The launch of this new digital currency has huge implications for Bitcoin and the crypto industry at large.
So what can we expect?
Facebook's new digital currency has been an open secret for some time, and was given many names by the internet before launch.
The best of these included Global Coin, Facebook Coin, ZuckBucks, and my personal favourite, Panopticoin.
The idea of Facebook creating a currency, allowing them to track and record your personal financial information was too dystopian for most, so the jokes flowed thick and fast.
But unfortunately, Panopticoin and ZuckBucks were overlooked, and the currency was released under the name 'Libra'.
Facebook's plan for Libra is to create a digital currency that is more stable than Bitcoin, and has stronger security and scalability.
They're attempting this by creating a 'stablecoin' - a digital coin tethered to the price of existing national currencies.
This means that the value of one libra is always fixed to the value of this basket, which will hold a mix of dollars, euros, British pounds and likely a few more currencies.
Users will be able to use Facebook Messenger, Whatsapp as well as a standalone app, Calibra, to spend these digital coins.
This might sound like a better version of Bitcoin, but under the hood the two payment systems are very different.
Facebook is calling their coin a cryptocurrency that uses blockchain technology. But, while it uses cryptography to ensure secure transactions, Libra will not be using a blockchain. It will instead rely on a core group of validator 'nodes' to update a central database.
'Blockchain' is still a poorly defined term, so it's easy to throw it around without it meaning anything. I wrote an article explaining what a blockchain is in simple terms, and what Facebook is using definitely isn't it.
And to further the difference with Bitcoin, the production of libras is fully controlled by the Libra Foundation.
They initially claimed that every libra produced will be backed up with the equal value of real money.
However, there's currently nothing stopping them from 'printing' as many libras as they like.
This essentially makes the Libra Foundation a digital central bank.
And with a user base in the billions, it could very rapidly become one of the most influential organisations in the world.
So that's a quick look at what Libra is.
If you want more details on Libra and how it's set up, TechCrunch wrote an in-depth and detailed article that's worth a read.
But for now we're going to move on to discuss the implications of this new currency.
One of the causes championed by the Libra Foundation is to provide banking services to the billions of people around the world who still don't have access to banks.
And it looks like they have a great chance of doing it.
Libra will give billions of people access to a stable currency that only needs a smartphone and an internet connection to work.
This means that trading, saving and accepting loans will be far easier for huge numbers of people with limited access to banking services.
It's a fact that economies with greater freedom to trade do better. If Libra really does allow greater access to banking, it has a real chance of improving the lives of millions if not billions of people around the world.
It could also provide another benefit to these people by pressuring to governments to improve their domestic monetary policy.
Governments will begin to notice their citizens transacting increasingly regularly in a currency they don't control.
And since no government wants to lose control of its currency, it will effectively leave them with two options:
As of June 2019, there are 27 countries with currency inflation rates of 5-9%, and 16 countries with 10% inflation or higher (source).
(For reference, governments of most Western countries aim for an inflation rate of 2%)
At 10% inflation, a person's savings would lose 40% of its value in just 5 years, and over 60% in 10 years.
This is disastrous if you're a citizen of one of these countries trying to save up for things to improve your life.
So if citizens of these countries take up Libra and get used to a stable currency with low inflation, they'll begin to demand that of their own currency.
This may force governments to act more responsibly with their currencies to compete with Libra and gain back some control of their monetary system.
Libra may therefore be a force for good in countries where stable money is in greater demand.
Despite the positives, Libra still comes with many risks, especially if it is controlled and operated by Facebook.
With a long history of data breaches, privacy-invading practices and a general disregard for the best interests of their users, Facebook is hardly the company of choice to operate such an important and sensitive project.
Despite stating that they won't mix users' financial records with their social profiles, there are plenty of ways Facebook could still record this data and sell it.
The overwhelming majority of Facebook's income is generated by doing exactly this - selling user data to third parties for advertising.
With Libra, they'll be sitting on a goldmine of data that directly shows how and where users spend their money. That data will be insanely valuable, and they'll try and wring it for every cent it's worth.
And for anybody who says that Facebook won't collect this data because they've stated in their T&C's that they won't, this is all I have to say in response:
So who is going to own Libra, the person who holds it or you?— Yassine Elmandjra (@yassineARK) June 18, 2019
The person who holds it. That’s what makes Libra so special.
And you won't censor or limit access to it?
No, of course not.
So just to be clear, you will not exploit Libra holders?
No. That's what the terms say. pic.twitter.com/AA1sXj5Te1
The next problem with Libra is the question of censorship.
A major aspect of Bitcoin's appeal is that it is decentralised and censorship resistant. Nobody is in control so nobody can stop anyone else from using it.
But with Libra, your money will be directly controlled by a small number of companies with few regulations (unless things change) on what they're allowed to do.
This means that people's financial lives could be drastically altered on the whims of those in charge.
We're currently in the middle of a raging debate on the role tech companies should play in regulating the content on their platforms.
