The Implications Of Facebook’s Libra – Francis Mendoza
Libra is a cryptocurrency engineered by Facebook’s subsidiary- The Libra Foundation. It is a cryptocurrency purported to ‘run on a decentralized blockchain’. Libra was apparently designed to enable a simple global currency and financial infrastructure that allows the 1.7 Billion unbanked population to gain access to some form of financial services, since those 1.7 Billion cannot get access to a traditional bank. The unbanked cannot gain access, because access to traditional financial services are primarily restricted to cost, reliability and the ability to seamlessly send acceptable amounts of money.
Libra aims to differentiate itself from the mainstay cryptocurrency, Bitcoin, among others by:
· Low-volatility, by pegging itself through a basket of cryptocurrencies
· Accessibility, through access of Facebook’s existing infrastructure
· More Immediate Utility, through a consortium of 100 corporations that would accept Libra as payment, as well as not collecting any interest
· Speed, as transactions can move within seconds for negligible fees
The Libra team seeks to deploy it as an innovative payments infrastructure through Whatsapp and its massive following. The prospective beachhead market for Libra is India, with China and regions where unbanked people reside following suit.
It is posited that by empowering the unbanked population, the economic contribution within their respective regions could rise from $17 billion to $52 billion within the decade.
While Libra’s blockchain purports to be decentralized, in reality, it follows a consortium-based architecture, where votes are decided by the Libra Foundation’s corporate members, each having to pay $10 million for the operation of a node.
US Congress and other prominent members of the financial sector criticized Facebook for operating as a “Shadow Bank” though its Libra project, subverting traditional expectations for an accepted form of currency.
Libra is currently considered a threat to the US Dollar, the reserve currency of the world, for a variety of reasons:
· By being controlled by Facebook and other corporations instead of the US Government, it is substantially immune to capital controls and other financial countermeasures
· The Libra stablecoin and platform is the superior option in wiring and enforcing international contracts
· Libra is a potential loophole for several state and nonstate actors against US economic sanctions, which would greatly diminish international influence
· With several other foreign currencies being pegged to the dollar, a nation’s monetary policy is greatly affected by its behavior. Libra presents an attractive, stable alternative for a nation that does not want to be influenced by US Monetary policy
· With Facebook’s 2.4 Billion users, Libra is a threatening competitor to be the world’s dominant currency
The dollar cannot fundamentally compete against a stable cryptocurrency that can rapidly adapt its own behavior and elude the will of US Monetary policy- weakening America’s international influence
With the recent backlash against Facebook’s privacy scandals and the increasing intrigue against the quiet monopolization of technological resources by corporations, both governments and traditional banks will certainly not allow technology companies to act like banks in the digital age.
With the utility and interest provided by cryptocurrencies and blockchain, traditional banks will attempt to seize this technology themselves and bend it to suit their own purposes, while governments will heavily regulate it to preserve their international influence and control.
For centuries, International Banks have succeeded in creating a rigorous centralized power dynamic that services a critical mass of the first world population and stayed largely the same since..
..Until now. The centralized banking system that has serviced nations for centuries is no longer the last bastion of finance.
Meanwhile, while governments have utilized Information Technology to gather intelligence at inconceivable rates and proportions and to rapidly assert their influence, both domestic and abroad, the new decentralized power dynamic spawned by Blockchain and related derivatives threatens to weaken their hold on their own populations.
Both governments and traditional banks are acting out of self-preservation, threatened by the overwhelming disruption the Internet created across several industries.
If traditional financial institutions and governments are to survive this storm of silicon and steel, it must adapt quickly- or watch as the monuments they built to their hubris and their seemingly invincible systems crumble into forgotten, obsolete nothingness.
Digital Currency, if kept within Satoshi’s original vision, is set to revolutionize the way of life for billions across the world, as it is one of many advances within the next decade that will shift the power dynamic in favor of pure democracy.
It is something any person, regardless of nationality, border or race, can use to support businesses and causes they care about, as well as go about their lives without the domineering oversight of traditional financial institutions and the pitfalls from using their system (mismatch between inflation and wage increases, being too big to fail, etc.)
It is something that bring socioeconomic equity to other parts of the world that do not have the same opportunities as us, and is a means to shift towards a global meritocracy, where people are given more equal footing to forge their own lives and climb the socioeconomic ladder.
The Libra project, among other digital currencies and respective platforms, whether it succeeds or fails, is an integral part of cryptocurrency history and will be critical in paving the way for mass-adoption.
Published at Sun, 28 Jul 2019 02:45:29 +0000
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✅ Marco Verch is a Professional Photographer and Speaker from Cologne. ? This image can be used under Creative Commons 2.0. Please link to the original photo and the license.
By wuestenigel on 2018-05-01 18:50:15
