, libra is more like a virtual currency than what we call cryptocurrency.
this is my view.

[akhjob]

If anyone one is looking for a stable coin worse than Libra, here we go, China Coin proposed by the Chinese Government, neither backed by fiat nor physical assets.

source: https://u.today/china-coin-new-details-make-chinese-investors-disappointed-heres-why