Project Libra: The Next Global Game-Changer

Since the announcement of Libra, the new cryptocurrency by Facebook along with 27 other founding members, it’s become the norm to debate whether Facebook, of all companies, should lead the creation of a new cryptocurrency. It certainly seems ironic that a company that’s been plagued by multiple privacy-related violations is the same one designing a new way for people to securely send and receive payments. When reading the whitepaper laid out by Facebook and the other joining members, known as the Libra Association, there may be potential for this ambitious project. With Libra not set to roll out until mid-2020, it may help to delve further into what Libra really is about and what makes this ambitious project a potential win-win for all parties involved.

Libra is both similar to and different from Bitcoin. They are both built on the blockchain, but are backed differently. Libra, once available, will be backed by various fiat currencies and a mix of bank deposits and short-term securities. This gives Libra the classification of a stablecoin. Bitcoin on the other hand is backed simply by the trust that people give it. This explains why the value of it has been so volatile over time and continues to be. With Libra being a stablecoin, the Libra Association is tying its value to existing currencies, making it less likely to ride the ups and downs that Bitcoin has experienced.

In addition to Libra, Facebook plans to roll out its own digital wallet called Calibra to store the Libra tokens. For those concerned about their privacy, Facebook says it will not mix the data it gathers from the wallet with other entities of Facebook so it can be used for targeting ads (unless you specifically opt in). Your personal information and anything that can be used to identify you will not be tied to any transactions made publicly visible. Although adopters of the wallet will have to go through a thorough investigative process to use Calibra (known as ‘Know Your Customer‘), any data collected won’t be used to target users with specified ads. If this still doesn’t satisfy some people, they can use any digital wallet that can carry Libra, so there’s some flexibility there.

Where it gets interesting is how Libra can provide a potentially massive ROI to the founding members. The idea is that members put in $10 million a piece to build a reserve for Libra and to help kickoff the momentum. With that, the problem the Libra Association hopes to solve is the lack of a proper banking or other financial system that can serve the 1.7 billion people who would benefit from the stablecoin. The hope is that if those people, along with everybody who adopts Libra, have access to send money easily to others and receive it as well, it can become a global payment option. With that in mind, it can be mouth-watering to imagine the amount of money the founding members will be raking in from interest that Libra will generate from daily usage. It’s also possible that Facebook would use this momentum build out other financial services to strengthen its portfolio and keep people connected to its massive ecosystem.

Libra benefits don’t stop at the feet of the founders and people with no access to financial systems. If Libra does take off, it is very likely that it will be used within Facebook’s social platform to purchase things through ads and ecommerce pages. With the ability to pay for something almost as easily as sending a message through Messenger or Whatsapp, it will be a tremendous boost for those business owners with Facebook pages as well. Even looking at the big picture, that can only help the global economy by boosting spending across the board.

With all the potential advantages of Libra, there are some potential risks to keep in mind as well. The biggest is the uncertainty that Facebook and the other members will be able to handle the privacy and data protections that are a must for any financial system, let alone a cryptocurrency. Although it is given that Facebook will not merge Calibra information with other entities without user consent, people have seen this before. Trust is a hard thing to buy, and with all of the scandalous behaviors and privacy violations that have overshadowed Facebook, it’s possible people may become hesitant to adopt Libra (which would explain why they recruited other members in the first place and made it an association based in Geneva, Switzerland). Still, with nothing guaranteed until at least mid-2020, one can only imagine how powerful and world-changing Libra and Calibra can be if they reach their full potential. If successful, Libra will be what Bitcoin should have been: the next global game-changer.