What Is Libra? Facebook’s cryptocurrency, explained in five minutes
By BitLeague tech team
A few weeks ago Facebook introduced its long-awaited cryptocurrency project, Libra, and the internet’s been rightly abuzz about the social media giant’s foray into the world of digital currency ever since. With hundreds of millions of users and hundreds of thousands of brands congregating on the same social platform, the idea of a cryptocurrency payment system is one that doesn’t entirely come as a surprise, and the Libra coin’s presence in the global marketplace could very well change the way the world does business in less time than we think.
Here at BitLeague, we champion the convergence of innovation and accessibility, and at first look, it seems Facebook’s Libra concept embodies both.
So, what exactly is Libra? We’re here to tell you what we know.
What is Libra?
Ever heard of V-bucks? Chances are if you’ve ever ventured into the world of Fortnite, you know exactly what they are. In a nutshell, think in-game currency. You want an item for your video game (say, a really cool tool or weapon), you purchase V-bucks with real money, and use those V-bucks to buy that item. Simple enough, right?
Facebook’s Libra coin works similarly, albeit with a bit of a twist. It’s basically a one-to-one exchange concept (put a dollar in, get a Libra coin out, or vice versa), that’s tied to more than one currency. In theory, after the system has been around for some time, one Libra coin should be able to buy around one USD. In the world of cryptocurrency, there’s a simple name for this. We call it stablecoin.
What is the goal of Libra?
In its whitepaper, Facebook indicates that “Libra is a global, digitally native, reserve- backed cryptocurrency built on the foundation of blockchain technology. People will be able to send, receive, spend, and secure their money, enabling a more inclusive global financial system.”
Let’s unpack that.
Right now, if an artist in Africa wants to buy something and has no bank account, he has to buy local. With no bank account, he’s relegated to buying only what he can afford with the cash he has in his pocket — and if he can’t foot the bill with his own cash, he can’t buy it. In this way, our artist is handcuffed by a system that only allows him access to goods and services in a very small part of the world. With a concept like Libra coin, however, this would no longer be the case. Our same artist would be able to purchase and sell worldwide, sans bank account. All he’d need is a Facebook account, and he could convert his funds into a globally accepted currency to buy or sell any number of things available in a global marketplace.
Libra could quite possibly function as a currency solution for the tens of millions of people that don’t have a bank account or simply can’t afford the exchange rates involved with global transactions today. Libra currency would be accessible to anyone, anywhere — with virtually no barriers to entry.
The technology behind Libra
Libra uses blockchain technology, but without the blocks or the chains. It’s not permission-less either, as it relies on validators with permissioned access rather than nodes on a chain.
The validator network is currently comprised of 27 companies — including major names like Visa, MasterCard, PayPal, eBay, and Vodafone. Each company has pledged $10 million to Libra’s development. As of now, Libra’s goal is to source 100 validators — though that number could rise in the future.
Whether or not the support of these large companies is a positive or negative is still up in the air. One school of thought indicates that the whole validator concept smells like a rich kids’ club — one which could severely undermine the concept of “accessibility for all” that the project claims is its number one priority. The other school of thought, however, claims that backing by such large companies could be an appropriate checks and balances system given the potential growth of something as revolutionary as this.
Only time will tell what Libra means for the world and banking as we know it. Until then, we’re eager to enjoy the show.