Op-Ed: This Might Be Facebook’s Real Plan for Libra

Op-Ed: This Might Be Facebook’s Real Plan for Libra 1

Facebook released the white paper for its Libra “cryptocurrency” on Tuesday, and it received mixed reactions from individuals involved in the tech and finance industries.

For the most part, Bitcoiners view the upcoming launch of Libra as a nonevent — basically just PayPal with the “blockchain” buzzword tacked on to it. I tend to agree with this line of thinking.

On the other hand, there are plenty of venture capitalists and altcoin promoters who are excited about Libra’s potential to bring the idea of cryptocurrency to a much larger user base.

Although my views on Libra haven’t changed much since the release of the white paper, it is now much easier to understand Facebook’s ultimate plan for global monetary domination. To fully understand Facebook’s goals, it’s important to dig into how Libra will function at launch and compare it to the “permissionless” version that it may evolve into over time.

Coinbase 3

Libra 1.0

The basic version of Libra that will launch next year should not be interesting to anyone who has been in the Bitcoin space for an extended period of time. Those who are familiar with decentralized-in-name-only altcoins like Ripple’s XRP will be able to understand rather quickly why Libra is not interesting.

For now, the plan is to put control of the Libra network in the hands of 100 publicly identifiable consortium members. This is quite different from Bitcoin, in which the miners in the system are dynamic and potentially anonymous. It is this particular aspect of the Bitcoin system that makes it interesting because it enables things like a monetary policy that is extremely difficult to change and censorship-resistant transactions that allow payments to be made without any hiccups. As I’ve written in the past, it is questionable at best to refer to systems that do not have these sorts of features as cryptocurrencies at all.

On top of the consensus-by-consortium structure, Libra is also backed by traditional fiat currencies held in bank accounts. This is a nonstarter for any true cryptocurrency because it creates the same sort of centralized point of failure that led to the downfall of the old gold-backed digital currency systems such as E-gold and Liberty Reserve.

With the 100 publicly known consortium members and the fiat currencies held in bank accounts, there is no way that governments will allow Libra to be used for anything unique outside of what is already available via traditional online payment systems like PayPal. These centralized points of failure make it easy for regulators to come in and force the network to comply with know-your-customer (KYC), anti-money laundering (AML) and other financial regulations. Additionally, the fact that Libra is backed by a basket of fiat currencies means its monetary policy is still in the hands of central bankers.

Libra 2.0

Although the issues associated with the original version of Libra are obvious, the associated white paper also mentions a plan to decentralize the project into a permissionless system over a five-year period. The specific details of how this evolution will occur are not explained in the white paper, but according to TechCrunch, there is a planned move to a model based on proof of stake (PoS).

A key issue with this plan is that the original version of Libra will be backed by fiat currencies held in bank accounts. As long as that tie to the legacy banking system remains, it is impossible for Libra to operate in a truly permissionless manner.

This leads to the theory that the fiat backing involved with Libra will eventually be removed, leaving the digital currency’s price to float freely on the open market. In other words, the consortium of 100 corporations and other entities behind Libra will become the de facto central bankers of the system.

This is not dissimilar to how fiat currencies were originally backed by gold and how that tie to gold was slowly removed over time.

As the central bankers of the system, the consortium would be able to run the printing presses as they see fit. While governments often dilute the value of their currencies to pay off debts or increase spending, a consortium behind a privately issued currency may decide to increase the monetary base in order to increase their own profits or respond to some outside political influence.

Either way, the end result is centralized management of monetary policy. Whether at a national or international level, it’s only a matter of time before the creation and distribution of new money becomes politicized.

Meet the new boss, same as the old boss.

It Won’t Get That Far

Of course, it’s extremely unlikely that governments would even allow something like Libra to exist in the first place. Jorn Lambert of Mastercard, which is one of the original 27 Libra consortium members, has stated that the project may not even launch if there is too much pushback from regulators. Additionally, lawmakers in the United States and Europe are already sounding the alarm. And it should be noted that these concerns are just related to the 1.0 version of Libra.

The main concerns from governments are: (1) Libra transactions will not be sufficiently traceable and lead to various forms of money laundering, terrorist financing and illicit commerce, and (2) governments will lose the ability to control and manage the local monetary supply.

Simply put, governments will not allow a centralized digital currency like Libra to do the things that Bitcoin was created to do. Again, if Libra is allowed to exist, it won’t do much of anything that PayPal can’t already do.

