Facebook's new cryptocurrency Libra, has been launched to a mixed reception. Many commentators hail the development as innovative and game changing while others suggest that it has been poorly thought out and may be vulnerable to exploitation and manipulation.
Cryptocurrency has been on the radar for some years now, but has always suffered from brand awareness and security issues. While early adopters will readily proclaim a currency like bitcoin’s many benefits, most average people simply do not understand or trust cryptocurrencies.
Facebook's brand has the potential to change the negative perceptions of the ordinary person when it comes to cryptocurrency. Despite a series of embarrassing revelations that showed Facebook to be at best flippant when it came to protecting privacy most ordinary people still use and trust the platform.
Until now, the general population has viewed investment in cryptocurrency in all its forms, as speculative and risky.
The Libra currency we will be backed by bonds and other securities, which should make it more secure and less liable to fluctuation. This would appear to be the biggest advantage of the currency if it is to be used for transactional purposes.
The great aim of the Libra currency as stated by Facebook is to “bank the unbanked” - the estimated 1.7 billion people stretched across the globe that are said not to have a bank account. Facebook claims to have the technology and the reach to offer these people a simple and convenient transactional platform to conduct business with. They claim that Libra the cryptocurrency will be encrypted and have all the anonymous features that Bitcoin has, while their transactional wallet - Calibra will be housed separately on the Facebook platform. Transactions will be able to be made via a simple phone message or sms text.
It is a daring and bold concept that has the potential to shake the very foundations of the financial system as we know it.
Critics of the system point to the structure of Libra and the permission-based mining system that will ensure it's stability.
Only partner's of the Libra currency will be allowed to mine the currency.
Critics of this structure suggest that makes Facebook the pseudo central bank and this is where Facebook's history in relation to trust raises its head.
One of Facebook's most vehement and energetic antitrust critics, Matt Stoller described the launch of the cryptocurrency as a launch of a private global international monetary fund run by tech bros. This cynicism is shared wildly among Facebook critics and many trading analysts.
Cryptocurrency was conceived as an alternative to the Fiat monetary system controlled by central banks. Control by any central authority will not be well received within the cryptocurrency market as it runs counter intuitively to the very core of cryptocurrency.
The likes of Matt Stoller are not the only ones concerned. European authorities are already investigating ways to secure their currencies against what they see as a new threat to their stability and American house and senate leaders have called upon Facebook to halt development of the cryptocurrency until their concerns can be alleviated.
Whatever the fate of a Libra, the launch of the currency has served to legitimise the concept of cryptocurrency in many people's minds. This comes at a time when Bitcoin has reached a seventeen-month high.
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