Libra the new currency of Facebook

Let’s start Facebook wants to revolutionize the world economy with the launch of Libra and what is Libra? A global virtual currency independent of governments that is driven by Blockchain technology, which has a simple global infrastructure that will empower thousands and thousands of people around the world to send and receive money as easily as well as send messages and photos. Its creation was for those people who do not have access to a bank or traditional services, with the objective of buying goods or services. It is estimated that there are 1.7 billion people who do not have financial services, especially in the least developed countries, this being their key market available in which they are interested in covering in full, placing themselves as a bank for those who do not have a bank and So take it to the next level – globalization.

Facebook will premiere on Tuesday, June 18, on its Libra website and the company expects the new currency to be up and running at the beginning of next year. The news came from David Marcus in charge of the Libra Foundation, who was previously in charge of the Vice Presidency of Facebook messaging.

The real strength of Facebook does not lie in doing things or functions that other companies or electronic wallets have already offered us before, if they do not offer the same benefits to their more than 2 billion users without having to download a new application or create any Calibra is born from there.

To enable this, Facebook is launching an “independent” subsidiary that provides basic financial services on its wallet called Calibra that will build services that will allow sending, spending and keeping pound starting with a digital wallet that will be available in Whatsapp , messenger, Instagram and as a independent application, in which they are working with the Light Speed ​​project, making it the fastest application with the smallest size of the entire Market. Now from Messenger we can call and message our Facebook friends along with Instagram and Whatsapp

They have also made many other proposals such as Desktop App for the desktop to chat and make video calls, there is also Whatsapp Business an app designed for companies and users to interact, you can see the catalog of those companies that will obviously make us use pounds. Facebook follows in the footsteps of the giant We Chat app that upon arriving at a restaurant you can see the menu, order and even pay in the same app.

Instagram already has a billion users, they are becoming a market place where they can offer products and services but online and have placed a search engine to find what we want and buy directly from content creators with Libras .

Well, it will be regulated like other payment service providers having a high degree of security to be able to convert its digital currency into local Fiat currency based on an exchange rate, wanting to supplant the cash (85% of the world money moves in cash) , and make them all those movements

You go through Facebook and other companies worldwide digitally. It will be a currency to be able to pay Facebook’s annuities, to pay your acquaintances, applications, world transactions etc.

Allowing users to send Libra to almost anyone with a smartphone at low cost … highlighting a little here that effectively the transactions will not be free Facebook will receive a small commission of those transactions which will be the main direct income of the company benefits that can be obtained thanks to control and information, in a few words there will be a small fee.

If users are asked if they can mine pounds, the answer is NO, they can not create pounds from their computers, there is no limit in pounds in circulation as with Bitcoin that there can only be 21 million, but they can be buy as many pounds as traditional currencies want to exchange.

More than 2 billion people are those who use the Facebook application if the majority accept this currency, Libra would be positioned among the first three most important cryptocurrencies.

The Blockchain of Libra adopted a BFT tolerance system for Byzantine faults using the Libra BFT consensus protocol, “it will be pseudonymous and users will be allowed to have one or more addresses that are not linked to their real identity”, which in my opinion it could not be that since Facebook handles huge amount of data and personal information of all its users.

Let’s see, Libra is more a stable currency type like the Stablecoins, which means that your quotation will be linked to other assets and for this you need that your quotation does not oscillate too much, it will be backed by a reserve of currency and assets Low volatility such as bank deposits or state bonds from countries with high credit quality, which means that their quotation will fluctuate little so that it will not be the, huge option for all those people who expect a speculative opportunity.

This reserve of dollars is to support tokens, since users have to pay their money to obtain Libra, this reserve of money will be invested in other assets of very low risk will not be static as those found in the market Monetary either bank deposits or short-term debt and high quality and consists of keeping all the money, “Facebook” takes “nothing” of that money more than for safe investments, the interest generated from the reserve of assets is will use to cover system costs, to guarantee low transaction rates, and to pay dividends to investors who provided capital to boost the ecosystem, only the association will be the only one that has the ability to create and burn Libra, the currencies they are only created when the authorized resellers have bought those coins of the association with Fiat assets that back them and in the opposite case the coins only burned when said Resellers sell Libra to the association, in exchange for the underlying assets.

