Facebook wants to become the central bank with Libra and profit from the Bitcoin hype. But the blockchain is primarily a facade, Libra is neither decentralized nor a crypto currency. Learn more about Crypto Currencies and BTC at lerablog.org, before you start reading.
If Facebook is the answer, Libra will develop into a world currency. But the Facebook coin has little in common with Bitcoin and other crypto currencies. Libra is a digital currency that resembles Wechat Pay rather than Bitcoin. The question of whether Libra is a crypto currency is directly related to considerations of privacy and user trust.
Crypto currencies vs. central banks
With the blockchain as a technology and especially with crypto currencies, a lot revolves around trust, more on codection.com. In principle, this is very similar to conventional currencies such as the euro, which also work solely because we trust, for example, that the state and the central bank will not devalue them. In the case of fiat currencies, i.e. uncovered money, recent history - actually only from the 20th century onwards - has shown that this trust in the state is not always justified. Replacing this blind trust in a central authority that controls the monetary system has been one of the core promises of crypto currencies from the outset and can be found in Bitcoin's first announcement, written by Satoshi Nakamoto.
Facebook also wants to give the impression that its digital currency is decentralized, so that users do not have to rely on a central authority. Libra is to be controlled by the Libra Association based in Switzerland, which includes many other companies such as Paypal, Visa, Uber and Mastercard. The mere fact that many well-known companies are on board - and have each paid at least ten million US dollars for it - combined with the ambitious goal of creating a global financial network, is causing a lot of hype. If you then stick the label "Blockchain" on such an ambitious project, you can be sure that everyone is talking about it.
Decentralised, my ass: Libra Association functions as a central bank
The new blockchain for the global currency is a decentralized, programmable database designed to support a low-volatility crypto currency that acts as a medium of exchange for billions of people," the Libra white paper says. Admittedly, there are many superficial technical reminiscences of Ethereum or Bitcoin in Libra: Smart Contracts, Dapps, Move, a programming language of its own, and all that even faster and better. The Libra blockchain is to be used by around 2.7 billion people who have a Facebook profile and can process up to 1,000 transactions per second. Bitcoin processes around seven transactions per second.
Unlike Bitcoin or Ethereum, the Libra Blockchain is not a public blockchain, but a Consortium Blockchain in which only paying members of the Libra Association are involved in mining. According to Facebook, this is necessary in order to avoid problems such as high energy consumption, slow transactions and other difficulties that plague Bitcoin, for example. For this reason alone, the Libra Association acts as a sort of central bank. According to Facebook, this will change after five years and the Libra blockchain will open, but one can be sceptical about this.
Facebook has lost too much trust
With all the decentralized ambitions and the participation of many other companies, it should not be forgotten that Libra is a Facebook project. Most users will interact with the blockchain using Facebook products. Libra Wallets will primarily be integrated into Facebook apps such as Whatsapp or the Facebook Messenger. That doesn't sound very decentralized.
On the contrary, Libra will further strengthen the power of one of the world's most powerful corporations. Facebook is one of the companies responsible for undermining the decentralized idea behind the Internet. Now Facebook is also attacking the decentralization underlying most other crypto currencies. If you want to use Libra, you have to trust Facebook to do so - and this should not be particularly easy for many users in view of the past few years.
The Cambridge-Analytica scandal is just one of many prominent examples that has contributed to how much trust Facebook has lost among users. With all the convenience that the digital currency promises, many users may rightly wonder whether they should trust Facebook with their money - and information about their shopping habits - after the company has already proven that it is not trustworthy with private data. While Facebook asserts that information about Libra users' shopping habits is not used to play out advertisements tailored to them, not everyone should believe this promise either. After all, selling user data is part of Facebook's business model. At present, it looks as if Facebook is developing a payment system that integrates centralization and monitoring.
Libra is a digital and not a crypto currency
Libra contradicts the ideology underlying all crypto currencies and is not decentralized. The digital currency is also being launched by a company that is known for its questionable approach to the privacy of its users. A fully traceable digital currency from a social network whose business model is to sell user data should provide sleepless nights for any potentially interested user. Why shouldn't Facebook use this new tool to capture purchase decisions and resell them to third parties?