Ever since the world caught wind of Facebook’s involvement in the cryptocurrency space, countless speculations and rumors regarding the specifications of the project popped up. However, the social media giant finally unveils the official white paper for its much awaited cryptocurrency project, thus putting speculations to bed at last.
The white paper clears out the early claims of Facebook’s cryptocurrency being referred to as the GlobalCoin, by revealing that stablecoin is dubbed “Libra”. And while the world was aware of project Libra, there were still speculations regarding what name the cryptocurrency would bear.
According to the whitepaper, the fundamental goal behind Libra is fairly simple: a simple cryptocurrency that is global and offers ‘financial infrastructure that empowers billions of people’. Per the platform, despite there being countless operational blockchain projects, mainstream adoption seems far-fetched and the hindrance is vastly because of price volatility and lack of stability. This is where Libra comes in, as the white paper reads:
The world truly needs a reliable digital currency and infrastructure that together can deliver on the promise of the internet of money.
Facebook’s cryptocurrency is engineered on three basic principles, all working in sync to create a more inclusive financial system for its users. First and foremost, it is built on a secure, scalable and reliable blockchain, and the platform’s stablecoin will operate on the native Libra blockchain as well, according to the whitepaper.
Secondly, Libra is backed by a reserve of real assets that are specifically meant to give the coin intrinsic value. The white paper explains that a basket of bank deposits and short-term government securities will be held in the Libra Reserve for every Libra that is created, thus garnering trust for the stablecoin. The main purpose of the Libra Reserve is to preserve the value of the coin over time, which cements the claim for Libra’s stability and contained volatility.
Thirdly, it will be under the governance of the independent Libra Association which is a non-profit membership organization headquartered in Geneva, Switzerland. The association is tasked with providing a framework for the governance of the network and is comprised of members from diverse businesses and institutions. Mastercard, Uber, Andreessen Horowitz and Women’s World Banking are a few members of the association.
The white paper also addresses the speculations regarding who will hold the reigns of the project. And surprisingly enough, despite having played a key role in the creation of the Libra Association and the Libra Blockchain, Facebook doesn’t have the final decision-making authority. Instead it rests with the Libra Association.
Facebook, however, will be maintaining a leadership role, at least in 2019. But Once the Libra network launches, the platform and its affiliates will have the same commitments, privileges and financial obligations as any other Founding Member. Many would see this as Facebook’s projection of ownership and slight control over the project which isn’t good considering people were already skeptical about the social media giant’s involvement with sensitive financial data.
However, the white paper did mention that Facebook has developed a regulatory subsidiary dubbed Calibra, particularly designed to separate social date from financial data. The platform intends to follow various anti-money-laundering and know-your-customer regulations in the jurisdictions in which it conducts business Furthermore, it is working to acquire money transmitter licenses in U.S. states “that treat cryptocurrencies as the equivalent of money”.
One of the most important points in the white paper was that Libra would start as a permissioned blockchain, in which access has to be granted to a user for running a validator node. Could this factor prove to be a hindrance when it comes to Libra’s acceptance among the crypto community in particular? We’ll know for sure upon the launch of its testnet later this month.
However, the white paper does claim that in the spirit of having the best interest for its users at heart, Facebook will work on making the Libra network a permissionless one. But they have cleared it out that this will take time.
The challenge is that as of today we do not believe that there is a proven solution that can deliver the scale, stability, and security needed to support billions of people and transactions across the globe through a permissionless network.
Despite the minor shortcomings, the project seems to have garnered massive support, and not just in monetary terms. Spencer Bogart, general partner at San Francisco-based investment firm Blockchain Capital, said:
Facebook’s efforts in the space has the potential to be one of, if not the most, significant external catalysts for Bitcoin and crypto adoption in the technology’s history.
Moreover, according to reports, RBC Capital analysts Mark Mahaney and Zachary Schwartzman believe that the platform’s long awaited crypto project might just be the most important initiative in the company’s history.