02 July 2019
This is it, the big one, the Titanic of crypto coins, the De Havilland Comet, Apollo 11, Windows 10, Nelson Mandela, the Tesla Model 3. If this one doesn’t fly, it’s all over.
Facebook are launching Libra Coin. It isn’t owned by Facebook, it is owned by a consortium called The Libra Association (TLA, get it?). It is operated by Calibra, they have a wallet, an app, and an open development platform. It’s all detailed here.
This Time, it’s Different
The Bank of England has announced it will open up deposit facilities to tech companies, to extend the scope of their successful banking regulations. The Libra Crypto Coin will be underpinned by a fund made up of currencies, bonds and other assets, this fund will be allowed into the overnight deposit facility and will earn interest. That opens up the possibility that coin holders can earn interest. This is a new model of a crypto coin as a yielding asset with credible backing.
Being underpinned by a managed fund enables a stable exchange rate. As one asset in the fund declines, they move exposure to another, avoiding the volatility of Bitcoin. The launch value of a Libra, will be in the same region as $, €, and £.
Who is The Libra Association?
Based in Geneva, the members include Visa, Mastercard, Paypal, eBay, Spotify, Vodafone, Uber, Lyft, Coinbase, Union Square Ventures, Kiva microcredit, and Women’s World Banking. They plan to have 100 partner companies at launch, each paying $10 million for an equal seat on the board. This approach will help avoid the anti-trust accusations Facebook already faces around the world.
Tin Foil Hat Section
Facebook can bypass international banking, and perhaps more importantly, bypass Apple Pay and Google Search with their control of user data. In user data mining terms, actual spending data is the Gold Standard. The Libra data base is the holy grail of tech. It is a key selling point of Libra that the system is run by Calibra. Facebook, or any other partner, does not get transactional details tied to usernames. WhatsApp and Messenger will enable Libra coins as any app developer can, but the data is encrypted. Currency can be changed via the Calibra app, this adds to the deposit fund with it’s talent for bearing interest. Calibra will also hold client wallets, solving the lost password problem of Bitcoin. They then have the ability to refund losses, like China’s WeChat.
Can someone be “deplatformed” like they can on facebook or youtube? Where do the coins go in that scenario? If The Association has a policy on this point, they are keeping it to themselves.
The tiny fees, fractions of a cent, are just enough to deter spam and Denial of Service attacks (where a miscreant or competitor would automate millions of fractional transactions to slow the whole thing down to an unusable level).
Testnet, for developers, is already in Beta and available for use. There will be bonus payments for early adopter users, developers and node operators. Venture capitalists, like Andreessen Horowitz, a partner, are being encouraged to fund start-ups building Libra infrastructure.
There is no plan to vet developers, leaving a potential for scammers to target naive users or devise hacks. Facebook will bear the brunt of complaints as it is the de-facto face of Libra. A serious early security breach of Libra or Calibra would tarnish all crypto for good. Equally, any unsavoury behaviour at The Association could mark the end. The next 2 years are the defining period in the fate of crypto currency.
Is That all?
Libra can enable banking facilities for an estimated 1.7bn users who do not have access to banks now and provide an online identity. Where can you get Bitcoins? Where can you use them? The answers don’t trip off the tongue. The new kid sits alongside Facebook’s 7 million ad clients and 90 million small businesses. A decentralised replacement of Paypal, with a captive audience. It’s hard to imagine a more favourable scenario.
Small business and public operator take-up would be a major boost. There is a huge potential in micro transactions which drown in fees today, like Ad-Click payments. You can transfer a few cents, it can handle your transit pass, it can enable a global transit pass.
Some advantages of using credit cards are not yet addressed;
• it’s credit – even if you settle every month
• loyalty points and cashback rewards
• ubiquitous acceptance
• challenging fraudulent use – the card company block-and-phone-call manoeuvre every time you go abroad. They’ll need an app for that.
Some people will say “Cambridge Analytica” in reflex to any mention of Facebook. Fair enough but, Facebook still has over 2 billion users, most of them are outside US and EU and have never heard of Cambridge, or Analytica, or Collusion. Libra is coming, the only question is whether it will be the new Facebook or the new Google+.