A transaction without the involvement of any banks, that is, a decentralized transaction. A transaction with high speed and accuracy. A transaction without much loss. This is a dream of almost the majority of the people living in this universe. Right? Is it possible? If the same question was asked 10 years ago, then we can shake our heads left and right and say “no” without any doubt. But in the present scenario, we can say yes with perfection. Now the next question arises- but how? The answer to this is “Cryptocurrency”.
A cryptocurrency is a decentralized virtual or digital currency which uses cryptography for security. It uses blockchain technology, a distributed ledger enforced by a disparate network of computers. As there is nothing to control cryptocurrency, it is completely free from government interference or manipulation. The first blockchain-based cryptocurrency was Bitcoin, which was launched in 2009 by an individual or group known under the pseudonym, Satoshi Nakamoto. The 10 most important cryptocurrencies other than Bitcoin are Litecoin, Ethereum, Zcash, Dash, Ripple, Monero, Bitcoin Cash, NEO, and EOS.
What is Libra?
Libra is a cryptocurrency registered by Facebook. The registration occurred in last May at Geneva, Switzerland. It is set to launch in the first half of 2020. It will be run by a non-profit based in Switzerland. Facebook partners with 27 companies to launch Libra(Iliad, VISA, Lya, Mercado Pago, PayU, Vodafone, Farfetch, eBay, Uber, Mastercard, Bison Trails, Booking Holdings, PayPal, Stripe, Spotify, Ribbit Capital, Kiva, USV, Thrive Capital, Xapo, Andressen Horowitz, Coinbase, Creative Destruction, Anchorage, Breakthrough Initiatives, Mercy Corps, and Women’s World Banking). One of Libra’s main goals is to reach 1.7 billion people worldwide who don’t have access to the banking system. It’s similar to Bitcoin but Libra will be backed by several international currencies and its value will be directly associated to those currencies so that it’s value will remain fairly stable. Another advantage is that Libra will have low transaction fees. Most probably Facebook will be selling products on Instagram and Whatsapp but other websites could also use the cryptocurrency for E-Commerce. But beyond E-Commerce, Libra will be useful for people in developing countries with low banking infrastructure as Libra will be useful for storing and transferring money without paying high fees.
Libra White Paper
Facebook released a White Paper which contains all the details about Libra. In White Paper, it is mentioned that the mission of Libra is to enable a simple global currency and financial infrastructure that empowers millions of people. The White Paper consists of 8 sections( Introduction, Introducing Libra, The Libra Blockchain, The Libra Currency and Reserve, The Libra Association, What’s next for Libra, How to get involved and conclusion). Totally, White Paper provides all the details about Libra and we will get a fair idea if we go through it.
How Does Libra Work?
Libra will be managed by Swiss-based non-profit. Libra has gained the support of many founding member companies too. While other cryptocurrencies are decentralized, Libra will be backed by government-backed assets from central banks and facebook. Facebook says that Libra will be made available to facebook messenger and WhatsApp users who can cash in their local currency to buy Libra. Calibra is an independent subsidiary that will manage all Libra developments and transactions for the company. The currency will be kept in this digital wallet and can be spent on products and services at participating merchants. For starters, the Calibra wallet app will allow to send money with each other sometimes for free or by charging a small fee(Revenue for Facebook). To withdraw funds, users will be able to convert their digital currency into legal tender based on an exchange rate. Libra handles transactions with a blockchain similar to Bitcoin. A blockchain is a distributed record of transactions that records who owns how much of a coin, and who transferred what coin to whom. But the difference is that Bitcoin’s blockchain is distributed to everyone who uses it but Libra’s blockchain is owned by the Libra Association(The 27 companies who are the partners of Libra).
Libra v/s Bitcoin
Many people have great confusion on Libra and Bitcoin. The problem is that is both of them similar? Is there any difference between them? Anyways let us analyse and compare these 2 cryptocurrencies.
- Open: Bitcoin is open in nature and is not issued or managed by any central bank or authority. We can download a crypto wallet or even build our own wallet. Also, anyone can send money to anyone. But that is not the case with Libra. Libra is not open in nature.
- Governance: Bitcoin’s future is decided by the developers and the crypto community. If any person does not like an activity, he/she can hard-fork the code away and create their own coin. This is not the case in Libra. As it is backed by many companies, corporations or the people who buy the nodes will decide the future of the currency.
- Permissionless and Borderless: Bitcoin users having their own private keys and wallets can send money to anyone and does not requires any kind of permission. But as Libra is managed by Facebook and the government, it will start to push back. Also, Bitcoin does not care about your personal details(who you are, where you live, etc.) but Libra does.
- Value Proposition: Bitcoin’s value is not dependent on any single government. On the other hand, Libra’s value depends on inflation, government control and effects on primary currencies.
- Decentralization: Bitcoin facilitates people to download the open-source code for free and run a node. Libra also has multiple central nodes but can be shut down or closed by the government if they want.
- Trust: In Bitcoin, there will be no banks or other bodies to control the transactions. It is people to people system so that no third party is involved and you do not have to trust anyone. But in the case of Libra, as it is controlled by Facebook, Facebook will be responsible for each and every transaction committed.
Usually, in blockchain technologies, every transaction made with digital currency is recorded by each computer that is connected to the network. Though it’s recorded under a pseudonym. So that the user’s personal information is not directly connected to the transaction. Facebook has assured that Calibra will not share user’s financial details and personal information anywhere except in “limited cases” and also will not use it for targeted advertising. Facebook also made sure that Calibra will have the same kind of verification and anti-fraud processes that banks and credit cards use.
Our world has changed a lot. In the past, if we need to perform a money transaction, going directly to the bank and doing the formalities for it was the only way. Then, slowly there came a change- Online banking. After that many people started to do transactions through their personal computers and mobile phones. Yes, the banking system still exists, but many people, especially the youths are performing transactions online and in the coming future the number will have a humongous increase. And see now, cryptocurrency is slowly lifting its head. Even though it’s not that popular at present, it’s service has been used by many. In the coming days, if the trend of changing personality among the people continues, then cryptocurrencies like Libra will be the next milestone delivered by technology. Also remember, Libra is owned by Facebook. Considering the worldwide popularity and acceptance of Facebook, it will not be a herculean task for Libra to have growth. The goal of Libra is- a stable currency built on a secure and stable blockchain, backed by a reserve of real assets, and governed by an independent association. The goal is pure, energetic and glorious. Let technology with good aim grow and let all of us be a part of it.