Cryptocurrencies have taken the world by storm over the last few years. Although Bitcoin is the first one on many people’s lips, Facebook has now joined the trend with its ‘Libra’ cryptocurrency. But it’s apparent that there isn’t much love for Libra. As of yet, anyway.
Even before Libra has had a chance to take off, people and companies have disappeared from the project, and legal trouble seems to be coming Zuckerberg’s way. The US committee in charge of legislation for this expressed their opinions to the billionaire. They made it clear that they thought he wasn’t responsible enough for this sort of jump. This is especially when considering his past when it comes to data and personal privacy.
Zuckerberg fought back, claiming this was a big leap in society that the US should be leading. But where exactly Libra will be heading, no-one really knows.
Why is Facebook Developing This Cryptocurrency?
First things first, Libra isn’t Facebook’s own cryptocurrency. It belongs to the ‘Libra Association’ that Facebook has co-founded. Libra claims that the purpose of this cryptocurrency is to ‘empower billions of people,’ claiming that the 1.7 billion without bank accounts worldwide could benefit somehow.
But there’s no denying that Facebook has had its own hand in digital cash before. This was with their ‘Credits’, that allowed users to make payments on games played within the social media platform. Zuckerberg has claimed that sending money online should be made much simpler and easier. Libra is the answer to this in his own eyes, making it both easier and cheaper to transfer money.
He has also admitted, however, that if Libra were to become a success on Facebook, it would likely increase the company’s value, and therefore increase advertising costs. He was always going to benefit somehow. But there’s no doubt that Facebook has its own plans for Libra.
In fact, Facebook has created its own subsidiary, called ‘Calibra’. This will keep users’ social data and financial data separate. Whether this will actually be the case, no-one knows.
Who is Going to Have Direct Control Over Libra?
Facebook will not have direct control over the new Libra cryptocurrency. Instead, it will act as one of the members of the Libra Association.
The Libra association itself is aiming to grow to 100 members, which will essentially act as financing partners in order to get the project finally up and running. The good news about this, however, is that each of these 100 members will have a say in what happens with the project. This means Facebook won’t have any more power than the others.
But being one of the first partners to pioneer this, Facebook could play a slightly larger role initially. Facebook itself was keen to reassure people, that once Libra has been launched, Facebook’s own roles and responsibilities won’t outweigh any of the other founding members – phew!
Libra vs. US Dollar
The main difference between Libra and the US dollar is that the US dollar has been tried and tested for centuries, and is accepted in places even outside of the US (such as certain areas in the Caribbean, and even India), as they find it to be more reliable and trustworthy than their own currency.
As well as this, the dollar comes in a physical form. That adds another element of convenience when choosing to use it. The main downside to the dollars is the cut when exchanging to a different currency – as banks usually take a larger cut that they should do, thus decreasing the value of your trade. As well as this, through things like quantitative easing (i.e., printing money or adding it digitally to the banking system), the dollar could drop in value over time.
Although cryptocurrencies don’t yet suffer from these downsides, many parts of the world are yet to accept them. So, they’re certainly not as universally usable as other currencies. Cryptocurrencies’ real value comes when using them through online trade. This is what they were originally intended to be used for.
What are your thoughts on Libra? Drop a comment below to let us know!
