Facebook’s Libra cryptocurrency whitepaper dropped this week, sending shockwaves through the Bitcoin and altcoin community.
Is Libra the thing that pulls blockchain kicking and screaming into the mainstream, for the benefit of one and all? Or is it the final nail in the coffin of a cryptocurrency experiment just a decade old?
Here are 10 key takeaways from the newly released Libra whitepaper.
While plans for Libra involve the eventual setup of a decentralized governance model, it’s starting with several “founding members.” Those include Mastercard, Visa, Facebook, PayPal, eBay, Bitcoin exchange giant Coinbase, and more.
By 2020, the team hopes to have set up the Libra Association – a community-driven entity which oversees the blockchain’s development.
While that sentiment may sound noble, one should consider the cost associated with having a say in Libra’s future…
Immediately overtaking Dash as the most expensive masternode coin, Libra demands its node operators stake $10 million worth of Libra Investment Tokens as security. The whitepaper describes the process of running a node:
“To be such a node, an entity needs to make an investment of at least $10 million in the network through purchasing Libra Investment Tokens… Each $10 million investment entitles one vote in the council, subject to a cap.”
That’s good news for blockchain security – with so much at stake, node operators are incentivized to do the right thing for the sake of the entire ecosystem. However, the high buy-in price also reduces possible candidates down to a tiny list of the financial elite.
By 2020, the Libra Association is expected to have 100 members – equating to $1 billion being staked on the blockchain.
To be included in the initial group of Libra’s founding members, businesses must meet a $1 billion market value requirement – or hold more than $500 million in customer balances.
Those companies must “reach greater than 20 million people a year nationally.”
Finally, they must be recognized as a top-100 industry leader by a respected authority, such as the Fortune 500, S&P Global 1200, etc.
Amendments are made for “newly emerging industries,” but every applicant must still convince the council that their participation would provide a “meaningful contribution” to the ecosystem.
To meet the needs of billions of customers, Facebook built its own blockchain based on the Byzantine Fault Tolerance (BFT) consensus algorithm. Libra could achieve the scalability that the current crop of blockchain projects have sought in vain for years – as per the documentation:
“Able to scale to billions of accounts, which requires high transaction throughput, low latency, and an efficient, high-capacity storage system.”
Typical whitepaper promises? Or has the necessity of creating a Facebook-centric currency driven developers to create something entirely new?
Every national currency integrated into Facebook’s system will be completely interchangeable with Libra, according to the whitepaper. But that doesn’t mean their respective values will be interchangeable.
In other words, the value of the Libra will still fluctuate like any other currency when exposed to the open market. The solution posited by Libra is to back the coin with “low-volatility assets.”
Speaking of which…
The Libra will be a “pegged” cryptocurrency, but not to gold, the dollar, or any other traditional peg. Rather, several “low volatility” assets have been identified to act as the financial backbone behind the digital coin:
“…it will be backed by a collection of low-volatility assets, such as bank deposits and short-term government securities in currencies from stable and reputable central banks.”
In another slap in the face to hardcore crypto enthusiasts, the Libra will be tangled up in the very financial infrastructure Bitcoin was created to circumvent.
While the founding members of the Libra Association belong to the financial and technological elite, apparently that won’t always be the case.
The transition from corporate oversight to community governance is expected to take five years:
“An important objective of the Libra Association is to move toward increasing decentralization over time. As discussed above, the association will develop a path toward permissionless governance and consensus on the Libra network. The association’s objective will be to start this transition within five years, and in so doing will gradually reduce the reliance on the Founding Members.”
Skeptics of Libra and Facebook’s overarching influence may be surprised to learn that once the blockchain gets up and running, it won’t be controlled by any one entity.
From the whitepaper:
“Before the launch of the network, the association is committed to establishing a fair and transparent process for accepting technical changes to the Libra Blockchain. No single company — including Facebook or Calibra — will have the ability to determine the future evolution of the blockchain.”
But as we learned earlier, the entities making up the Libra Association will still have a say. Depending upon the make-up of that association, and its motives, the cryptocurrency could still be subject to manipulation.
However, in fairness, the same could be said of all cryptocurrencies to some degree, regardless of the stated aims of their communities and foundations.
Reaching the end of the Libra whitepaper, one is left with the impression of a cryptocurrency which embodies the best aspects of both Bitcoin and Tether.
That would be a sore kick in the teeth to cryptocurrency enthusiasts whose core goal may just have been achieved by one of the corporate entities they sought to replace.
“A stable currency built on a secure and stable open-source blockchain, backed by a reserve of real assets, and governed by an independent association.”
Libra’s development is just getting underway. Expect more fireworks in the coming months as Libra’s development sends tremors through the existing Bitcoin-dominated cryptocurrency real estate.
Will the development of Libra feed off the rest of the crypto community, just as current projects do?
Will Libra’s very presence bring an end to cheap ICOs and IEOs, which now must stand even less of a chance than they did before?
The whitepaper ends:
“Our journey is just beginning, and we are asking the community to help. If you believe in what Libra could do for billions of people around the world, share your perspective and join in. Your feedback is needed to make financial inclusion a reality for people everywhere.”
Last modified: March 4, 2021 2:36 PM