Let’s be Honest: Libra isn’t a Cryptocurrency. It’s a currency.
In June 2018, Facebook publicly announced their plans to launch Libra, a “cryptocurrency” for the masses.
The announcement came with the usual big corporation feel good muck about opening up financial options for the bankless, facilitated transactions in the digital age, and all that token jazz you expect from a product launch in 2019.
While major publications have been quick to call out Facebook and the potentially dangerous consequences of a corporation of this size venturing into the world of finances and banking, one thing that has been questioned less is the nature of Libra itself.
Facebook calls it a cryptocurrency. I say enough of this. Let’s call it what it is.
Libra isn’t a cryptocurrency by any stretch of the word. Libra is a currency, plain and simple.
What makes a Cryptocurrency a Cryptocurrency?
Unlike true cryptocurrencies such as Bitcoin, Litecoin and all the rest, which are largely open, anonymous, lacking a central governing or regulating body, and are subject to market whims, there’s nothing about Libra that suggests it will be any of these things.
Let’s start with the markets. Crypto is traded openly and in limited supply. Bitcoin isn’t infinite — its scarcity and ever-present demand are the major factors in driving up its market value and asking price.
As such, the value of any given crypto is unstable. It fluctuates based on market choices and its supply limitations.
Libra, on the other hand, will be tied to underlying bank assets to keep it stable and there will be no limit to the amounts in circulation.
Unlike Bitcoin which functions more like a commodity when traded, acquiring Libra is as simple as exchanging your dollars for an equivalent in “Facebucks” in a different, digital currency.
Turning towards the regulation side of things, Facebook has promised to make governance of Libra fairly hands-off.
The currency will be governed by a subsidiary company called Calibra, of which responsibility and decision-making seems to be divided among Facebook and the early investors such as MasterCard, Uber and Spotify.
In this sense, the Libra isn’t so much decentralized, but run by an exclusive oligarchy of investors who forked in $10 million each for a seat at the table. Instead of being run by a single corporation, its run by several with shared, mutual interests in the coin.
That hardly screams decentralization — especially when you compare the management (as in, utter lack thereof) overseeing any other true cryptocurrency.
Next, concerning privacy, Facebook has promised to keep the data from Libra separate from user’s Facebook account data, effectively keeping it “safe” from advertisers.
Of course, Facebook is hardly a company known for transparency, openness and the unrestricted agency of its users. Nor is it a company known for respecting the right and privacy of account holders.
Of all the major companies, it also has arguably the world’s worst track record when it comes to “protecting” client data, having made it to abusive third parties such as Cambridge Analytica, Russian election-meddlers, and hate groups.
And consider this: Facebook and WhatsApp have in the past both publicly commented on how neither would share data with one another — yet it was revealed just last year that the two are in fact sharing data.
There is literally no reason to think that the people running Libra will treat data any differently. Sure, they might play it straight for the first few months or years, but there inevitably will come a time when they make that transition.
There might be a minor scandal, some reporting in the Guardian, or it might be an official announcement that no one cares about any longer. Regardless of how it happens, as long as Mark Zuckerberg is even peripherally involved, it will happen.
It is quite telling that even the people running the people reporting Libra are simultaneously treating it like a cryptocurrency and legal tender.
Take this quote comparing it (rather surprisingly) to a national currency:
It won’t be so dissimilar to when you exchange U.S. dollars for euros during a European vacation, for example.
I wonder how many times Bitcoin has been mistaken for Swiss Francs.
Curiously, I’ve also seen several sources comparing the usage of Libra to PayPal. While there certainly seem to be some similarities in terms of potential application functionality, that’s where the comparison ends.
PayPal functions like a digital wallet or third-party banking system. Users do not “buy” into PayPal bucks every time they transfer money through the systems — they continue to send and receive legal tender in a digital form.
In this sense, PayPal functions like an exchange of currencies, and not a provider of its own currency.
Some supports of Libra might be inclined to compare the currency to other softer digital currencies, the likes of which are not uncommon among mobile apps and the video game industry.
Epic games, EA, Ubisoft are hardly strangers to implementing digital currencies in their titles. However, where those currencies differ is that they solely exist in-game.
I’d like to think we’re still years away from buying a Starbucks coffee with our Fortnite V-Bucks (but we’ll see, I suppose).
One wonders if by having the cryptocurrency float around that
Facebook has found a way to deflect some of the regulatory heat it might otherwise have expected.
Cryptocurrencies, though still somewhat esoteric among the general population, have entered the popular vernacular.
While some people have had catastrophic turns with them, investing their life savings only to watch the markets tumble, I suspect many people have view cryptocurrencies as being fairly innocuous — as something people with more technological savvy get worked up about, but ultimately doesn’t concern them.
This laissez-faire attitude might be exactly what Facebook is counting on.
To the masses, the Libra might just be one more coin. No different than Litecoin or even Dogecoin for that matter.
To others, Libra is not unlike PayPal or some other transactional system.
Ultimately, people are seeing Libra as anything but what it really is. A currency, and one that — owing to the billions of users on Facebook’s platform — might have the clout to compete with dollars, euros, rupees, you name it, for dominance.