The future of Libra – Shaqueilla Seale
Libra is a cryptocurrency and blockchain platform introduced by Facebook. It seeks to eliminate the alienation of persons around the world that have no access to financial services for many reasons. Given that these people that were left behind have mobile phones and internet access, Libra seeks to be a solution to the lack of service. Using their mobile phones, people should be able to secure their financial assets and move money globally without the excess fees that are charged by banks. These charges are brought upon the customers for simply wiring money or taking money from the ATM and some banks even charge monthly to hold a customer’s money. To some, those charges are pocket change but to others those charges can accumulate and those customers with limited income don’t have the money to allow for these charges. These fees are the reason why 1.7 billion people remain ‘unbanked’. Apart from Libra wanting to overcome those fees, Libra aspires to be an easy way to exchange money as easy and secure as sending a text message on your mobile phone. Libra, although still being in the development stage has already caused a major uproar throughout the world, especially among regulators. However, it is yet to prove everything within the white paper.
Libra believes in cooperation with the financial sector, regulators and experts instead of blocking them out like other projects. This collaboration is Libra’s way to being sustainable, connected, secure and trusted. It is no secret that most huge companies, within the financial sectors or otherwise, rely on independent, regulated board of members. Libra is taking the same path with the introduction of the Libra Association as a way to be a trusted space. Can Libra be decentralised with an entire board behind it given the board’s purpose? This governing board, the Libra Association, contains 100 members that are the only entities that have the authority access to create nodes on the blockchain. I personally believe that having a governing board that oversees the data on the blockchain makes the project more centralised than decentralised. This is because being a decentralised project gives the idea that no one person controls the data and is mostly ‘permissionless’.
Libra is ‘permissioned’ with hopes of becoming ‘permissionless’ after 5 years. Libra’s position on this decision is understandable in the fact that they want to be able to scale billions of accounts. As of right now it is believed that no proven solution using a ‘permissionless’ system is able to do what Libra hopes to achieve. This is because ‘permissionless’ systems are slow and so Libra would avoid all of the transaction lag and high energy consumption.
Even with the mission of Libra, there is still no threat to the U.S. currency. This is because Libra is fully backed by a reserve of real assets to gain value. These assets are tied to the U.S dollar and other currencies and so without the U.S currency Libra would lose value. This is because Libra advertises assets such as government securities in currencies from stable and reputable central banks and U.S treasury investments which are some of the safest investments. Libra can pose no threat unless they release their connection to those assets.
Having large tech companies act as banks will undercut any banking institution being that the bank fees would no longer be applicable and so the bank’s profits would be lower. This will make bank compliance very unlikely, especially when billions of people making transactions through tech companies and not banks will take the power away from banks. These tech companies can possibly threaten the structure of the global financial system and it is impossible to imagine the government and banks will just allow this change to take place. I think the future of digital money is bright and has many pros, however traditional people who won’t stray from traditional banking practices will severely hinder mass adoption.
Facebook being an already untrustworthy organisation, regulators may not want them to control a global currency. Not only that, they have a ‘permissioned’ system with a board that can still be unsafe and contain collusion among members. The public will be in the dark because it is not a truly public ledger like most other projects. Having one group in charge of such a revolutionary project can potentially cause a huge problem no matter how justified the decision is.