Last week our theme was “The FOMO crowd is back in town. Will Bitcoin have a blockbuster comeback?”. Our theme for this week is “Facebook’s Libra looks and smells like a cryptocurrency, but it really isn’t”
TLDR. Facebook finally released their much anticipated white paper on Project Libra. Facebook’s entry into the cryptocurrency market means that companies around the world are now considering their cryptocurrency strategy. There isn’t a big company in the world that isn’t going to join the cryptocurrency market. Thousands of centralized stablecoins are on the way.
Lately, every week I am on the edge of my seat, wondering what will happen next. It’s been another big week… While its not clear yet how Libra will affect the future of other cryptocurrencies, for now it looks like they are responding positively. Bitcoin hit new highs this weekend.
Early last week, Facebook the world’s largest social media company published a white paper about Libra, and over this weekend Bitcoin broke back to back records, reaching $11,000 in less than 24 hours, after blowing past the $10,000 mark.
In ancient Rome, Libra was a unit of weight, equivalent to 12 ounces. It was the forerunner of the pound. On Tuesday, Facebook unveiled it’s own a unit of money, Libra, a digital currency pegged to a basket of major currencies.
Weighing in on Libra, many questions come to mind. If Facebook’s 2.5 billion users adopt Libra, to pay for things and send money to each other, Facebook could disrupt banks, governments and everyone that’s involved the money business.
Is Libra a cryptocurrency?
Well, its being presented as one, but Libra doesn’t really follow the basic principles that other cryptocurrencies adhere to. Its not open, public, neutral, borderless, and censorship resistant. It lacks the decentralization that makes cryptocurrency enthusiasts, so faithful and loyal to Bitcoin. When thinking about Libra, it might be better to compare it with traditional peer-to-peer payment networks, like PayPal, Venmo, Square or even Western Union.
Like these networks, Libra is layer on top of the existing financial system. Each coin is backed by traditional currencies, to eliminate volatility and ensure its price is stable. But its also very different. Because of Facebook’s enormous reach, Libra could unify payments on a global scale and lower transaction costs.
Will Libra’s launch motivate other big tech companies follow Facebook’s suite?
Facebook’s Project Libra could motivate big competitor’s to create their own cryptocurrency. Amazon, Google Yahoo and many others are making moves, that indicate cryptocurrencies will soon become a bigger part of their platforms. Forbes has published a great list entitled “Blockchain 50: Billion Dollar Babies.”
There isn’t a big company in the world that isn’t going to join the revolution.
While Amazon hasn’t made any official announcements, it has already registered a number of new crypto-related domains, including AmazonEthereum.com, AmazonCryptocurrency.com, and AmazonCryptocurrencies.com. This has raised speculation that Amazon could be getting ready to make its move into the cryptocurrency market. Recently, Amazon was granted a patent for various techniques to build a proof-of-work (PoW) cryptographic system similar to those used by Blockchains such as Bitcoin.
Google is working on displaying cryptocurrencies in a friendly way, showing relevant information that include top news and other suggested cryptocurrencies, when a user performs a search. Its also invested in several blockchain startups, including Veem, a payments platform that lets enterprises instantly send and receive payments in different currencies, using Bitcoin.
Yahoo owns 40% of the Japanese crypto exchange, Taotao, which it bought in April 2018 for $19 million The platform allows trading for Bitcoin and Ethereum, and for margin trading for Litecoin, Ripple, and Bitcoin Cash.
Libra is not really a cryptocurrency.
Its looks and smells like a cryptocurrency, but the truth is, it’s an operating system for moving fiat money around the world. According to the whitepaper, developers will be able to build on top of Libra their own payment applications.
The authors of Libra’s white paper write: “Imagine an open, interoperable ecosystem of financial services that developers and organizations will build to help people and businesses hold and transfer Libra for everyday use.”
While in theory everything sounds open and transparent, ofter the reality is very different. The channel always wants to own the consumer advantage. Big tech companies have always developed strategies to capture the majority of the created value and in the case of crypto we can expect exactly the same. This is how Apple, Google, Amazon, Microsoft and Facebook became so huge and retain their positions. The argument has always been simple, “join or die.”
But, it’s important to see through the hype. We need to consider the who and why. Whose best interests do they have in mind. Big tech companies have huge numbers of customers and know everything about them. They push advertising and encourage customers to shop through their platforms. They understand that decentralization and blockchain can potentially shift the ownership of their livelihood, user data. Moving data from them, into the hands of the users. The ownership of data is the reason they are trying to figure out how to morph cryptocurrencies and blockchain for their own purposes. Its the only way to make sure they keep control.
Facebook’s entry into crypto could be a double edged sword. Facebook could setting the model of what crypto is and what it’s not. While the Lightning Network is showing great promise, it might be too little too late. Libra might be the first digital currency to capture the payments market. We could be seeing cryptocurrencies morph into centralized stablecoins and not the decentralized cryptos we’ve known and loved for the last 10 years. The trump card for cryptocurrencies, but its uncertain if they can capitalize on it, is Facebook’s irresponsible past privacy practices and the whole debate about control vs. freedom and centralization vs. decentralization. Would you trust Facebook with your money? IMHO, most people just want an easy and cheap way to send and receive money and Facebook will do just that, building on the momentum and hype for cryptocurrencies.
Ilias Louis Hatzis is the Founder & CEO at Mercato Blockchain Corporation AG. He writes the Blockchain Weekly Front Page each Monday and has no positions or commercial relationships with the companies or people mentioned and is not receiving compensation for this post.
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