It wasn’t too long ago that cryptocurrency took the world by storm and became an internet sensation. But while you can be forgiven for thinking the hype has passed, Facebook have recently announced a plan to launch its own cryptocurrency, Libra.
At the moment, Facebook has over 2 billion users around the world and that number is only expected to grow. So could a cryptocurrency on the world’s biggest social media platform spell disaster? Some experts seem to think so. But to help you come to a decision of you own, we’ve gone ahead and answered some questions you may be having about Facebook’s venture into cryptocurrency.
While there’s no definitive answer as of yet, Libra has been labelled as a type of cryptocurrency, as there is no bank at the heart of the platform. With Libra you’ll be able to send money to anyone no matter where they are in the world, which according to the Libra White Paper, will be as easy as sending a text message.
Libra is reportedly hoping to launch in the first half of 2020, but recent speculation surrounding its level of security could delay its arrival.
Following comments by the United States House Financial Services Committee Chairman, Maxine Waters, about the lack of regulation regarding cryptocurrency, a hearing is expected to be heard on July 17 to discuss Facebook’s proposal.
First and foremost, Libra will need to be accepted in many places before users can start trading. Facebook believe that in order for the platform to work successfully, users must have easy access to the platform in order for its value to remain high over time.
And with a goal to make sending money quick, easy and most importantly, safe, Libra is made up of three components. It will be:
It doesn’t take an expert to see the clear danger with mixing social media and financial details, and Facebook seems to think so too, which is why Libra transactions and data will be stored via a separate service, called ‘Calibra’. So you won’t have to worry about Libra posting your details on to your Facebook profile!
Though there’s no definite plans yet, it’s said that Calibra could be stored in Facebook’s Messenger server, so it’s easier for users to make transfers to contacts.
According to the Libra WhitePaper, the cryptocurrency will be backed by a set of “real assets” such as bank accounts and short-term government securities. Money that is invested in Libra will also earn interest, that will be put toward maintaining the platform and act as funding for its growth and development.
Although Libra is not set to launch until 2020, it has already gained the seal of approval from a range of founding members, including global payment giants, Visa and Mastercard.
Paypal, Spotifty, Uber and Vodafone have also signed up as founding members, which are collectively recognised as the Libra Association.
One foundation of Libra’s design is a safe and reliable blockchain. When we talk about blockchains, they’re typically divided into two categories: permissioned and permissionless. Like the name suggests, in a permissioned blockchain, a user must be given permission to join the platform by the owner.
A big benefit of having a permissioned blockchain is that they’re often more private and controlled than permissionless blockchains where anyone can join. It also means that the owner can choose the platform’s structure and software updates.
Libra will begin as a permissioned blockchain with the hope to become a permissionless blockchain as it grows.
Although a permissioned blockchain does promise a controlled environment, because it is a centralised platform, users can be more prone to attacks as only two thirds of users must act responsibly. However, Facebook have reportedly said that should a user be hacked, scammed or lose access to their account, Calibra will refund lost coins.
Facebook have revealed that Libra users will be charged to use the platform, but while exact figures are unclear, the fees are said to be low and manageable.
It’s hard to say. However, in late 2018, Mozo research found that Australia pays some of the highest international money transfer fees in the world, due to transfer fees charged by the big four banks. And with Libra promising a quick and budget-friendly option for global transfers, some banks and even IMT specialists may be fearing Libra’s arrival.
It’s also worth mentioning that no bank or other remittance service has signed up to be apart of the Libra Association, which could be a subtle indication of how each feel about the new cryptocurrency.
Love all things fintech? Then make your next stop our fintech hub! It’s filled with all the latest fintech news and insights.