Recently the social network giant, Facebook announced its plan to launch its own cryptocurrency in 2020. It plans to call the currency ‘Libra’. There are plans to connect the system to Facebook’s user base, thus giving stiff competition to its rivals like Google Pay and PayPal. The developers expect it to become the most widely adopted digital currency.
There has been a mixed response from different sectors on the announcement of the cryptocurrency. There has been regulatory concern around data privacy and potential illegal usage. However, the social networking giant claims that this highly secure currency is quite flexible and adaptable to future innovations and governance requirements. It further adds that the currency can be scalable to billions of accounts with high capacity and low latency.
Representatives of Facebook clarify that the company will not have any special rights or privileges concerning Libra, but will be one of the stakeholders. Few other stakeholders include eBay, Vodafone, Spotify, PayPal among many other high profile organizations. The organization plans to include a few more companies so that the list would contain at least 100 high profile company names, which would be responsible for taking decisions concerning the cryptocurrency. The Libra Association would be an independent; not-for-profit membership organization would serve as the governing entity of Libra.
Facebook plans to have a special wallet for its users, which would be called ‘Calibra’. The wallet will allow users to make transactions with Libra.
Just like other cryptocurrencies, Libra exists entirely in digital form and all its transactions are recorded on a digital ledger called blockchain, which confirms each transfer. The blockchain is supposed to be managed by founding members in the initial stage but the plan is to convert it into an open system in the future.
The plan is to peg Libra into a basket of assets that will help in deciding its value. The actual details of the assets have not been released still. They could be bank deposits, government securities in stable currencies that are generated by popular and renowned banks.
Supply of Libra will grow or shrink based on its popularity. If there is a huge demand for the currency, then the association plans to buy underlying assets and create a mint. If people want to cash out of the cryptocurrency, the association plans to pay them and then destroy the exact amount of Libra.
The company plans to regulate Calibra to prevent money laundering and other financial crimes. It also plans to keep Calibra’s details separate from Facebook’s social data. It further clarifies that financial information and account information would not be used to improve ad targeting by Facebook. It says it would seek customer consent before using Facebook data to improve its features. Facebook has received significant backlash from many legislators and regulators. Other factors like slow development of digital currency and slow adoption of this type of currency would be a few hurdles that Libra should overcome before it becomes popular around the world.