And with the rise in instances of deplatforming, the question has to be asked of Libra as well.
Will those in charge ban certain groups from using Libra?
Will users interacting with these groups be banned as well?
And what are the rules that users need to abide by to avoid being deplatformed?
If you get kicked off Facebook do you also lose access to your Libra?
A host of questions need answering right off the bat.
But the issue of centralisation goes further.
The governments of developing nations who don't want a foreign currency eroding their power will inevitably try to ban their citizens from using Libra.
This means restricting access to Facebook, Instagram, Whatsapp and Calibra.
This is undoubtedly an authoritarian turn for a government to make, and a horrible outcome for advocates of freedom.
But ultimately, a government that doesn't have full control over its money can't appease its supporters and govern successfully. And if it can't do these things, it risks losing power.
So I don't imagine it would be a decision many governments would happily make, but the threat of losing control of their currency as their base of power may force their hands.
And despite the potential benefits of Libra in developing nations, many of these citizens may end up finding themselves with fewer freedoms than before.
Libra may end up being a force for good in the world if it is able to make it past US lawmakers, but it also comes with a host of potential problems that will need urgent solving.
But this new currency will undoubtedly be a positive for Bitcoin in the long term.
As I discuss in my beginner's guide to Bitcoin, it is the best form of money humans have ever invented.
To sum up 125 pages in a few sentences, money is just a substance that humans collectively agree has value.
Money doesn't do anything in and of itself like feed or clothe you.
It simply allows people to measure the value of one thing against another.
There's nothing intrinsically valuable about gold, bitcoins or even dollars, other than their ability to store and measure value.
Since its invention over 10 years ago, Bitcoin has been a better store of value than any other medium, and will continue to do so due to its increasing scarcity.
It is currently difficult to measure the value of other things with Bitcoin (e.g. being able to say "this cup of coffee is worth x bitcoin").
It's still relatively volatile, but this will inevitably improve with better technology and as the market for Bitcoin matures.
Bitcoin is also apolitical, neutral, censorship free, and can't be manipulated in any way due to the decentralised nature of its developers and users
(Take a look at my beginner's guide to Bitcoin if you want to dive deeper into these topics, as I've just skimmed the surface here.)
None of these attributes are features Facebook can simply install on Libra to compete with Bitcoin, as these approaches are fundamentally opposed to each other.
This has three important implications:
As we've discussed, governments in developing countries could have a strong incentive to ban Libra by banning the main apps that it's available on.
Doing this will advertise the benefits of Bitcoin's decentralisation and censorship resistance to millions of people.
Having been introduced to digital currency and the benefits of a strong store of value, these user will then flock to Bitcoin as the only alternative.
Economists use the term 'hard money' to describe a currency that maintains its value better over time relative to other currencies.
There are many examples in history of populations with no previous connection with one another colliding, and the group with the harder money inevitably winning out.
European explorers in the 17th to 19th centuries frequently encountered local tribes who still traded with beads, skins and other items.
The explorers would use their more advanced technology to mass produce these items, in the hope of trading more effectively.
But in the process, they produced huge surpluses of these goods.
These huge increases in available money inflated the value of the local currencies so much that they eventually became close to worthless.
The only option for these locals was to abandon their traditional money and take up gold as their form of money.
Gold, being the best store of value across the world for thousands of years, always won out against any local currency it encountered.
Which is why almost every country in the world eventually developed a monetary system based on the gold standard.
We abandoned that gold standard in the 20th century for a purely fiat (latin for 'by decree') system, but that's for another time.
But now with the invention of Bitcoin, we have a harder money than even gold.
And the same story will play itself out between Bitcoin and our current money, which is essentially all backed by US dollars.
And as the value of these dollars gets continually inflated away year upon year, the value of Bitcoin will only grow and grow.
Eventually, millions if not billions of people around the world will get introduced to digital currency through Libra.
And once they're comfortable with digital currency and are no longer apprehensive about the new technology, they will come to see Bitcoin as the harder money, and will gradually begin to jump ship.
The value of Libra is tied to a basket of existing currencies.
These currencies, as we've seen time and time again over the 20th and into the 21st century, are very prone to catastrophic crashes and market panics.
Bitcoin is an uncorrelated asset, which means when financial markets go down, Bitcoin is likely to go up as it captures the money people are pulling out of traditional assets.
Bitcoin has certainly had its share of booms and busts, but continues to get more and more stable over time.
The current financial system, however, has seen two trillion dollar meltdowns in the last 20 years alone, and is almost guaranteed to experience more.
So once again, more and more users will be exposed to the benefits of holding harder, and more stable money than what they experience with either Libra or their own currency.
All, some or none of what's written here may come to pass, but it's my best assessment of what Libra means for Bitcoin over the next 5-10 years.
If Bitcoin is indeed going to become the dominant currency in the future, there will be many detours like Libra along the way.
However, Facebook's new digital currency could end up being the Trojan horse that lets Bitcoin conquer the minds of billions.
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