Facebook’s announcement in June that they were unveiling a brand-new cryptocurrency they’re calling Libra, got major coverage in the news for days. While most people have heard something about it, few can explain it, or understand the impact it could have. Colin Harper, who writes for Venture Beat, says that people immersed in the cryptocurrency realm have been aware that Facebook was working on a cryptocurrency for some time, but didn’t know exactly what it would look like until the announcement on June 18. Harper explains the major differences between Bitcoin and Libra. Here are a few:
- Bitcoin is an open system
- Libra is closed and will be “highly gatekept”
- Bitcoin is permissionless, decentralized, secure, anyone can join the network, and all transactions are final
- Libra members had to commit a minimum of $10 million to join the centralized network and their members will control all transactions. They can blacklist users, roll back transactions, and have total access to all your financial information
- Bitcoin has millions of computers in the network, and roughly 10,000 full Bitcoin nodes which are mining bitcoin.
- Facebook is partnered with 27 other major corporations which are Founding Members of the Libra Association. They will be in charge of maintaining the Libra network. They hope to have 100 members by launch in 2020. Or about 100 private servers.
Harper says, “If you’re using Libra, the new boss is the same as the old boss; they just work in the corporate offices of Silicon Valley instead of the member banks of the Federal Reserve.”
David Black, writing for Forbes, says Facebook’s Libra cryptocurrency has a fatal flaw. He says that the core reason he expects Libra to fail is:
- It’s a large body of new code
- New code is always riddled with bugs, no matter how hard the developers try
- Unlike the code big companies like Facebook are used to, bugs are really hard to hide in this application
Also writing for Forbes, Frances Coppola is very concerned about the privacy and digital identity issues, “Facebook’s business model since its inception has been to harvest and monetize data. I see no reason to assume that this has changed. So when I find, buried in Libra’s whitepaper, two sentences that imply Facebook’s real aim in creating Libra is to set the standard for global digital identities, my hair stands on end. ” She says that from a financial perspective, Libra seems fairly harmless. She believes that Libra is a vehicle for achieving Facebook’s wider goal of becoming the standard setter for digital identity. “Facebook is the last organization on earth that should have anything to do with digital identity or standards setting. For that reason, Libra must be stopped.”
Apparently Washington agrees. Lawmakers sent a letter to Facebook’s founder and chief executive, Mark Zuckerberg, asking him to delay launching Libra until they have had time to interrogate and investigate. “Because Facebook is already in the hands of over a quarter of the world’s population, it is imperative that Facebook and its partners immediately cease implementation plans until regulators and Congress have an opportunity to examine these issues and take action,” lawmakers wrote.
Facebook’s head of their Libra project, vice president of Messaging Products, David Marcus, will be testifying before the Senate Banking Committee on July 16. The House Financial Services Committee will hold its own hearing on Libra on July 17. Stay tuned for further developments.