Obviously aimed at harnessing the power of technology to disrupt the digital world, social media titan Facebook announced its plans to launch its cryptocurrency, Libra in 2020. Taking a bit of the crypto world here and another bit of traditional payments world there, Libra is to be the crypto of the unbanked sector of the world.
To Facebook, this is to be a global currency but to many outside, there is still a lot to know. In this piece, we will be pointing out some facts about this new cryptocurrency and what it could mean for the global financial scene.
What is Libra?
Libra was worked on to be a new entry into the payments market. It is being developed by a 28-member consortium of companies and firms with which Facebook is its major driving force.
Libra was created as a means to bring the power of cryptocurrencies to the unbanked sector of the world along with providing a global payments platform. Libra uses a bit gained from the crypto world by basing its services on Blockchain technology and all transactions are to be made through this technology.
Libra also leans a bit to the traditional payments platform’s base of services by being controlled by the government and the founding partners.
How does Libra Work?
Like every cryptocurrency out there, Libra was created to a payments solution to the world at large. With Libra, users with access can pay for goods and services as well as send money across oceans and seas.
Libra bears a striking semblance to traditional payments platforms like Paypal, however, its peculiarity is that it is aimed towards people without bank accounts. Also taking a leaf out of Bitcoin’s book, Libra is a currency of exchange but cannot be bought with the expectations of an increment in value.
It is government-issued which means centralisation makes sure its value is tethered to the US dollar. So, in reality, using Libra will be like exchanging a currency for another and not as a store of value.
Libra also bears a semblance to all digital currencies of sorts by adapting a wallet to its services. This means that transactions made with Libra can be done with its custom wallet app called Calibra.
Calibra will make it such that funds can be transferred in and out of it through Whatsapp, Facebook messenger and other Facebook apps.
Beyond PayPal and Bitcoin
Libra’s published white paper explained that about “1.7 billion adults globally remain outside of the financial system with no access to a traditional bank.” While this bears a striking semblance to the reason behind the launch of cryptocurrencies, Libra’s peculiarities are to run far beyond.
Libra hopes to target the percentage of people without access to a bank account or high transaction fees as charged by payments platforms like Venmo or PayPal. With Libra, transactions are made easier.
You can think of it as getting rewards on credit cards. With PayPal, Uber, eBay, Spotify and other partners backing up Libra, there are possibilities of getting rewards or discount upon use. This means that beyond sending money overseas, users might get to spend less than when purchasing with other cryptocurrencies.
Going beyond Bitcoin, centralisation has made it such that they will be sanctioned by the government. This means that unlike with Bitcoin, you don’t lose track of your funds. However, you should know that the only way this could be possible is through access to the data.
Though Libra accounts will be made to be anonymous, there are still possibilities of user behaviours being used to track. However, it would seem that Libra is set to offer more positivities by offering cheaper services and of course, more like an online bank for customers to keep their funds and trade when they please.