Facebook’s new crypto – a down-and-dirty guide
A wise man once said, “Hey, invest in crypto.” That was in 2016, and now that’s pretty terrible advice.
… Or is it? It seems like every day a new kind of cryptocurrency pops up, with promises of it being the next great thing. Facebook is the latest tech giant to announce it’s unveiling a cryptocurrency to call its very own.
The idea for Facebook was kinda-sorta stolen from the Winklevoss twins…who recently released a digital currency exchange called Gemini.
In what is a hilarious coincidence, a planned occurrence, or a solid bit of sass on Zuckerberg’s part, the new coin will be called Libra. Why is this so funny? Well, let’s take a little walk down memory lane. As is common knowledge (in case you forgot, a whole movie was made about it), the idea for Facebook was kinda-sorta stolen from the Winklevoss twins…who recently released a digital currency exchange called Gemini. Seems like Mark may be back at it with his (allegedly) sticky fingers.
Expected to drop in 2020, Libra is an attempt by Facebook to create a faster, easier, better global currency. They’re working on making the use of Libra as frictionless and easily adaptable as possible. According to David Marcus, the head of Calibra (Libra’s governing organization, also the name of Libra’s wallet), their goal is to have the structure, technology, and ability to support usage by billions of people.
Sounds ambitious, sure, but could all 27-ish of Libra’s backers, some of the most well-known companies in the world, really go so wrong?
Finally, crypto with real value.
Some hype surrounding Libra focuses on how, unlike other coins like Bitcoin and Ether, Libra’s value is tied to a reserve made up of funds (actual, real money…or fiat currency, if you’re feeling fancy) from investors and users, meaning its value is less likely to fluctuate greatly. As anyone who invested in Bitcoin at its height only to lose money knows, traditional cryptocurrencies are incredibly volatile.
Cryptocurrencies’ worth has, until this point, been a bit like how cool you were in high school. Going back to the 10th grade, you were only as cool as people believed you were. Your coolness wasn’t truly tied to anything, and some were just cool while others weren’t. Libra’s like that kid who whose dad showed up and took the entire class to a Metallica concert.
Libra’s got the money in the bank, literally, to back up its worth.
That kid was definitely cool and for a very clear and specific reason: Libra’s got the money in the bank, literally, to back up its worth.
Value preservation is the name of the game here. On Libra’s website it states:
Just as consumers in Europe know the number of Euros it takes them to buy a coffee today will be similar to the number of Euros it will take them tomorrow, holders of Libra, too, can be confident the value of their coins today will be relatively stable across time.
In other words, while you probably won’t become an overnight millionaire by getting in early on Libra, you also aren’t likely to lose everything because of a dip.
Does it play well with others?
Libra is built on the same blockchain technology as all cryptocurrencies. Interestingly, however, there is some debate as to whether Libra truly is a cryptocurrency by definition. While coins like Bitcoin are hallmarked by their anonymity, openness, and decentralized nature, skeptics are quick to point out Libra doesn’t share these traits.
It will be managed by Calibra, which will be controlled by Facebook and investors.
Since it will be managed by Calibra, which will be controlled by Facebook and investors (ahem, large corporations with lots of money and power), the concept of decentralization doesn’t seem to be a priority.
There is definitely an argument to be made that Libra is more of a standard currency than a cryptocurrency. It differs from traditional crypto in many ways, from its reserve to its management, and it’s clear Facebook has plans to do big, not-typically-crypto things with it.
Bad press
While there’s a lot of hype about this new cryptocurrency, it definitely has its skeptics.
Set up for failure
David Black, a fintech contributor for Forbes, writes about his concerns, stating:
[Libra is] brand new, and it’s supposed to work flawlessly keeping track of financial assets from day one. The chances it will perform without flaws from the beginning are essentially nil … Facebook, like the other internet giants, is incapable of building code that works, even after extensive testing and use by millions of users.
He believes this alone will set Libra up for failure, even referring to it as “Lie-bra” at one point.
What anonymity?
Other nay-sayers are concerned about true anonymity since Facebook doesn’t exactly have the best track recordhref when it comes to keeping private data private. With security and anonymity being a huge draw for crypto users when promises of such are coming from a source with unclear reliability, there’s bound to be a fair amount of justified skepticism.
No real benefit
A third and major red flag of Libra is how there seems to be no real benefit to your average, law-abiding citizen to use it and its wallet, Calibra, over traditional banking options. Libra’s value is tied to actual fiat currencies, so if Libra’s value goes up, it’s probably because the dollar, the euro, or both went up as well. There’s no real investment potential there. Libra coins (what is the plural of Libra? “Libras”? “Multiple Libra”?) aren’t insured in any way like money in the actual bank is, so there’s no security advantage from the perspective of asset protection.
Potential security issues
It seems one of the few advantages of Libra that traditional banking doesn’t offer is the ability to sign up for and use it without any of the traditional trappings of opening a bank account. This includes bypassing security measures including fraud and scam detection.
Who would that benefit? Potentially some pretty shady people. Facebook’s stance on this is that Libra and its freedom of use will level the playing field for people like those in developing countries, who may not have equal access to banking or even the global economy.
While equality is an incredibly important goal and one almost everyone will agree on, it’s also important to acknowledge the risks of an open system like a for-everyone, anonymous, so-easily-accessible cryptocurrency.
Let’s sum up
At the end of the day, we’ll have to wait and see what Facebook has in store for the world with Libra. Will this be the way to finally revolutionize the way we all see, access, and handle money in our global economy, or will it turn out to be a big ploy to get more control over our data by the big, bad Facebook machine?
Only time will tell. In the meantime, we’re all on the edge of our seats.
