Trust is the fundamental element in business transactions. It is what keeps economies and societies functioning. Throughout history, we have managed to build complex institutions from legislative, judicial, law enforcement to banks and various financial institutions to enable trust in commercial transactions. We also invented tools such as fiat money, bonds, stocks and contracts to guarantee the successful execution of business transactions.
And then came Bitcoin and its blockchain technology that allowed two parties to exchange value with trust without legislative institutions, fiat money, banks or contracts. It is, simply, a revolutionary technology. This is probably why blockchain was hyped as the next generation of the internet that will create the programmable economy.
(Full disclosure: I own bitcoins and have a small investment in Facebook.)
Despite the many successful implementations of blockchain, it has not been as transformational and didnt generate the much-hyped benefits.
One reason is that blockchains are implemented as disconnected solutions with no foundational protocols such as TCP/IP, HTTP and HTML that created the internet revolution. Additionally, no single blockchain network emerged as the dominant one that would offer a multitude of business services to produce the desired transformational benefits.
Enter Facebooks Libra cryptocurrency and blockchain.
On June 18th, Facebook announced the Libra blockchain and cryptocurrency, which raised many questions: What is Libra and how will it work? Is it a cryptocurrency? Is it a blockchain? Will it overtake Bitcoin and Ethereum? Will consumers trust it? What is its potential? Whats in it for Facebook? And will Libra become the unifying and transformational blockchain that everyone was hoping for?
The Libra whitepaper holds some answers to the above questions, including how it will be governed. Libra will be launched by the Libra Association, which is an independent, nonprofit membership organization, headquartered in Geneva, Switzerland. Libra will be governed and controlled by this association and will be independent of Facebook. It is currently composed of 28 organizations.
The key difference between Libra and Bitcoin is the permissionless versus permissioned blockchain. Simply put, a permissionless blockchain implies that anyone with the right hardware infrastructure can apply the mining protocols and participate in validating transactions and in becoming a validating node on the Bitcoin network. Currently, Bitcoin has over 9,500 nodes, which enabled it to withstand the test of time and produce an immutable, distributed and secure ledger.
In contrast, Libra is going to be a permissioned blockchain that is centralized where its consensus mechanism, software and governance are controlled by Libra Association members who are the only ones permitted to validate transactions. At launch, the Libra blockchain will have 100 permissioned organizations. Visa, Mastercard, Uber, Vodafone and Spotify are among the founding companies of the Libra Association.
So, is Libra a cryptocurrency with a blockchain like bitcoin?
Well, Libra applies many of the same building blocks and concepts as Bitcoin. It uses a blockchain, cryptography, digital wallets, anonymous accounts, smart contracts and the gas concept with a new programming language called "Move." This makes Libra more like Ethereum than Bitcoin.
Libra will be implemented as a stable cryptocurrency by pegging it to a basket of low volatility assets such as the dollar, euro, yen and bonds, and through creating the Libra Reserve. This reserve allows the 100-node consortium to mint and destroy Libras as needed and based on demand. So, when customers buy Libra coins using dollars, those dollars are put into the reserve that is then invested in low volatility assets. This fund concept is missing from Bitcoin and Ethereum, which leads to their price swings and speculations and makes Libra a powerful contender to Bitcoin, Ethereum and other cryptos.
Libra is also being architected with some advantages over traditional cryptocurrencies. It will consume far less electricity than Bitcoin and is touted to have a higher throughput of 1,000 transactions per second (TPS) compared to bitcoins seven TPS and Ethereums 15 TPS.
It also promises to make sending money across the globe as easy as texting and will have very low fees compared to close to 5% of the transaction value of international wire transfers.
Furthermore, Libra has the potential of helping many of the 1.7 billion unbanked to enter the global financial system. It could trigger a wave of innovation in financial services as much as the internet did for online services. These are some remarkably important advantages for Libra that could possibly offer the transformation that has been expected from blockchain and cryptocurrencies.
With Facebooks 2.4 billion users across the globe, Libra has the potential of transcending governments and central banks and possibly becoming an international digital currency. If Facebooks users adopt Libra to shop, transfer money and transact, it could make Facebook one of the most powerful financial institutions in the world. That would herald a consumer revolution but could also make financial systems less stable and reduce governments economic sovereignty, writes The Economist.
Its clear that Facebooks Libra has legs but also some serious challenges. Aside from the technological challenges of delivering the Libra network with the advertised throughput, security and smart contracts, there are questions on whether a 100-node blockchain network can be immune to global outages and to denial of service attacks.
In addition, how will a 100-node permissioned blockchain move into a permissionless one within the planned five years, and maintain the promised 1,000 TPSs? Will consumers accept it as a slower alternative to credit card processing that is at some 1,700 TPS? Finally, it is not clear when Libra will be available and how will it be rolled out.
