Facebook has revealed the details of its cryptocurrency, Libra, which will let you buy things or send money to people with nearly zero fees. You’ll pseudonymously buy or cash out your Libra online or at local exchange points like grocery stores, and spend it using interoperable third-party wallet apps or Facebook’s own Calibra wallet that will be built into WhatsApp, Messenger and its own app. Today Facebook released its white paper explaining Libra and its testnet for working out the kinks of its blockchain system before a public launch in the first half of 2020. If the idea of Facebook and it’s partner companies having even more information on you… you should be.
Libra, will run on a blockchain network secured at launch by 100 distributed computer servers, or nodes. Twenty-eight node-running members are currently on board.
The Libra blockchain will go live in 2020, with the Libra Association – a Switzerland-based non-profit – tasked with leading the cryptocurrency’s ongoing development. In a white paper released Tuesday, the organization detailed how the Libra blockchain will be Byzantine fault-tolerant, meaning faulty behavior by some of the actors in the network will not compromise the security of the broader network.
“[The Libra blockchain makes] it extraordinarily difficult for an attacker to compromise 33 separately run nodes that would be required to launch an attack against the system.”
Facebook is launching a subsidiary company also called Calibra that handles its crypto dealings and protects users’ privacy by never mingling your Libra payments with your Facebook data so it can’t be used for ad targeting. Your real identity won’t be tied to your publicly visible transactions. But Facebook/Calibra and other founding members of the Libra Association will earn interest on the money users cash in that is held in reserve to keep the value of Libra stable.
Facebook plans to develop Libra into a “global coin”, pegging it to “well-known currencies” such as the US dollar and British pound in a bid to prevent the “wild swings” of conventional cryptocurrencies such as bitcoin and Ethereum. This is one of the first red flags. This is less a cryptocurrency than it is an attempt at a stablecoin. As such… it isn’t even really moving into the cryptocurrency space but more the space of fiat banking.
If you’re wondering about Libra’s implications on the future of payments: stop it because Joshua Davis has it all figured out.
Facebook won’t fully control Libra, but instead get just a single vote in its governance like other founding members of the Libra Association, including Visa, Uber, and Andreessen Horowitz, which have invested at least $10 million each into the project’s operations. The association will promote the open-sourced Libra Blockchain and developer platform with its own Move programming language, plus sign up businesses to accept Libra for payment and even give customers discounts or rewards.
So yeah… this will all be tied together and of course, since Facebook really is a data company you can assume that your purchases will help inform companies in order to be able to target you (even if indirectly).
Early bitcoin core developer Peter Todd, a well-known industry figure and an applied cryptography consultant, and outspoken Bitcoin maximalist didn’t mince his words.
Libra runs on a permissioned blockchain, which means that only companies in the Libra Association can mine it/control it. After five years they say they will transition to a permissionless chain. Except… no blockchain has ever moved from permissioned to permissionless. Also… anybody familiar with Facebook’s constantly moving permissions on the social platform? Yeah. It’s nothing more than a private global federal bank.
The root problem with conventional currency is all the trust that’s required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust. Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve. We have to trust them with our privacy, trust them not to let identity thieves drain our accounts. Their massive overhead costs make micropayments impossible. – Satoshi Nakamoto
What Facebook, or any company like Facebook, is proposing is not a cryptocurrency. It doesn’t have any of the fundamental characteristics of cryptocurrency. It doesn’t stand on the five pillars of an open blockchain. In fact, it has none of those. –Andreas M. AntonopoulosThe five pillars: open, public, neutral, censorship-resistant, and borderless.
- Open… naw, total opposite. Highly centralized. It costs $10 million USD to be a node.
- Public? Nope… Run by an organization that paid $10m a pop to be included.
- Neutral – No way… how could it be? It’s backed by multiple, government created, fiat currencies. To build on many features of Libra’s blockchain, developers must seek permission from Facebook and its partners who administer it.
- Censorship-resistant – again, nope. Its chain isn’t even… see above… to build on many features of Libra’s blockchain, developers must seek permission from Facebook and its partners who administer it.
- Borderless – Can you use Facebook in China? Messenger? Whatsapp? or would you simply do like the majority of Chinese and use WeChat and Renren? They use those for a reason after all.
What they are building might be more akin to a better version of PayPal. They will also share info with government authorities – they’ve not said which ones but how can they be borderless, censorship-resistant, neutral, etc. AND comply with an individual nation-state at the same time?