What is the Facebook Libra?
This question is one of the many questions I have been hearing more and more and here are some others:
- Is the Facebook Libra a Bitcoin Fork?
- Will the Facebook Libra actually be on a public blockchain?
- Can I mine or stake the Facebook Libra once it launches?
- Is there a specific wallet for the Libra or will any other wallet work?
- What Countries will the Libra Support?
- Why is Facebook making the Libra? How will Facebook profit from it?
- Will the Libra be backed by anything?
- Is there a testnet available for the Facebook Libra?
In this update I will be sharing answers to all these questions and more. If you ever wanted to understand the Facebook Libra and why it’s such a hot topic keep reading…
Is the Facebook Libra a Bitcoin Fork or a Fork of any other existing Cryptocurrency?
The Facebook Libra is not a bitcoin Fork, in fact, it won’t even be a proof of work blockchain like Bitcoin. The Libra team has decided to adopt Proof of Stake, while leveraging the Byzantine Fault Tolerant (BFT) approach. They are calling it the Libra Byzantine Fault Tolerance (LibraBFT) consensus protocol.
Will the Facebook Libra actually be on a public blockchain?
The Libra nodes that support and validate transactions will be private and furthermore it will require a permit and $10 million investment to operate a node. This is a drastic move that would likely make the Libra the largest centralized blockchain and cryptocurrency, directly going against the fundamentals of every cryptocurrency that came before it.
Can I mine or stake the Facebook Libra once it launches?
Unfortunately not, because the nodes will be private and require a massive investment, you likely won’t be able to participate in Libra beyond buying it, holding it and using it to pay for things.
Is there a specific wallet for the Libra or will any other wallet work?
Facebook has already created a subsidiary called Novi (recently rebranded from Calibra to Novi in May 2020) and the Novie team have already started on the wallet. You can checkout their site and even request early access here.
What Countries will the Libra Support?
Facebook is aiming to make the Libra available to everyone in all countries. Although take that with a grain of salt since the Libra definitely won’t easily be made available in countries blacklisted by the United States.
Why is Facebook making the Libra? How will Facebook profit from it?
In Mark Zuckerberg’s own words: “The way that this will help Facebook over time is that basically in our ads system, it’s an auction. If you’re a small business, we don’t have a rate that you have to pay — you bid and tell us what the ads are worth to you if you can get customers into your store or if you can complete a transaction.
And what we basically see is when we eliminate friction for a customer buying something from a business, then the value for that business of advertising on our system goes up, so they bid more in the ad system. If we can make that now, in addition to finding businesses that people want to interact with, people can also transact with them directly. I would expect that over time that will lead to higher prices for ads because it will be worth more to businesses so they will bid more on the ads system.”
To summarize his statement; If the Libra can make it more convenient for businesses to do business on Facebook and more purchases actually happen on Facebook than say, Amazon or Google, then the Social media giant will be able to snap up an even larger portion of the ad market.
Will the Libra be backed by anything?
Initially the original plan was to create a stablecoin backed by a reserve of cash and low-risk government securities denominated in a mixture of selected fiat currencies: US dollars, euros, British pounds, Japanese yen, and Singapore dollars.
Facebook has agreed to go through the required regulatory approval and some of the initial feedback from regulators is: “the potential for a multi-currency Libra coin to interfere with monetary sovereignty,” (this is according to the updated Libra white paper). So it seems Facebook now has a new strategy: The Libra Association, will issue multiple stablecoins denominated in single currencies. However, there will still be a Libra coin, but it will be a “digital composite of some of the single-currency stablecoins available on the Libra network.”
Is there a testnet available for the Facebook Libra?
Yes there is and if you want to learn more you can check out the Libra site. Don’t feel like reading their site? It’s only 5 steps to start checking out the testnet:
1. Clone Libra:
git clone https://github.com/libra/libra.git && cd libra
2. Checkout the Testnet Branch:
git checkout testnet
3. Install Dependencies:
4. Run the CLI:
5. Run Your First Transaction:
For this, you’ll have to do a little reading here.