The 7 Key Takeaways About Libra
Understanding Libra, Facebook’s cryptocurrency, requires extensive analysis of the recently published White Paper. Our team dived into the details to extract the key takeaways.
1. The Name ‘Libra’ Was Inspired by the Romans
An interesting fact about Facebook’s native currency is that is inspired from three distinct elements: the Roman weight measurement system, the astrological sign for justice, and the French term for freedom.
The culmination of these three elements embodies the essence of Libra, which aims to be a global cryptocurrency for everyone. The focus of Libra is to create a currency that empowers billions of people, allowing them to engage in frictionless financial transactions in a simple, secure, and cost-effective manner.
2. Facebook’s Cryptocurrency Will Be a Stablecoin
Libra will be a stable digital currency, which will be fully backed by real assets stored in the Libra reserve. Stablecoins are cryptocurrency that are stable in value, usually pegged from a real-world currency (such as US$) or a commodity (such as gold) that are stable in nature.
The Libra reserve is created through funds originating from both investors in the separate Investment Token, and users of Libra. This means that you can invest in the project through an Investment Token that could potentially pay out dividends in the future or if you are keen on getting your hands-on Libra coin itself, you have to convert your local currency into Libra.
Essentially, Libra is only created when there is more fiat with which it is either exchanged or backed up. The Libra reserve will then be invested in low-risk assets that will yield interest over time, which will then be used to cover operational costs, support low transaction fees, and pay dividends to Investment Token investors who helped jump-start the ecosystem. The stability of Libra will therefore be supported by a global basket of fiat currencies and low-risk assets; likewise, you can convert your Libra at any time according to the prevailing exchange rate to your local currency.
3. Libra Has a Long List of Prominent Backers
Facebook will relinquish control over Libra, instead conferring control to Libra Association, a Geneva-based non-profit organization with a long list of prominent founding members, including Paypal, Mastercard, Stripe, Visa, eBay, Lyft, Spotify, Uber, and Coinbase. The list of global members includes corporations from a wide range of industries, including finance, retail, non-profit organizations, and eCommerce entities. Currently, there are 28 members, each of whom are required to invest $10 million into the development of Libra.
The Libra foundation aims to accumulate a total of 100 partners with a reserve fund of $1 billion, which is going to be used to manage Libra’s price stability. All members will also be granted a single vote for the governance of Libra, with each entity serving as nodes in the Libra network. The association will also spearhead Libra’s native open-source technology, by promoting its developer platform, which is fueled by its own programming language. Given the wide reach of the cumulative networks of all members in the association, it is not hard to imagine that there will be a colossal base of ready users for Libra, something which would have been incomprehensible with any other past cryptocurrency projects, particularly on this scale.
4. Libra is Built on an Open-Sourced, Secure and Scalable Blockchain
Libra will be built on the Libra blockchain, a natively developed open-sourced blockchain that uses a Byzantine Fault Tolerant (BFT) consensus approach called LibraBFT Consensus Protocol. However, the Libra blockchain will initially be a permissioned (closed) blockchain. This means that access to the network is limited to a handful of selected and pre-approved entities who will become nodes in the system.
A permissionless system – such as Bitcoin and Ethereum – allows anyone to participate in the network and become a node. Libra will gradually transit into a permissionless network within five years of the public launch of Libra blockchain and ecosystem. The rationale behind this is that a permissionless network has limitations in terms of speed and scalability, and in order to deliver a scalable, secure, and stable solution globally across billions of people and transactions, it needs to be a permissioned system at first. That said, Libra blockchain will be open in the sense that anyone can use the network and even build applications on top of the blockchain.
5. Libra Blockchain Utilizes A New Programming Language Called “Move”
Libra blockchain will facilitate smart contract functionality, using a relatively new language called ‘Move’. Smart contracts are pre-programmed contracts that are self-executable, thereby allowing for the automation of contracts without the need of any third parties or intermediaries. Move is a simple but powerful language, and is relatively suitable as a “first programming language”.
More importantly, Move is designed with a key focus on security and safety, since leveraging a simpler language facilitates easier code writing and execution, and reduces the risk of unintended bugs or security flaws.
6. Libra’s First App Will Be Calibra – A Cryptocurrency Wallet
The first application to be built to support a cryptocurrency must be a wallet. This is exactly the case with Libra, in which Calibra, a cryptocurrency wallet, will facilitate the storage and exchange of Libra coins. Calibra will be the first application to be built on the Libra blockchain.
Calibra is also the name of the company which will develop the wallet, and is in fact a subsidiary of Facebook, built to ensure separation between financial and social data, and to build and operate services on its behalf on top of the Libra blockchain.
Calibra will be available as a mobile application and will also be integrated with Facebook’s Messenger application and WhatsApp, allowing users to convert fiat currency into Libra in their wallets and thereafter send, receive, and pay for stuff using Libra.
7. Libra’s Incentive Program to Foster Adoption
To generate higher levels of adoption among users, Libra has developed an incentive program to encourage more developers to create applications on Libra blockchain, and more merchants to accept Libra as a payment currency.
Node operators, who represent the founding members of the Libra association, will be rewarded with Libra coins for getting users to sign up and use Libra. Businesses that attract users towards Calibra will also be rewarded with incentives which they can pass on, in part or in their entirety, to users in the form of discounts or free Libra tokens for their purchases. Merchants in the network are also incentivized by receiving a percentage of the transaction value back for each transaction that is processed on the platform.
The incentive programs are targeted towards the entire Libra network, ensuring that a holistic approach is undertaken to foster adoption in the usage of Libra.
Libra is still in the early stages of development with lots of things left to do, with a targeted launch in early 2020. However, Libra is perhaps the most ambitious and hyped cryptocurrency in existence, drawing on the stature of Facebook as a unicorn, as well as the partnerships that have been developed by the Libra association. With plans to create a fully-functioning blockchain that is open-source, and facilitates smart contract technology using a native programming language, Libra seems to be moving in fundamentally the right direction.
More importantly, the adoption of cryptocurrency and blockchain technology by a giant technology firm has set the tone for mainstream adoption of this nascent technology, and the fact that a prominent list of institutions, all of which were previously openly reluctant to embrace cryptocurrencies, serve as members of the Libra association, is a huge testament to the changing tides of acceptance towards distributed ledger technologies. Saying that this is a huge deal is perhaps an understatement, but it is definitely a well-deserved victory for the industry and technology.
* The information above does not constitute any form of financial or investment advice and should not be relied upon. Investing in Digital Assets carries risk. For more information please see our risk warning.