Facebook officially announced its Libra cryptocurrency earlier this week, and analysts are starting to weigh in on it. The social networking firm describes Libra as a “global currency and financial infrastructure,” add that it will “reinvent money” and “transform the global economy.” The release statement about Facebook’s Libra is full of buzzwords and feel-good terms, but is it really a cryptocurrency? And will it really do everything the company claims it will do? Opinions vary widely.
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What is Facebook’s Libra?
According to the company’s press release, Libra will enable users to move money around the world cheaply and easily. It will be backed by a reserve so its value remains stable and will be available around the world in both developed and developing markets. Anyone with an “entry-level smartphones” and data connectivity will be able to use it, and the transactions will supposedly be fast.
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Facebook also published a white paper about Libra in which it describes the reserve of assets, which is a “basket of bank deposits and short-term government securities.” The company also provided additional information about the reserve here.
The company established the non-profit Libra Association to govern the Libra blockchain. As had been reported before the announcement, a network of validator nodes forms the association’s membership and operates the blockchain. The list of founding companies includes MasterCard, PayPal, Visa, eBay, Uber, Spotify, Coinbase, Andreessen Horowitz and more.
Mostly positive views
Most analysts are generally quite positive on Facebook’s Libra, with many responding to the marketing language the company used. Canaccord Genuity’s Michael Graham describes the digital currency as a “bold initiative for global good.” He expects the social media firm to enjoy a “modest” financial benefit if it is successful, but mostly he sees it as “socially conscientious leverage of the company’s global clout to bring financial inclusion to billions of Earth’s citizens for the first time.”
He believes Facebook’s Libra has the “right level” of centralization. The company will hold one of every 100 of the votes in the blockchain’s governing body. The blockchain will start out permissioned and transition to permission-less within five years. Graham expects the consensus mechanism to provide security for fast transactions.
The analyst also notes that Libra validates blockchain in general, adding that the bitcoin price rallied right after Facebook’s announcement. He even thinks Facebook’s Libra could displace bitcoin and other digital assets one day. He also thinks the founding companies which are behind it will increase the likelihood of it being successful because they include payment processors, messaging platforms, transportation companies and media services. He describes the potential scale or reach as “unprecedented.”
Graham does admit that regulation could become a concern, although he calls it “by far the mist credible …read more