Facebook has finally revealed details about its Facebook Libra Project this Tuesday. The Facebook Libra project is still at very early stages and whilst Libra is yet to launch its blockchain and cryptocurrency for the general public, the project’s website provides a glimpse into technical, organizational as well as the financial structure of the Facebook Libra project.
Below are the top 4 things you need to know about Libra.
The project’s value is based on the need to provide the unbanked and underbanked global population with equal and fair access to financial services. The existing financial system puts both categories at a disadvantage. People with less money usually have less choice when it comes to financial services and, as a result, pay much higher fees for financial services.
At the same time, existing cryptocurrencies that aim to disrupt legacy financial systems are very volatile and lack global scale adoption. The price volatility of existing projects makes it challenging to use cryptocurrency as a medium of exchange. For example, the majority of consumers use Bitcoin as a store of value rather than digital cash to pay for goods and services.
Project Libra is bringing together large companies from various industries to reduce costs of using financial services by creating a highly scalable blockchain that will host Libra coin. The blockchain will also provide developers with the ability to create smart contracts using newly developed Move programming language.
Facebook promises that Libra coin will be stable unlike existing cryptocurrencies because it will be backed by liquid financial instruments that create intrinsic value and allow to manage price fluctuations.
In other words, if you want to buy Libra Coin, you will need to pay fiat for the cryptocurrency. This is the only way Libra coin can be minted. Your fiat will be then converted into low risk and liquid government-backed security. This is how Project Libra ensures that it’s cryptocurrency has stable prices.
“We believe that a global currency and financial infrastructure should be designed and governed as a public good.”
Facebook has created the Libra Association which is made of a diverse group of businesses, NGOs as well as academic institutions. While this is only the initial list and Facebook hopes to include around 100 members by the year 2020, there are a number of members that you most likely will be able to recognize. The association includes the likes of Mastercard, PayPal, Lyft, Spotify, Uber, Vodafone, Andreessen Horowitz, Kiva and the list goes on.
While the largest blockchain and cryptocurrency projects actively work on establishing partnerships with government organizations as well as large businesses, Facebook certainly has a leg up as far as establishing strategic partnerships. Active participation of large companies in the Facebook Libra Project will inevitably drive growth and mass adoption.
The overwhelming majority of blockchain projects followed Bitcoin’s lead and adopted the notion of blocks as a way to record transactions on the network. One of the consequences of this architecture is a relatively slow transaction throughput.
For example, Bitcoin blockchain has a maximum of 7 transactions per second. Ethereum is a faster blockchain and can currently manage roughly 15 transactions per second. Meanwhile, MasterCard boasts 45,000 transactions per second.
To accomplish scalability and maximum transaction throughput, Libra Blockchain will use a blockless architecture. Libra Blockchain will be a single data structure that records the history of transactions and states over time. This is similar to having a pipe with water (transactions) which is constantly filling a swimming pool (Blockchain database). In other words, the data will “flow” into the distributed database maintained by full nodes.
Libra Blockchain is undeniably the first cryptocurrency project to be embraced by major corporations.
In order for Libra Blockchain to work, the foundation must maintain an open dialogue with governmental agencies around the world to make sure that Libra Coin can be used by consumers to pay for goods and services throughout the world. This could pave the way for adoption for the rest of blockchain and cryptocurrency projects.
In addition to this, to ensure stable prices Libra will need to enter into an agreement with major cryptocurrency exchanges. This will further increase utility for all projects as it will increase liquidity and depth of the market allowing large institutional investors to enter cryptocurrency market.
Libra’s price will remain stable while its supply will grow. Bitcoin is a deflationary cryptocurrency. There could ever exist only 21 million Bitcoins. With Libra’s success, Bitcoin’s price is primed to experience growth. Consider buying Bitcoin at CryptoFish while it is not too late.
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