What’s Libra and why tech giants of Silicon Valley are involved in it?
Facebook started developing its own cryptocurrency called Libra and it believes that Libra will become a global currency for billions of people around the world. People that would benefit the most from it would be the ones that live in developing countries where access to financial services is very not developed or very limited. In other words, it’s creating digital money that you can buy stuff.
Since the announcement of the news in June 18, 2019, Facebook drew enormous attention from governments, politicians, financial regulatory systems and large tech companies.
Yes, it is, but not exactly the same. Bitcoin blockchain is a decentralized cryptocurrency where literally anyone can run a node. On the contrary, Libra’s nodes will only be run by the members of the Libra Association: that is Facebook, Uber, Mastercard, Visa, Stripe, and others. This is where all the disagreements are debated. There were initially 28 member companies and recently some of them bailed out.
It is argued that the decentralized system makes the payment process much slower. As of now, Bitcoin can process seven transactions per second while a centralized system of Libra will be able to process up to 1,000 transactions per second. To contrast, Visa is also a centralized system that is able to process 24,000 payments per given second.
Libra is planning to launch in 2020, it seems like there is still time ahead. But, Some European governments are already announced that Libra has to meet the highest standards of the financial regulatory system in order to be able to get into their markets. Large banks are also worried about the company of this massive size to create their own currency.
The first company to leave Libra association was Paypal, followed by Ebay, Stripe, Visa and Mastercard. Out of initially joined 28 member companies, now there are 21 companies left. One of the major reasons for some of these big tech companies to abandon Facebook’s Libra is because the regulatory scrutiny is picking up. Also, Zuckerberg is going to testify in front of Congress about his project with the goal of defending it.
In developed countries, the usage of paper money is getting less and less. Because they can be torn, damaged and lost. In the countries where financial systems are underdeveloped, cash is widely used. Over time, it will change as technology and innovation is catching up fast. Digital money is a currency of the 21st century because it’s more convenient and secure. Libra has all the chances to become the next currency that millions, if not billions of people might use.
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