Libra, Facebook’s very own cryptocurrency has turned the world into a frenzy, ever since it was announced. The social media giant has a user base of 2.32 billion, the launch of Libra is bound to change the dynamics of the crypto space. Scrutinized by the U.S. lawmakers over its implications, the impact of Libra on the world remained a mystery to be explored. Apart from that, the enthusiasts are looking forward to discover the impact that Libra will have on the world’s first decentralized cryptocurrency, bitcoin.
Bitcoin is the largest cryptocurrency by market cap. After the official launch of Facebook’s crypto project, both bitcoin and Libra are considered to be competitors in the crypto space. Although both digital assets are categorized as cryptocurrencies, they have subtle differences.
Steven Eliscu, EVP of Corporate Development at DMG Blockchain, while elaborating on the differences between these two cryptocurrencies to BlockPublisher, explained that bitcoin is an excellent store of value but not ideally useful as a medium of exchange and said;
The value of the Bitcoin network is directly reflected in the value of the bitcoin cryptocurrency. The value of Libra is tied to the US dollar, while the value of the Facebook-created network used to send Libra]will be a component of the company’s overall value reflected in Facebook’s stock price.
Steven is of the view that mostly cryptocurrencies built on public blockchains are a store of value rather than a medium of exchange as most of them aren’t widely accepted and had an unstable value. In contrast to volatile bitcoin and other cryptos, he suggested that Facebook’s Libra advocated the traits of a medium of exchange. Further justifying his claims, Eliscu stated that as Facebook has billions of users, Libra can surely gain the trust of the majority and serve as a medium of exchange.
Apart from that, he also extended his thoughts to the privacy provided by both cryptocurrencies. He commented that Facebook’s in-network permissioned blockchain based payment system didn’t comply with Satoshi’s vision i.e., providing uncensored public blockchain, free from governmental influence.
Moreover, he stated that Facebook’s Libra would be supervised by a central authority that could allow transaction data to be used in a way that invades user privacy. On the other hand, bitcoin which is built on a public blockchain is not capable of being influenced by any authority or government.
Furthermore, Eliscu also suggested that while the value of bitcoin network depended on the value of bitcoin, the value of Facebook’s network will be dependent on Facebook’s stock price and price of Libra relied on the fiat it was pegged to.
While conversing with BlockPublisher, David Kemmerer, CEO of CryptoTrader.Tax, one of the leading cryptocurrency tax compliance solutions, confirmed that Facebook’s entrance in the crypto space will bring several developments and modifications. In this regard, he elaborated:
I think Facebook’s entrance into cryptocurrency will be substantial. Bringing digital payment capability to the unbanked within third world countries will enable massive groups of people to participate in the internet economy which have never before been able to. I think Facebook will also educate the mainstream and make the world of cryptocurrency much more normal.
Bitcoin is a volatile asset that obeys only the fundamentals of supply and demand. Due to this, manipulating the price of bitcoin is near impossible. But the price of Libra will always depend on the nest of fiats it will be pegged to because it is a stablecoin that follows another commodity or security.
Another key difference between bitcoin and Libra is the energy consumed by both cryptos during mining. Being a more centralized asset than many other cryptocurrencies, Libra is expected to draw very less energy. While mining bitcoin requires solving of complex problems in the presence of extremely high computing powered machines, Libra is said to draw power equivalent to data centers. Although data centers do consume power, mining bitcoin requires many times more power and energy than drawn by data centers.
Introduction of Libra by Facebook is a very prospective move for mass crypto adoption as Libra is likely to lead cryptocurrencies in becoming mainstream. In addition to that, Libra is suggested to achieve what even bitcoin couldn’t manage i.e., to be perceived as a reliable medium of exchange. However, in true essence, Libra doesn’t obey the decentralized nature, familiar to other cryptocurrencies. That’s why it won’t be facing problems and opposition like the ones dealt by control and authority challenging bitcoin.
Libra’s entrance into the crypto space is a very interesting development and it would be interesting to witness how bitcoin usage is affected by a cryptocurrency built by the social media giant.