The power of the names involved in Libra, as well as the scope of the project, are serious business. Its initiator is the largest social network in the world. Its partners include some of the world's largest finance, technology, cryptography and retail companies. It will be integrated with some of the most popular apps in the world.
Last week, I had several meetings with Facebook executives and experts involved in the project and I read more than a dozen documents describing various aspects of it. Libra is still in its infancy and many details are unknown. some will probably remain unknown until the first half of 2020, when the project is to be officially launched. But here's a complete overview of what we know right now.
With BalanceFacebook renews its old dream of building a payment network; the company tried in 2015 with Messenger Payments, but the feature, which allows users to send and receive money, never goes away.
We are in 2019 and the times are very different. Crypto-currencies such as Bitcoin have shown that it was possible to create a digital network and a decentralized secure network of equals, and that everyone could use it. Ethereum used the same underlying technology, the blockchain, to create a platform of decentralized applications. And stable pieces, such as DAI, USDC and TUSD, have shown that it is possible to create a cryptocurrency whose value is not as volatile like bitcoins value and ether.
With all these elements in place, Facebook is trying to transfer money, but this time, with a system incorporating some of the best assets of the crypto-currencies available today, as well as a small army of partners responsible for providing support and promoting adoption.
- 1 A brief history of Facebook's blockchain project
- 2 Three books and a calibra
- 3 A solid list of partners, with some notable omissions
- 4 A fast, powerful blockchain, but not yet without permission
- 5 A non-volatile cryptocoin
- 6 The wallet that is open to everyone (who provides a piece of identity)
- 7 Rules and regulations
- 8 When is Facebook Balance launched?
- 9 What does all this mean?
A brief history of Facebook's blockchain project
January 2018 was perhaps the first serious sign that Facebook was preparing something in the blockchain space. In a seemingly out of character move, CEO Mark Zuckerberg spoke on the power of decentralized networks.
"Encryption and cryptocurrency (…) take the power of centralized systems and put it back in the hands of people," he said. "But they run the risk of being more difficult to control.I am interested in deepening and studying the positive and negative aspects of these technologies and the best way to use them in our services."
In May 2018, things became serious. Facebook reassigned David Marcus, formerly at the head of Messenger, ran an internal blockchain project. This has led to many reports on the size and scope of The Facebook blockchain effort, although Marcus and – subsequently – Facebook, insisted that the team is small.
"I'm setting up a small group to explore the best way to take advantage of Blockchain on Facebook, starting from scratch," Marcus said at the time.
After that, rumors intensified. and details of the Balance project, as it would have been called internally, began to take shape (the nickname of Libra mentioned in these reports remained, but "GlobalCoin"seems to have been abandoned." Facebook has continued to add people to its "small" blockchain team; in February 2019, the company acquired the main responsible for starting crypto. Chainspace. According to the official rumor, Facebook's blockchain team "was exploring many different apps", but even then, the plans for Libra – which turned out to be a not-so-small project after all – had to be well advanced.
Three books and a calibra
Now that Libra has been officially announced, let's dispel an inevitable confusion. Libra has several characteristics: the Balance Blockchain, the Libra Balance and the Balance Association.
The Libra Association is a non-profit organization based in Geneva, Switzerland, which governs Libra. It is run by founding members, including Facebook, but the social network has no particular preference in decision-making.
The Libra Blockchain is a new type of blockchain, designed primarily to support the Libra cryptocurrency, but which also allows anyone to create smart contracts, like Ethereum.
The Libra coin is a special type of cryptocurrency, a stablecoin, which means its value should not change much in comparison to a stable real-world asset like the United States. dollar. It is backed by fiduciary money and the current equivalents held by depositories chosen by the Libra association.
Finally, Calibra is a cryptocurrency wallet that allows users to send and receive Libra coins. Unlike the three projects above, Calibra is built and maintained by Facebook and will be integrated with WhatsApp and Messenger.
A solid list of partners, with some notable omissions
Facebook and its 2.38 billion monthly active users, associated with the 1.5 billion users of WhatsApp, should provide a good base user base for Libra. But history has shown that sometimes a giant like Facebook is not enough to promote adoption by users. Facebook, for example, is associated with many businesses in the financial and retail sectors, as well as non-profit organizations, to promote user adoption and usually makes Libra less a Facebook project but more a global project.
