Announced in 2019, Libra is the global digital currency by Facebook that would allow the social media platform’s billions of users across the globe to make financial transactions online. With cryptocurrency development services on the rise, Libra is set to become a global currency – especially for people in developing countries who do not have the access to competent banking or financial services. Libra, in simple terms, is digital money that can be used to transfer or even buy stuff on the platform.
Facebook will not be alone in governing the currency, but partnering with Libra Association – a Geneva-based entity that has 28 members founding members, including Uber, PayPal, Mastercard, Spotify, Visa, Vodafone Group, and many other common names in technology and finance.
The name Libra is taken from the basic Roman measurement of weight. The abbreviation lb for the currency Pound is derived from the term Libra, and the £ symbol originally comes from an ornate L in Libra.
The Need for a Cryptocurrency
Cryptocurrency software development companies maintain that this system is going to take the financial markets by the storm. Facebook while expanding as a cryptocurrency development company envisages reaching the 1.7 billion people around the world who do not have proper access to a bank account.
How Will Libra Work?
Libra, the global currency and financial infrastructure, is a digital asset built by Facebook that promises financial inclusion on a global scale. Libra is apparently being powered by a new Facebook-created version of blockchain, which is a form of distributed ledger of transactions that is not centralized. The decentralized structure of blockchain renders it uncorruptible and provides enhanced security to the transactions. Each transaction is processed and verified by a large number of independent computers, called nodes, rather than being verified by a central authority. Therefore, there is no single entity that can be hacked or a single authority that can dictate terms in any transaction.
A cryptocurrency development company assures secure currency development in this manner.
Who is in-charge of Libra?
Libra Association is a collective of companies that is supposed to take charge of the Libra currency. It is deemed an independent, non-profit association based out of Switzerland. The main functions decided for it include:
- To validate transactions on the Libra blockchain
- To manage the reserve and allocate funds to various causes that Libra supports
The Libra Association Council is going to be the internal wing that votes on important policies and operating decisions for the currency.
What is the Difference between Libra and Bitcoin?
While Bitcoin and Libra are both based on blockchain technology – which is a distributed decentralised ledger technology –Libra is very different from Bitcoin. It is effectively an initiative involving 28 influential corporate entities. Bitcoin is still regarded as a product of libertarian values. The Libra Association believes in collaborating with the financial sector and involving various regulators and experts from different industries to create a sustainable and secure foundation for the currency.
Even though Bitcoin is built on a reliable technological base, it has come across various challenges relating to rules and regulations around the world. The governments of most countries have not accepted the currency as it is outside the purview of organized finance. Since its value sees huge swings, it is regarded as a very volatile currency.
Libra on the other hand, does have a few things working for it. The main difficulty that Bitcoin faced was gaining the acceptability from people. Facebook already has more than 2 billion users, and as Libra vows to play by every regulation, there is no reason for people to not trust it. Libra is also backed by real assets, which makes it a more stable currency that is not prone to wild fluctuations. This is another factor that is in favour of Libra.
How Will Libra be Distributed and Used?
While the details about how the currency will be made available are still murky, the presence of large payment firms like Visa and Mastercard indicates that users will be able to buy the currency for their use easily. Facebook is also rumoured to kickstart the Libra ecosystem by handing out small amounts of the currency for free. Some experts also believe that the founding member companies will eventually pay some amount of salaries to their employees in the Libra currency. This will guarantee a more reliable source of the Libra currency in circulation.
Users can simply download a digital wallet that allows them to send or receive Libra currency through their smartphones. Facebook wants to start making the currency available in every country at once so that anybody in the world with a smartphone is able to use it.
What Can Libra be Used to Buy?
With the Libra digital wallet, Facebook wants to allow users to send and receive money from each other. Other than money transfers, Facebooks wants to facilitate online shopping as well as various transactions between online vendors on a daily basis.
Libra is also being suggested to be used for various on-demand services accessed through websites or apps, like ride hailing services through Lyft or Uber.
Is Libra Safe?
Although a number of experts have expressed privacy concerns over a financial app run by Facebook, the company is said to have been making every effort to prevent money laundering and fraud by implementing the most advanced technologies. Traditional technologies, verification procedures, and anti-fraud processes being used by banks and credit cards already are going to be a part of the process. Additionally, a number of automated systems proactively monitoring activity to protect and prevent fraudulent behaviour will also be in place.
Facebook also indicated the presence of ‘live support’ to enable users to get help on the spot regarding loss of access to account, loss of money through fraud, or issuance of refunds.
Libra blockchain is going to be built on open source code that allows developers as well as research community to continuously monitor the technology. Design or security flaws will be nipped in the bud itself. Facebook is also expected to implement a ‘bug bounty’ program that can provide incentives to coding enthusiasts as well as security experts to point out vulnerabilities in the platform, which can be timely addressed.
What is the General View of Banks and Financial Institutions about Libra?
Facebook has not launched its digital currency – Libra – yet, but it is generating a buzz all over the world, especially in the financial and banking sector. There is a growing mistrust among people when it comes to Facebook and privacy laws, but Facebook is doing everything in its power to gain the trust of its users. Various countries are making their internal regulations and financial standards stronger, and drawing clear pictures of what is allowed and what is not allowed as far as the financial sector of the country is concerned.
Lawmakers all over the world are showing mild concern over Facebook’s expansion in the financial domain. Facebook already has over two billion users and has access to a large amount of data. In such a situation, giving additional powers to the company in the form of access to financial data is making a few institutions and governments uncomfortable.
Facebook and its allied group of companies are doing everything in their power to win and keep the confidence of their patrons, and ensuring that the laws and regulations that they are creating are comprehensive and cover every grey area.
What Does the Future of Libra Look Like?
How Libra eventually fares in the markets, and whether it is able to overtake its previous and more popular competitors, is something that we will have to wait and see. In the meantime, Facebook is assuring prospective users that their account information and financial data will not be used towards improving ad targeting or retargeting on the parent websites.
Facebook backed Libra is projected to be sustained through a small charge for every transaction on the blockchain. Facebook went as far as committing that most of these charges will be transferred to the vendors itself who can choose whether to absorb them internally or relay them to their customers in the form of discounts or payback points.
With the world increasingly leaning towards cryptocurrency owing to its many advantages, it will be interesting to see how Facebook’s cryptocurrency, Libra, performs once it is launched. Already armed with a huge database from Facebook and other big brands forming the Libra Association, Libra has already been given a head start in the domain.