10 things you should know about the Facebook Libra cryptocurrency
The long-awaited Facebook cryptocurrency has been revealed. Here are 10 key takeaways.
Or just get 10 quick takeaways right here.
1. Libra is built on HotStuff and has its own programming language
Libra was programmed using a purpose-built language called Move. It's also built on a relatively little-known, but evidently sizzling, Byzantine fault tolerance mechanism called HotStuff which goes for that dream team combo of security and scalability.
It's the same mechanism used by a project called Cypherium which launched its mainnet preview on Friday and recently partnered with Amazon and IBM.
As Cypherium founder and CEO Sky Guo explains:
"HotStuff is the most advanced BTF algorithm designed to date and provides significant performance benefits when compared with other consensus mechanisms. Its design also makes it very simple to implement, which makes it more robust than alternative systems. All of this is absolutely invaluable when it comes to delivering a fast and reliable blockchain solution to users who require a truly scalable solution capable of processing thousands of transactions per second, combined with absolute reliability, and all without sacrificing decentralisation."
According to an explainer published by the US Federal Reserve, "Through connecting banks, payment service providers, digital asset exchanges and enterprises, Cypherium provides a seamless global payment experience."
2. It's being actively marketed as a cryptocurrency
The style of the time is to hide the greasy crypto and blockchain sheen behind a facade. But Facebook has bucked the trend and has loudly and proudly declared that Libra is a cryptocurrency.
Because of this, the single biggest winner that is likely to benefit the most from the success of the FB coin is probably Bitcoin.
3. The Libra stablecoin reserve will be earning interest
Libra will be backed by a general basket of low-risk investments, including "bank deposits and government securities from stable and reputable central banks".
As such, all the money backing Libra will be earning interest. This interest will be first paying for the upkeep of the network and ecosystem and funding its growth and development, and secondly, any remainder will be paid to the early investors as dividends.
"Because the assets in the reserve are low risk and low yield, returns for early investors will only materialize if the network is successful and the reserve grows substantially in size."
4. Users will buy Libra and sell Libra through authorised resellers
Users will not interact directly with the Libra reserve, but will instead transfer between fiat and Libra when desired. This will be done through authorised resellers, who will be the only entities permitted to transact large amounts of fiat and Libra in and out of the reserve.
These authorised resellers will integrate with cryptocurrency exchanges and provide liquidity for users that want to cash in and out of Libra.
5. The blockchain will be fully public and transparent
All transactions on Libra will be transparent and publicly visible, à la Bitcoin.
This is going to be fascinating for blockchain analysts and spectators, and perhaps bodes well for privacy coins. However...
6. Users can be pseudonymous
No real-world identity is required to use the Libra blockchain. Users can hold one or more addresses that are not linked to their real-world identity.
7. ID is needed for the Calibra wallet
You'll still need a government-issued ID to sign up for the Libra Calibra wallet.
You won't need a Facebook account though, just the ID.
8. It will have fees
It's still going to have fees, The Libra Foundation suggests, but they will be low and transparent.
9. The crypto is not owned by Facebook, but the wallet is
The Libra Foundation will be governing the Libra cryptocurrency and blockchain, not Facebook itself.
But the Calibra wallet is Facebook's through and through. It allows for Libra payments in Messenger and WhatsApp and is a subsidiary of Facebook.
10. There's nary a bank nor remittance company to be seen
Initially, the membership roster will include a select set of large companies, but over time this will expand. The current founder's list is not what it will be forever. On the whole, it seems carefully designed to allow for growth and decentralisation under a range of enterprises.
The selection criteria for node operators include meeting at least two of three of the following criteria:
- More than US$1 billion in market value or greater than US$500 million in customer balances.
- A reach greater than 20 million people per year multinationally.
- Being recognised as a top-100 industry leader by a third party specific association or media company.
For blockchain companies, the criteria are different and comparatively easy.
Crypto-focused investors need more than $1 billion of assets under management to be eligible, while blockchain infrastructure companies must:
- Have been in operation for more than 12 months.
- Be good with security.
- Be custodying or staking equal to or more than $100 million in assets for customers or clients.
Funnily enough, there's nary a remittance company nor bank to be found in the roster so far. Facebook was reportedly seeking investment for Libra from Wall Street, but the banks there were apparently quite chilly on it.
Some remittance companies, meanwhile, may be facing a moment of profound existential dread. Libra is being very clearly positioned for remittances, and as a cryptocurrency, it can offer international transfer times and fees that fiat just can't yet match.
Disclosure: The author holds BNB and BTC at the time of writing.
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