Additionally, there is no reason for Libra to retain its value if the fiat currencies that back it are eventually removed.

Bitcoin has value because it’s decentralized, apolitical and permissionless. It’s digital gold. Government-issued currencies have value because governments have armies and law enforcement that can force people to use those currencies. Unless the Libra consortium plans on raising an army, this new digital currency will eventually have only the worst features of both bitcoin and fiat currencies.

This is a guest post by Kyle Torpey. Opinions expressed are entirely his own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.

Op-Ed: This Might Be Facebook’s Real Plan for Libra 2
blank
About the author

E-Crypto News was developed to assist all cryptocurrency investors in developing profitable cryptocurrency portfolios through the provision of timely and much-needed information. Investments in cryptocurrency require a level of detail, sensitivity, and accuracy that isn’t required in any other market and as such, we’ve developed our databases to help fill in information gaps.

Related Posts

blank

E-Crypto News Executive Interviews


blank

bitcoin
Bitcoin (BTC) $ 32,548.00
ethereum
Ethereum (ETH) $ 2,074.16
tether
Tether (USDT) $ 1.00
binance-coin
Binance Coin (BNB) $ 290.32
cardano
Cardano (ADA) $ 1.18
xrp
XRP (XRP) $ 0.598070
usd-coin
USD Coin (USDC) $ 1.00
dogecoin
Dogecoin (DOGE) $ 0.192609
polkadot
Polkadot (DOT) $ 12.94
binance-usd
Binance USD (BUSD) $ 1.00
USD
EUR
GBP
bitcoinBitcoin (BTC)
$ 32,548.00
ethereumEthereum (ETH)
$ 2,074.16
tetherTether (USDT)
$ 1.00
bitcoin-cashBitcoin Cash (BCH)
$ 445.80
litecoinLitecoin (LTC)
$ 120.53
bitcoinBitcoin (BTC)
27.651,97
ethereumEthereum (ETH)
1.762,15
tetherTether (USDT)
0,849575
bitcoin-cashBitcoin Cash (BCH)
378,74
litecoinLitecoin (LTC)
102,40
bitcoinBitcoin (BTC)
23,914.48
ethereumEthereum (ETH)
1,523.98
tetherTether (USDT)
0.734745
bitcoin-cashBitcoin Cash (BCH)
327.55
litecoinLitecoin (LTC)
88.56

Automated trading with HaasBot Crypto Trading Bots

Crypto Scams

Cryptocurrency Exchanges
Cryptocurrency Exchanges and the Plague of Scams and Bans
June 29, 2021
blank
What Role Do Cryptocurrencies Play In The Era Of Ransomware Attacks?
June 9, 2021
Crypto Scams On The Rise As Market Enters Bull Cycle
Crypto Scams On The Rise As Market Enters Bull Cycle
December 22, 2020
Harpreet Singh Sahni perpetrated the Plus Gold Union Coin (PGUC) scam
Sydney Concert Promoter Harpreet Sahni Involved In $50M Crypto PGUC Scam
November 2, 2020
KuCoin hackers steal $150 million
KuCoin Exchange Hacked But Insurance Will Cover The Stolen $150M
September 29, 2020

Blockchain/Cryptocurrency Questions and Answers

Short-Sell Cryptocurrency
How to Short-Sell Cryptocurrency: A Brief Overview
July 17, 2021
Klaytn
What Is Klaytn (KLAY) And How Does It Work?
July 16, 2021
Cryptocurrencies
Our Crypto Roundup Interview Asks- Do Cryptocurrencies Have a Future?
July 15, 2021
Solana
What Is Solana (SOL) And How Does It Work?
June 26, 2021
blank
What Is Plethori Platform And How Does It Work?
June 12, 2021


CryptoCurrencyUSDChange 1hChange 24hChange 7d

bitcoin
Bitcoin (BTC) $ 32,522.00
ethereum
Ethereum (ETH) $ 2,041.51
tether
Tether (USDT) $ 1.00
binance-coin
Binance Coin (BNB) $ 289.02
cardano
Cardano (ADA) $ 1.17
xrp
XRP (XRP) $ 0.590146
usd-coin
USD Coin (USDC) $ 1.00
dogecoin
Dogecoin (DOGE) $ 0.189918
polkadot
Polkadot (DOT) $ 12.79
binance-usd
Binance USD (BUSD) $ 1.00