But, more importantly, Facebook needs the blessing of governments across the globe and the trust of its customers. These are two enormous obstacles that Facebook would need to overcome. It is by this fundamental trust from governments and from consumers that would define the future of Libra and possibly of Facebook. So, can Facebook address these two trust problems and use Libra to solve its own low level of trust from consumers and governments?
- What Is Cryptocurrency? A Simple Guide To Understanding ... - February 28th, 2020
- Cryptocurrency Prices - Compare the value of all crypto ... - February 28th, 2020
- Cryptocurrency Trading | TD Ameritrade - February 28th, 2020
- Cryptocurrency TradingView - February 28th, 2020
- Cryptocurrency Definition | Bankrate.com - February 28th, 2020
- Cryptocurrency - SlideShare - February 28th, 2020
- Cryptocurrency | Barron's - February 28th, 2020
- What Is Cryptocurrency Mining? - Mycryptopedia - February 28th, 2020
- Cryptocurrency Jobs, Employment | Indeed.com - February 28th, 2020
- Cryptocurrency exchange, bitcoin rate. Buy bitcoin instantly - February 28th, 2020
- Cryptocurrency | Definition of Cryptocurrency by Lexico - February 28th, 2020
- Best cryptocurrency to Invest 2019 - The Complete Guide - February 28th, 2020
- What is the Cryptocurrency Act 2020? - February 28th, 2020
- What Is Cryptocurrency Mining? Webopedia Definition - February 28th, 2020
- cryptocurrency GitHub Topics GitHub - February 28th, 2020
- Cryptocurrency Market News - Bitcoin and Altcoins News - February 28th, 2020
- Amazon.com: Cryptocurrency Investing Bible: The Ultimate ... - February 28th, 2020
- Major sell-off wipes $40 billion from cryptocurrency market - Yahoo Finance - February 28th, 2020
- Can cryptocurrency become the UN money of the future? - Yahoo Finance - February 28th, 2020
- Venezuela Sanctions: What U.S. Citizens With Cryptocurrency Need To Know - Forbes - February 28th, 2020
- Warren Buffett: Cryptocurrency 'has no value' 'I don't own any and never will' - CNBC - February 28th, 2020
- VeChain (VET) Billion Dollars Partners Believe in the Cryptocurrency - The Cryptocurrency Analytics - February 28th, 2020
- Why has the Tezos price made significant gains? - Coin Rivet - February 28th, 2020
- Cryptocurrency Exchanges Now Have To Devise A Method For The Secure Transfer Of Information - Technology - UK - Mondaq News Alerts - February 28th, 2020
- Cryptocurrency Explained on the Latest Episode of The Simpsons - Bitcoin News - February 28th, 2020
- How Big Is The Role Of Digital Asset Custodians In Enterprise Adoption? - Forbes - February 28th, 2020
- VertCoin (VTC) One Click Miner Beginning To Rock the Cryptocurrency World Already - The Cryptocurrency Analytics - February 28th, 2020
- Sweden Could be the Next Major Cryptocurrency Market - Coin Idol - February 28th, 2020
- Tagomi Becomes the Part of Facebooks Libra Association to Develop a Cryptocurrency - TWJ News - February 28th, 2020
- A plan to sell Perth Glory to the LFE cryptocurrency firm is over, but the deal never added up - ABC News - February 28th, 2020
- Cryptocurrency in Focus: Ethereum Is on Fire - TheStreet - February 27th, 2020
- Crime And Punishment In The Cryptocurrency World - Forbes - February 27th, 2020
- The Mystery of Warren Buffett's Missing Crypto is Solved - Cointelegraph - February 27th, 2020
- Warren Buffett says he will never own any cryptocurrency - Yahoo Finance - February 27th, 2020
- Why 2020 is an important year for cryptocurrency exchange regulation - CryptoSlate - February 27th, 2020
- Hot or cold. Which cryptocurrency wallet is the best? - Toshi Times - February 27th, 2020
- JONES DAY TALKS: Hard Forks and Airdrops: The IRS Issues Cryptocurrency Tax Guidance - JD Supra - February 27th, 2020
- Cryptocurrency exchange operator ruled in breach of contract - The Straits Times - February 27th, 2020
- Raccoon malware targets massive range of browsers to steal your data and cryptocurrency - ZDNet - February 27th, 2020
- The Simpsons Just Gave Cryptocurrency Massive Mainstream Exposure - The Daily Hodl - February 27th, 2020
- Simpsons predicting the future again: Jim Parson of The Big Bang Theory explains what cryptocurrency actually is - The Independent - February 27th, 2020
