Even when its exchange rate was soaring, there were many who stayed sceptic about Bitcoin. Even when the newspapers and blogs were filled with articles explaining what cryptocurrency is, how the blockchain works, and what they can do for our digital life, people have been arguing that this is not a viable model. Among the counterarguments that kept emerging was the fact that the value of cryptocurrencies is not tied to something tangible – like that of the “real” money (fiat currency) is tied to the economy of a country, for example. Now all this may change with the emergence of Libra, a cryptocurrency backed by Facebook and several other major internet companies.
What is “Libra”?
Let’s make one thing clear: Libra is not the future of Bitcoin. It has quite a few fundamental differences that make it a completely different matter altogether – quite a few of these are the exact opposite of what Bitcoin brings to the table.
The “not Bitcoin”
For one, Bitcoin is a completely distributed system – there is no single entity that controls the entirety of the system. In its case, anyone can have a “full node” that validates any and all transactions. In the case of Libra, the members of the “Libra Association” will run all of the nodes, meaning that they will be the ones validating transactions – this makes Libra a “permissioned” system as opposed to Bitcoin’s “permissionless” dynamic based on consensus rather than trust. While the Association is a not-for-profit organization, all of the members are businesses. Having all the nodes in one hand, so to speak, gives power to the entity behind it – and exposes the entire mass of Libra tokens to control.
On the other hand, Libra will be a token 100% backed by assets. Membership in the Libra Association is conditioned by a contribution of $10 million to the total pool of cash behind the tokens. The Association plans to have 100 members by the time the coin is launched, meaning that the entire pool of coins should have a “real-life” value of at least $1 billion, either in cash or in government bonds or similar assets. This is done with the goal of reducing the coin’s volatility – or the “bubble” we mentioned above. Libra will not soar like an eagle but it won’t bomb either. This stability is something that “traditional” cryptocurrencies can’t offer at this time.
Will Libra be useful to us?
If it works as advertised, Libra should make it easier and cheaper for us to transfer money instantly all over the world. It will be stable, it will be easily accessible all over the world, and it will be accepted by major tech companies like eBay, Uber, Lyfy, Spotify, and others while having the support of payment processors like VISA, MasterCard, and PayPal. Other than that… we’ll see.
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