The other day I wrote about Quantum Money, aka S-Money, a futuristic currency that could enable galactic scale commerce. But that post may have been too forward thinking as there will likely be plenty of other currencies to come and go before we ever get to Quantum Money with Facebook’s foray into cryptocurrency, Libra, the next to grab the spotlight. A reference to Roman currency, Libra is more than just a pure cryptocurrency play. When all is said and done it may very well usher in a whole new global financial system. One in which Wall Street and powerful banks are pushed aside in favor of a new decentralized world order.
Facebook’s desire to create their own currency has been well documented. They’ve even dabbled with creating their own payments system along the way. Some have even suggested that AI chatbots in a futuristic iteration of Messenger could handle all of our payments for us, talking to businesses and creditors on our behalf. But now we may wind up with something else entirely. And ironically it could come to us from the former head of Messenger.
As Wired reports:
“Near the end of 2017, on a Dominican Republic beach with his family, Facebook executive David Marcus wrestled with a question he’d been pondering since his previous job as president of PayPal. How would you build the internet of money? A friction-free global digital currency would be a boon for the many people with mobile phones but no access to banking. And who better to develop something like this, he wondered, than Facebook, with its global reach and massive user base? Marcus, then head of Facebook Messenger, thought he had an answer. He texted his boss and told him it was time to talk about Facebook creating a cryptocurrency, saying that he had a clear view of how to do it, in a way that would earn trust even from those skeptical of Facebook. Marcus spent the next few days writing a memo that laid out his ideas.
Facebook CEO Mark Zuckerberg quickly endorsed the plan, saying the approach synced with his ideas. Zuckerberg had long sought an in-house currency for Facebook—remember Facebook Credits?—and the lofty aspiration to empower consumers in the developing world reprised a familiar theme of serving the next 2 billion. (Think internet.org with digital money instead of broadband.) Besides, competitors like Apple, WeChat and Google were making inroads into global finance.”
So far, so good. A long held desire to connect the world fused with an interest in helping people manage their personal finances now combined with an actual plan to make it happen. But how exactly would this new currency work? What would the logistics look like? And will anyone even be willingly to entrust Facebook with their finances in the first place? Especially when you consider that by embracing the blockchain, Facebook would essentially be trying to take control of a technology that by its very definition can’t be controlled. Surely, this kind of power grab would be a bad look for a company with a delicate image problem to begin with. What could they possibly have to gain by introducing Libra and then walking away from it?
Wired explains how it work and how Facebook’s motivations would play out:
“It begins with a new cryptocurrency designed for payments ranging from micropayments to remittances without fees (‘as easy to send money as an email’) as well as enabling more exotic ‘smart money’ use cases like dynamic contracts, which could enable blockchain-based loans or insurance. The value of the coin will be pegged it to a market-value basket of several trusted currencies, with individual Libras worth about a buck. It’s money, not an investment vehicle. Libras will be fully reserved; basically, every time a user trades traditional currency for Libra, that money will go into the reserve, and stay there until the customer withdraws money from the system.
And here’s Marcus’s big idea: To deflect the well-justified wariness of Facebook’s every move, Facebook has open-sourced the technology, and will cede control of the blockchain to a neutral Libra Association—kind of a Switzerland of digital coinage—that will of course be based in Switzerland. The Libra Association will consist at first of up to 100 founding members including Facebook, each of which will invest at least $10 million to fund the association’s operations, and receive interest earned off the reserve. (Libra’s NGO members are exempted from the investment requirement.) Each member will be empowered to operate a node on the blockchain, and have a voice in determining changes to its code and managing the reserve. (This limited access is called a ‘permissioned’ blockchain.) ‘Facebook will have one seat on the council that oversees the foundation but will have no more rights, no more governance, that isn’t the exact same as what everybody else has,’ says Kevin Weil, a top engineer who left his role as Instagram’s product chief to work on the project.’”
It all sounds good in theory. By limiting Facebook’s influence and control over a currency that would run on their platform any trust issues are instantly put to rest. Doubly so when you factor in the power of the blockchain and its decentralized ethos. As such, I can very easily see this currency taking off, even among people who wouldn’t ordinarily trust Facebook, which is pretty much everyone these days, or those who may be wary of digital currencies, which is pretty much everyone else. But are stringent safeguards, a cohesive vision, and strong rhetoric enough to win hearts and minds and change the entire global financial system overnight? To fundamentally alter our perception of money while winning back the trust of millions of users? That I’m not so sure about. But even if it doesn’t it may not matter much in the long run. After all, it’s only a matter of time before quantum money makes Libra obsolete anyway.
is Libra the Greatest Idea Ever?
Leave a comment