Stepping away from right-wing regulatory gatekeepers and left-wing crypto-anarchists, Facebook’s Libra has something for all of us in the middle. Let’s face it, it is at present not so much a blockchain but rather a decentralised Paypal 2.0. With solid technical and organisational backing, the short-term benefit for businesses and e-commerce is the emerging market of millions of users worldwide who are going to become holders of a cryptocurrency that is easy to transact via familiar Facebook products such as Messenger or WhatsApp. It is destined to make a difference, yet it remains to be seen what kind of difference and it will be up to consumers to differentiate.
So, what is Libra?
Libra coin is linked to a basket of historically stable currencies-backed securities consisting of USD, EUR, GBP, JPY, at least in the beginning. The start value of 1 Libra will be close to that of a dollar, euro or pound which might classify Libra as a stablecoin.
Intended usage – it is likely to become available with Calibra, Messenger and WhatsApp while allowing cross-border payments between friends and family, micropayments, small business and Facebook marketplace transactions.
Technology innovation – Libra’s architecture introduces a dedicated new programming language called Move, which will allow apps to move Libra coins from one account to another without being misplaced or duplicated.
Libra coin is backed users’ funds put into the system and paid with standard fiat currency. The reserves will be held by the founding members of Libra Association, such as Facebook, who will earn interest. Users will be able to purchase Libra using their local currency through wallet apps and local resellers such as grocery stores. Businesses are likely to withdraw Libra, which is similar to a reserved collateralised currency, and exchange it into local currency since it would make little sense to hold it for any other purpose.
How can I potentially use Libra?
Facebook is tackling the matter with Calibra, a subsidiary of Facebook and the first custodial wallet for Libra. After passing KYC, users will be able to use Calibra wallet either as a stand-alone app on iOS and Android or as WhatsApp/Messenger integration.
The main differentiator will come from the school of major credit houses. Both users and transactions will be subject to anti-fraud monitoring, allowing users to be compensated for lost funds due to fraud, scams or forgotten passwords. While this is not in line with decentralised money philosophy, it should be welcomed by businesses and end-users who are used to this type of experience with PayPal, credit cards and bank accounts.
What are the potential basic integration and adaption options?
Although the Libra Association will not be allowing third-party developers to contribute modules (smart contracts) to the Libra blockchain for an undeclared period (until certain maturity), it is planning to offer incentives to early adopters among developers and merchants. This could come in the form of a percentage of transaction paid back, which businesses can keep or pass on to their customers to make participation more attractive.
To be able to receive payments via WhatsApp and Messenger, merchants will most likely need a valid KYC-passed wallet such as Calibra. Initially, merchants might have to rely on interfaces built into WhatsApp, Messenger and Facebook Marketplace for receiving such payments. Given that both Stripe and Paypal are participants, they are most likely to support the ecosystem with their payment gateways.
Facebook Marketplace is likely to be the main gateway into Libra at the initial stage.
E-commerce and merchants will most certainly be the first to benefit from Libra due to better access to customers and payments.
What do regulators say?
Countries like India, China and other markets that take a stand against cryptocurrency or are under US sanctions will contribute to delays of the rollout and geographical limitations for the production launch of Libra network, originally planned for 2020.
Although the majority of regulators are taking a conservative approach, Facebook’s 2.4 billion customer base implies more action from the governmental bodies and will speed up the adoption process, one way or another.
What does the crypto community say?
The true blockchain enthusiasts are generally pushing back on the Libra initiative, calling it centralised, and condemning the whole idea of ‘Federal Reserve 2.0’. In message boards throughout the world, blockchain purists keep explaining that the Libra network is not really decentralised (as it is controlled by an invite-only club of corporations and does not allow any enthusiast to launch their own node, unlike Bitcoin or Ethereum). Furthermore, it does not have cryptographic blocks and mining mechanisms typical to modern blockchains (the Libra white paper carefully calls it a “versioned database”).
However, the community feels positive about the fact that Libra is going to introduce millions of people to the concept of cryptocurrencies and decentralised money, which may become a ‘gateway drug’ driving adoption of truly decentralised cryptos such as Bitcoin and Ethereum.
Some blockchain technologists are also fascinated by architectural solutions that the Libra white paper and the Move programming language have introduced. Those few who have participated in the initiative are citing the corrupt and inefficient monetary policy, high remittance costs and other problems of modern world finance in defence of their work on Libra.
At the end of the day
Businesses will flock to the platform simply because nothing can beat the 2.4 billion-strong community of potential customers. And with Google, Apple and Telegram already in the game, all working on their own versions of global financial platforms that are blockchain based, the wave of new thinking will be even larger. Balancing the known world of fiat currencies and the unknown universe of crypto used to be one of the major dilemmas but this might become elementary. Millions of people around the world could finally relate to this and become active participants in the crypto space.
This will force businesses to adapt to the changing landscape and get used to tech giants offering financial services. Those who will manage to keep up with integration and new ways of transacting will be able to ride the wave of the decentralised finance revolution and gain access to a massive customer base.
It will be great to witness the disruption that Libra is going to bring next year.