Neither should they contribute many interests since they are investments of minimum risk and in the financial markets we can find that the higher the risk, the greater the profitability.

Calibra mentions that he has a dedicated team of risk management experts to prevent them from using the portfolio for fraudulent purposes, and that is why they indicate they could make a “refund”, but remember that Libra is not a decentralized cryptocurrency and is not all safe, at the beginning you have to deliver an official identification document since they (Facebook) can segment who has pound and who does not have pound at that time we say there are exceptions and guarantee that there is no anonymity.

The confirmations are based on the nodes since they verify the transactions are part of the Libra Association and the nodes are going to be the founding members which means they can block the pounds, block transfers, freeze funds, see and analyze all your movements , what you do and what you buy, you can access this data, close your account, even report to the authorities those who do not comply with their monetary policy if they wish.

The currency will be managed by a consortium of companies, which will be based on a financial reserve (libra reserve). It will be implemented with the Blockchain technology which will serve as a solid base with a currency that could meet the daily financial needs and who will be responsible for governing and validating it will be the Libra Association, composed of 27 founding members with power from around the world, in the which the validation nodes of this network for this currency would also be distributed among its founding members, which in order to make a node in that network an entity needs to make an investment of 10 million dollars through the purchase of investment tokens in pound, that money goes to the Libra reserve to support the stable value of the Stablecoin. Among the companies that are inside we have: payment companies, popular service companies, companies in the cryptomoney space, which means that users will be able to find various applications of use shortly after their launch.

We can mention some companies that represent Libra: VISA, PayU, Stripe, PayPal, MasterCard, EBay, Uber, Spotify, Mercado pago, Farfetch, Booking, iliad, Vodafone, Anchorage, Bison Trails, Coinbase, Xapo, Thrive Capital, USV, Kiva , Andreessen Horowitz, among others. And the questions we must ask ourselves are:

Which companies will benefit? Facebook and its founding partners

Which companies will be harmed? When there are winners there are always losers, and they could be Skype, Hangoust, Tumblr, We Chat and even Tinder.

Will this coin succeed? Very likely if you have a giant behind you in the industry.

How will it affect the business benefits of Facebook?

Reviewing your past … Your evolution of the business benefits of Facebook: it goes public in 2012 during the fiscal year of 2012 it has gross income of 5029 million dollars since then, every year it has continued increasing its income to a very healthy pace thus closing the fiscal year of 2018 in 55300 million dollars, in percentage terms has obtained an average growth of 49.3% where the first years startle, but we see a slowdown in the last two years which indicates that the company is reaching a more mature phase.

We see profits or losses before taxes: in the fiscal year of 2012 the company obtained pre-tax profits of 1820 million dollars and like the income these have grown favorably every year until closing the fiscal year of 2018 with a profit of 25087 million, seeing the percentages that their average growth finished has been very good of 57%, but the explosive growth occurred the firsts years.

Analysts predict that in 2019 they will amount to 69,372 million dollars and up to 2020 to 8,397 million dollars, which represents the increases of 25 and 21% respectively.

Part of the benefits the panorama changes a lot, the company is expected to close 2019 with pre-tax profits of 25087 million dollars, and with a healthier increase in the year 2020 of 31274 million dollars, we can appreciate what they could obtain the new investments of the company in projects such as Libra and on the other hand the loss that the Cambridge Analytica scandal has caused, accepting Mark Zuckerberg that this scandal cost the company several billions and the investors also made him pay a drop in its price of 43%, which has damaged its brand, making several users no longer trust Facebook.

Studying the past and seeing if companies do things well is more likely to continue like this, but remember that past results do not guarantee future results.

Although it does not enjoy the sympathy of many people, if the use of this currency expands the power that this social network can have would become immense, they would control all the personal information and what we would do with our money, which is a considerable probability that it will become a Monopoly.