Here is the complete list of the founding members of the Libra association at its launch: Mastercard, PayPal, PayU, Stripe, Visa, Booking Holdings, eBay, Facebook, Farfetch, Lyft, Payment Marketplace, Spotify, Uber, Iliad , Vodafone, Anchorage, Bison Trails, Coinbase, Xapo, Andreessen Horowitz, Innovative Initiatives, Capital Ribbit, Capital Thrive, Union Square Ventures, Creative Destruction Laboratory, Kiva, Mercy Corps and Women's World Banking.
The list deserves to be browsed. The equation of payments is solid, with MasterCard, Visa and PayPal on board – but not a big bank. On the retail / technology side, the participation of Uber and Spotify will certainly lead to adoption, and the e-commerce giant eBay is also here. Remember the rumors about eBay accepts cryptocurrency? Well, it's happening. It should be noted that Amazon is not on board at the moment, nor Apple, Microsoft or Google.
It is also remarkable that, intentionally or not, there are some big partners on the blockchain side. Yes, Coinbase is one of the world's largest cryptocurrency markets, but there is no mention of blockchain corporations and foundations such as the Ethereum Foundation, EOS, Ripple and others.
I interviewed Tomer Barel, vice president of operations at Calibra, about it. He said that the Libra Association was willing to accept more members in the future and that there was no direct obstacle to the accession of one of these, even though he noticed that Libra is an entirely new blockchain product and as such different (although to some extent, interoperable) from other blockchain projects.
A fast, powerful blockchain, but not yet without permission
The blockchain Libra is a new blockchain, based on (strongly modified, said Barel) HotStuff protocol, launched a few months ago by VmWare. It will take many experts to go through his white paper and code (which will be published today and I have not seen it) until we have an objective idea of its strengths and its weaknesses compared to other blockchain projects. But here are some things to remember.
The Libra will start as a permission blockchain, then move slowly through a blockchain without permission.
This is very important: Bitcoin and Ethereum are networks without permissionwhich means that everyone can participate and run on a node, thus becoming part of the infrastructure of the blockchain. But on Libra, initially, only a small list of approved companies and organizations will be able to run. In simple terms, this means that it will be easier to make the Balance scalable (Barel told me that the goal is to have thousands of transactions per second), but that this will not be exactly a fully decentralized project at launch.
From the White Paper of Libra:
"The Libra Blockchain will be decentralized and will consist of a collection of validators who work together to process the transactions and maintain the blockchain status. (…) Initially, the association (and validators) will consist of a diverse and geographically distributed group of founding members, who are organizations chosen on the basis of objective participation criteria, and who have an interest in strengthening the Libra ecosystem and investing resources for its success. "
The timetable for turning Libra into a chain of blocks without permission is quite generous: the association plans to launch the process "within five years" following the launch of Libra.
Libra will be an intelligent contractual platform
Like Ethereum, Libra will allow third-party developers to create decentralized applications over their blockchain. However, unlike Ethereum, which is a versatile decentralized intelligent contract platform, Libra will have a strong predilection for financial applications.
Balance comes with a new programming language called Move
Move is a new language, which means that developers will have to adapt to a new programming environment. Facebook says that it is designed with "safety and security as absolute priorities".
Libra is an advanced blockchain
In the world of blockchain technologies, it is difficult to find two experts who agree on the type of blockchain that works best. But one thing is certain: Libra is not an obsolete technological element. It uses several advanced techniques and solutions, such as using Merkle trees to store the full registry history, and a fault-tolerant Byzantine consensus model (which means that it resists one-third of network nodes that are faulty or dishonest), as in the modern world. proposals such as Casper and Tendermint.
Fully evaluating the advantages and disadvantages of the technical solutions of the Libra goes both beyond the scope of this text and the capabilities of its author, but, again, I am sure that the experts will have their say in the weeks and months to come.
Libra is not a proof of work
Unlike Bitcoin, which in its current state requires immense computing power, Libra does not use a consensus algorithm for proof of work. This means that Libra does not waste huge amounts of energy.
Libra is pseudonym
Just like Bitcoin and Ethereum, Libra does not link network accounts to a real identity.
Libra is open source
Everyone can look in the code of Libra.
