Brief Introduction about Libra Cryptocurrency
Facebook says in an interview that Libra cryptocurrency is a “global currency and financial infrastructure”. In other words, Libra is a digital asset built by Facebook and powered by a new Facebook-created version of the blockchain, the encrypted technology used by bitcoin and other cryptocurrencies.
Facebook will not fully control the Libra cryptocurrency, but instead get just a single vote in the governance like other co-founding members of the Libra Association, including Visa and Uber, which have invested at least $10 million each into the libra cryptocurrency operations. This association will promote the open-sourced Libra Blockchain and develope platform with its own Move programming language, plus sign up businesses to accept Libra currency for payment and even give customers discounts or rewards.
What is Facebook’s Libra Cryptocurrency?
This isn’t actually Facebook’s cryptocurrency. It’s the project of the Libra Association, which Facebook co-founded. The association, which will serve as a monetary authority for the Libra cryptocurrency, says Libra’s purpose is to “empower billions of people in the world,” citing 1.7 billion adults without bank accounts who could use the currency.
But Facebook has its own interest in digital cash that predates Libra cryptocurrency. The social network ran a virtual currency, called Credits, for about four years as a way to make payments on games played on Facebook. In May, Mark Zuckerberg said that sending money online should be as simple as sending photos. Libra cryptocurrency is designed to make it easier and cheaper for people to transfer money online through the web, which might attract new users to the social network.
How Does Libra Currency Works
Libra is pegged to a group of “of low-volatility assets, including bank deposits and government securities” in multiple currencies. While there is a Libra Reserve, Libra cryptocurrency doesn’t seem like it’s necessarily pegged to its own value. Rather, the reserve functions as a kind of lower bound on Libra’s value.
Calibra cryptocurrency is going to be available as a standalone app on the App Store and Play Store. Apart from that, users can also use Libra within Facebook’s own messaging apps including WhatsApp and Messenger, making it much more accessible. It will make sending and receiving money between users just like exchanging text messages. In order to be eligible to use Calibra, users will need to present a valid government-issued ID to sign up. Do note, one doesn’t need to have a Facebook or WhatsApp account to create an account on Calibra.
For businesses, small merchants will be able to accept payment from their customers in Libra. Currently, in the first version of Calibra, only peer-to-peer payments or a transaction between two parties using the internet are supported. QR codes will also be supported. Facebook plans to later integrate other methods including in-store payments and POS systems.
How it is different from other cryptocurrencies
One of the biggest differences between other cryptocurrencies and Libra lies in the underlying technology behind both currencies. With bitcoin cryptocurrency, transactions are recorded anonymously on a public ledger known as the blockchain. It’s essentially a database maintained by the network of computers, on which all the transactions are secured in such a way that makes it virtually impossible to tamper and locate with. Libra cryptocurrency also uses a form of blockchain or distributed ledger technology. But unlike bitcoin, Libra’s blockchain is permission — at least for now — meaning that transactions can only be added to it by a group of trusted parties.
Different use cases
Bitcoin’s white paper describes the virtual currency as a peer-to-peer payment system, allowing people to exchange money without going through a bank.
It’s commonly used today as a form of investment, with the term “HODL” being a common slang phrase in the industry to describe buying and staying invested in the cryptocurrency for the long term. It’s frequently been referred to as “digital gold. ”
Libra’s primary purpose is to be used in cross-border payments and money transfers. The currency is tied to a basket of government-backed currencies and other assets, to avoid the volatile swings often seen in cryptocurrencies like bitcoin and ether.
Different regulatory questions
Facebook’s currency has taken the spotlight when it comes to talking of regulating cryptocurrencies. But some worry the company’s blockchain project could be lumped in with other digital assets by regulators.
That would be problematic given the difference between Libra cryptocurrency and a digital cryptocurrency like bitcoin. Whereas bitcoin rules out the need for financial intermediaries, Libra’s model is reliant on the entities which form the Libra Association, Coin Center’s Van Valkenburgh said.
“A system without intermediaries is a system without intermediary risk, and thus no need for a regulation aimed at safeguarding against the types of the risk presented by intermediaries,” he said.
Though bitcoin’s network involves so-called “miners” who record transactions, it wouldn’t make sense to regulate them as they aren’t trusted custodians of user funds, Van Valkenburgh said. Cryptocurrency exchanges and wallets, on the other hand, do require regulatory oversight, he added.