Recently we all got a buzz that Facebook has reinvented digital money. They are not called Zucker bucks but it sure will be controlled by Facebook and its partner giants. This cryptocurrency is most likely to launch next year and it’s more like PayPal than Bitcoin. I am going to break it down to you in simple words.
Libra is just like cash that lives inside your phone. You will be able to buy Libra through Libra wallet apps or from local grocery and convenience stores. You cash in your local currency like dollars and get nearly the same number of Libra coins. The first thing you will be asked to do is verify your identity with a photo ID. You will then be able to spend your Libra for online shopping or potentially pay for things like Uber or your subscription for Spotify as they are partners with Facebook. Since its almost free to move Libra from one account to another, you won’t have to pay high credit card processing fees that can add almost 4 percent to your total. Instead, some Libra apps will provide you with bonus and discounts or free coins for signing up and paying with Libra.
Just so you know, Facebook is building its own Libra wallet called as Calibra that will live inside WhatsApp, Facebook and as its own standalone app.
Calibra will be keeping all of your financial data separate from your Facebook profile which means it cannot use your transaction data to target you with advertisements, reorder your newsfeed or sell your information to marketers. I can imagine your relief after this!
Any time you can cash out of Libra and get your local currency back in your bank account or handed to you at a local store.
Now let’s get into the technicalities of this so-called cryptocurrency. Unlike Bitcoin and Ethereum, Libra is said to have much more stability in price as it is being secured and is not controlled by just Facebook. Instead, Libra is run by the 28 members that have paid about $10 million each to have a say in the future decisions for this currency. Financial companies like Visa and MasterCard, apps like E-Bay, Venture Capital funds like Andreessen and Horowitz are all members. They will be responsible to keep a check on the transactions and also keep the Libra Reserve.
The Libra Reserve is stabled by the most stable currencies like the US dollar, the British Pound, the Euro, and the Japanese Yen.
The idea is that even if one or two currencies go up or down, the price of Libra will stay stable which means that shops can accept the payments with Libra without worrying about the price fluctuations.
However, as compared to Bitcoin, Libra is permissible, which means that only select few entities can keep track of the Ledger. This makes it more of a digital currency than a titled Cryptocurrency.
The question that must be arising in your head by now is how will Facebook and the membership committee with earn from all this?
Well, the assets that are held in the Libra Reserve will be used to invest in low-risk debt securities and the interest will be used to clear out the operational expenses and investments in technology. After all this, members will be receiving a cut from the remaining interest in proportion to how much they have invested when they joined the committee.
If Libra gets popular and tons of people cash in, then the interest can add up to serious revenue for Facebook. Also, if the currency can persuade and makes it easier for small businesses to accept payments online, they will sell more stuff. These businesses will then have extra money to spend on Facebook ads which will make it extra quick to buy things with Libra. 90 million businesses already have Facebook pages but only 7 million advertisers currently exist on Facebook. If Facebook can turn more of those merchants into ad buyers then BOOM, Facebook will hit a Homerun with that!
If Facebook succeeds, the real win will be for the 1.7 billion people around the globe who are left in poverty with no bank account. They are exploited by International money sending services like Western Union that charge steep 7 percent fees that takes $50 billion away from families per year. Moreover, if they are mugged, they could lose all their money since nothing is saved online. With Libra, all they need is a photo ID and they can get an alternative to their bank account that is tougher to steal from and can make it easier to pay for what they need.
I know I didn’t talk about the recent privacy issues that Facebook had with millions of its users. There can be another side of this but just for the time being, I had stuck with the whips of this currency. If you want a more detailed version of this article (including the demerits), mention it in the comments section and I will provide you with that as well…
IBS TIMES Official Media Partner: NEWSWIRE
IBS TIMES Official Promotional Partner: IBS MESSENGER
Comments