A non-volatile cryptocoin
The currency is a stable type of currency, but it differs from most stable coins currently available on the market. Instead of closely monitoring the value of a real asset, such as the US dollar, Libra will have its own value. However, it will be supported by a basket of "low volatility" assets to ensure its stability.
Even if it is designed to be stable, the value of the Balance will fluctuate. If you buy a $ 100 balance today, its value might be slightly different in the future. According to a document that Facebook has sent me, "reserve assets are chosen so as to minimize volatility, so that Libyan holders can trust the currency's ability to preserve its value over time. ".
Sending and receiving Libra will be very inexpensive (or nonexistent), although the details on the price are unclear. So how are the entities going to hold the balance assets of Libra to make money? One word: interest. According to a document that Facebook has sent me, "interest on reserve assets will be used to cover the costs of the system, to guarantee minimal transaction costs, to pay dividends to investors who have provided capital to revive Ecosystem and support growth and adoption. " Note that Balance users will not receive a return from the pool.
The Libra Association will be the guardian of Libra and the only entity able to burn or hit the Libra currency. And this will be done in response to market demand. With the increase in demand for Libra, more Libra will be issued and the supply will increase – and vice versa.
The wallet that is open to everyone (who provides a piece of identity)
For most users, Libra will be largely attributed to Calibra, the wallet created by Facebook that allows you to send and receive Libra currency. It will be integrated with WhatsApp and Messenger, allowing users of these applications to register easily, reload their portfolios with funds and send, receive and pay with Libra (with "small" transaction fees), all from the applications. Calibra will also be available as a stand-alone application for iOS and Android.
Registration at Calibra will require a verification from KYC (know your client), which means that users will need to download some kind of government issued identifier before they can start using the service. Kevin Weil, vice president of products for Calibra, said the process of integration would be as simple as possible, "almost like a discussion."
Reloading funds should be as simple as typing credit card information. For unbanked people, in certain areas, it will be possible to go to physical places where they can refuel by handing money.
Regarding confidentiality, Facebook claims that Calibra "will not share account information with Financial, Facebook or any other third party without the consent of the customer".
In terms of security, Calibra will have built-in anti-fraud protection, a password recovery option and multifactor authentication. A characteristic of Calibra is that cryptocurrency portfolios will not benefit from 24×7 customer support.
Important: Due to the open nature of Libra, Calibra will not be the only Libra wallet that you can use. In fact, it should be quite possible to sign up for Calibra, fill it with money, and then move the books you received using a third party portfolio that has no connection with Calibra and the outside. of the Facebook ecosystem.
More information on Calibra is available at the following address: calibra.com; You can also sign up to receive notification when the portfolio becomes available.
Rules and regulations
Creating new forms of money and letting billions of users send it around the world is not as easy as building a platform: there are rules and regulations that vary from jurisdiction to another.
I asked Weil questions about the potential problems, and about the fact that Calibra will be a fully regulated entity and that Facebook is already discussing with regulators around the world and is applying for licenses to make it fully compliant . With the law Even though the entire project is envisioned as a global project, Weil has said that Calibra "would only work where it is legally allowed".
When is Facebook Balance launched?
The blockchain and the Libra coin, as well as Facebook's Calibra digital wallet, are still not ready for public use. Facebook indicates that it intends to embark on the first half of 2020. However, the "Start Cycle Code" for Libra Blockchain will be open today, and Libra is pleased with the comments community on the project.
As for Calibra, Kevin Weil said that Facebook still had "a lot of work to do" before Calibra could be made public.
What does all this mean?
Libra is one of the most ambitious cryptocurrency projects ever conceived. It includes a blockchain, an intelligent contract platform, a low volatility cryptocurrency and a portfolio that will be integrated with some of the most used applications today.
Many questions remain: Facebook has not exactly had a stellar privacy record in the last two years Society seems to have done a lot to make Libra a common, open and global effort. Still, the public and regulators will want to know if Libra and Calibra are opening new avenues for misuse of user data.
There is also the question of technical execution. Balance and Calibra are at an early stage of development and unforeseen obstacles may arise.
Nevertheless, Libra is a large-scale project, backed by a long list of hitters in the areas of payments and online retailing. Companies such as PayPal, eBay, Mastercard and Visa have so far hesitated to openly adopt cryptocurrencies. This is changing today and it is a big problem – both for the companies involved and for crypto-currencies in general.
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