- Manipulation, Hacks And System Errors Lead To Losses For Cryptocurrency Users And Exchanges - Technology - United States - Mondaq News Alerts - February 27th, 2020
- Analyst: Ripples XRP Could Fall by Another 25% Due to This Reason - newsBTC - February 27th, 2020
- Quadriga CEO Gerald Cotten dies, leaving $145 million of ... - February 24th, 2020
- Crypto Appears on Simpsons Where Jim Parsons Explains It's 'Cash of the Future' - Cointelegraph - February 24th, 2020
- Cryptocurrency Market Update: Hostility ousted as Bitcoin, Ethereum and Ripple make blissful moves - FXStreet - February 24th, 2020
- How This Cryptocurrency Platform Grew From Nothing to Top 5 Exchange Worth $1 Billion in 9 Months - newsBTC - February 24th, 2020
- How the IRS Audits Cryptocurrency Tax Returns - Filing Expert Shares Example, Insights on AML Focus - Bitcoin News - February 24th, 2020
- The Billion-Dollar Cryptocurrency Scams You've Never Heard About - OZY - February 24th, 2020
- Top Cryptocurrency Analysts Say $100,000 Bitcoin Predictions Way Off Base Heres Where They Think BTC Will Land - The Daily Hodl - February 24th, 2020
- Why Venezuela's Oil Based Cryptocurrency Is Still Alive - OilPrice.com - February 24th, 2020
- Bitcoins Potential to Benefit the African-American Community - Cointelegraph - February 24th, 2020
- Finance Sector Concerned Over the Increasing Dominance of Cryptocurrency - Inside Bitcoins - February 24th, 2020
- Swedens Central Bank To Begin Testing National Cryptocurrency - CryptoPotato - February 24th, 2020
- Ripple Battles XRP Scams, Launches Initiative to Combat Cryptocurrency Theft, Fake Giveaways and Financial Crimes - The Daily Hodl - February 24th, 2020
- Inside the Lachish Temple, the Earliest Example of the Letter Samekh - The Daily Beast - February 24th, 2020
- Cryptocurrency Definition - February 20th, 2020
- Cryptocurrency Market Capitalizations | CoinMarketCap - February 20th, 2020
- How Cryptocurrency Trading Has Evolved in Recent Years - Cointelegraph - February 20th, 2020
- Tezos to the Moon: How The Unstoppable Cryptocurrency Rally Could Double - newsBTC - February 20th, 2020
- Bitcoin touches $9,500 as $31 billion wiped off cryptocurrency markets - Yahoo Finance - February 20th, 2020
- The Fed's Cryptocurrency Head Fake | Opinion - Newsweek - February 20th, 2020
- Cryptocurrency, decentralized finance, and the sweet promise of 8% interest - Yahoo Finance - February 20th, 2020
- Global cryptocurrency regulation is turning bearish in these five countries - CryptoSlate - February 20th, 2020
- The future of blockchain and cryptocurrency in Africa - FinTech Magazine - The FinTech & InsurTech Platform - February 20th, 2020
- What Exactly Is Facebooks Libra Cryptocurrency? What Are Its Challenges? - CryptoGlobe - February 20th, 2020
- Is the cryptocurrency bull market finally here? - Coin Rivet - February 20th, 2020
- Regulating Bitcoin: WEF2020 Announced A Global Consortium For Cryptocurrency Governance - CryptoPotato - January 25th, 2020
- Research: Ether Was the Cryptocurrency Most Correlated to Other Coins in 2019 - Cointelegraph - January 25th, 2020
- The Dark Side of Becoming the Next Bitcoin - CCN.com - January 25th, 2020
- Cryptocurrency Market Update: Bitcoin, Ripple and Ethereum dive into the rabbit holes - FXStreet - January 25th, 2020
- Bank of England to consider adopting cryptocurrency - The Guardian - January 25th, 2020
- Crypto Tidbits: Bitcoin Hits $9,000, Institutional Cryptocurrency Investment Spikes, NBA Team Uses Ethereum - newsBTC - January 25th, 2020
- How Cybercriminals Are Converting Cryptocurrency to Cash - BankInfoSecurity.com - January 25th, 2020
- Cryptocurrency and OFAC: Beware of the Sanctions Risks - JD Supra - January 25th, 2020
- Alleged BTC-e boss will be extradited to France over cryptocurrency fraud - The Next Web - January 25th, 2020
- Indian central bank: Cryptocurrency is not banned in the country - FXStreet - January 25th, 2020
- Can Cryptocurrency be Regulated? - CryptoTicker - January 25th, 2020
- Latest news on the cryptocurrency market - Born2Invest - January 25th, 2020
- Plasticoin, the cryptocurrency that wants to clean up Uruguay's coast - Contxto - January 25th, 2020