It is not a currency that will release us and that could give you total freedom of your movements, without someone else controlling you.

I do not allow myself to make a recommendation to buy or sell this is up to the discretion of each one remembering that with investments you can lose money, you always have to consult with a financial advisor.

We are immersed in a financial revolution, power changes are coming, new powers and financial systems are coming, we are in the Stone Age of the cryptomonedas and in the future all will be using cryptomonedas like or not like people.

The words Security and Facebook lately have not gone well, which does not help at all for its credibility, we know that Facebook’s reputation is not the best, it is not a serious business since there are doubts about how it has handled privacy and the information of thousands of people.

Will you find a win-win situation in this story or will the Crypto currency war start?

What position will commercial banks and governments take in this regard?

What I know is that it will be the trigger for great changes to take place.

But not everything is so bad Libra could act as a bridge for Bitcoin and other cryptos due to the associations with Coinbase Xapo among others, more than a cryptomoneda would be the first global fiduciary money launched by a giant corporation which caused a reaction in governments, and have raised their voices against the Facebook currency since they see it as a shadow bank for privacy money laundering and terrorism for which we must be on high alert, Facebook is one of the most powerful companies .

Remember that everything created by a centralized organization that can be identified under a specific jurisdiction and subject to specific laws can not achieve any of its foundations and the reason why it can not achieve it is because the law prevents them from doing so, therefore not can be resistant to sensibility, are legally obliged to avoid the transmission of funds to certain entities and to certain countries (entities or countries that have been sanctioned or that do not have economic agreements by countries such as the USA that for example has sanctioned others countries such as Iran North Korea, Venezuela, etc., in those sanctions listed company or people listed, the OFAC list that is run by the US Treasury Department, is a list in which it is verified before which entities and individuals can transmit payments and Libra can not be resistant to sensibility, nor can it be without a border why they are prohibited iar money to certain countries which means that they must first be able to identify who is receiving that money and where that money is, and to identify who they are and where they are people to comply with the law against money laundering and regulations against the financing of terrorism essentially when it is currency Libra behaves basically like a world bank).

Anyone who implements a centralized payment system must follow all the rules of a bank or a money transmitter and at that point it is no longer neutral and it is not neutral as to why a cryptocurrency protocol must be available for any remany recipient, any value independently. Libra is not a regulated entity.

Trying to comply with payment regulations is going to be a mess and will result in the same problem that PayPal has which is present in 200 countries but can only serve 30 countries equally because their services are restricted because they consider it a bank.

Libra can be a competition for fiduciary currencies but can not operate monetarily before without complying with the monetary legislations of governments like banks, let’s put Venezuela as an example, this country does not want that currency is used by its citizens, a Centralized and identifiable organization like Facebook that is under a specific jurisdiction subject to specific laws can not do it, can not openly offer and services equally to everyone, that is the opposite of what Bitcoin is. Libra a battle against central banks will win ?.

It will be a very powerful shadow bank with many users, local and central banks should be really scared why companies with technology with as many users and technological experience as Facebook start playing banking that creates some real challenges for banks and financial services companies assistants. It will affect fiduciary currencies because it will oblige banks to modernize and will force the banking system to be more open, on the one hand that could be good but they can not be an open currency like Bitcoin.

Recall that the decentralized protocol like Bitcoin does not care where you are from where you are who you are, what you do with that money and why. But unlike Bitcoin Libra would be backed by international currencies such as the dollar, the euro and the yen.

Andreas M. Antonopoulos mentions why Libra does not compete against any chain of blocks since it must be: open, public, without permits, without borders, neutral and resistant to sensibility, it will be able to compete against retail banks and central banks, but not it has none of the fundamental characteristics already described of a decentralized cryptocurrency because it does not rest on the basic foundations of an open blockchain.

Libra could knock Bitcoin down but “Bitcoin has nothing” is not a cryptocurrency.

Libra is going more to a digital bank.

Let’s analyze- It’s about being free.


Image: Gerd Altmann