What is Libra
Libra is an open-source blockchain platform and Facebook’s venture into digital currency. It is set to launch in 2020 but is likely to be delayed.
How Libra coin works
Libra is comprised of
- Libra Coin (LBR)
- Single-currency stablecoins – like LibraGBP and LibraUSD.
Stablecoins were added to not interfere with monetary sovereignity and monetary policy.
Libra stablecoins will be fully backed by the Reserve, with cash and short-term government securities denominated in that currency. Amount of Libra coins minted and real assets placed in reserve will be determined by demand.
Initially starting with
Libra Coin users
Users exchange to Libra Coins online or at local stores using fiat currency and load the digital money into their wallet app.
Novi Wallet (formerly Calibra) can be used with
- Facebook Messenger
- Standalone app.
Benefits of the Libra Coin include the following:
- Low transaction costs, including cross-border transfer fees.
- Instant transfers.
- No hidden charges for deposits, withdrawals and payments (incoming, outgoing).
- Backed by underlying assets for stability.
- Scalability will make the Libra Coin usable for countless goods and services.
- Powered by blockchain for security & accessibility.
How much will a Libra coin cost?
Libra coin price will be determined using fixed nominal weights of the Libra single-currency stablecoins.
- 1 LBR = 0.50 LibraUSD
- 1 LBR = 0.18 LibraEUR
- 1 LBR = 0.11 LibraGBP
This approach is similar to the International Monetary Fund. LBR is fully backed by the reserve assets backing the stablecoins.
1 LibraUSD will equal 1 USD.
1 LibraEUR will equal 1 Euro.
Who is backing Libra?
The Libra Association was formed by Facebook in 2019 with the goal of attracting 100 backers before launch. Seven of the original named members have since left: Booking Holdings, eBay, Mastercard, Mercado Pago, PayPal, Stripe and Visa.
Despite some departures, there are still major players on board:
- Anchorage – blockchain platform
- Coinbase – crypto exchange
- Farfetch – luxury fashion retail platform
- Lyft – vehicle hire app
- Shopify – eCommerce platform
- Spotify – music streaming
As a Libra partner, it’s expected that Coinbase will list the Libra Coin.
Several venture capital firms are also Libra Association members, including Andreessen Horowitz and Thrive Capital. A minimum $10 million entry fee gets each member one vote in the council.
Libra Changes Since 2019
Mark Zuckerberg announced Libra in a Facebook post on 18th June 2019. Since then, a few key components have changed.
Initially, the Libra Coin was to be a multi-currency coin stabilised by underlying assets like a basket of currencies and US treasuries. This idea has been revised and will be augmented by single-currency stablecoins pegged to fiat currencies (e.g. LibraEUR, LibraUSD etc.). These, too, will be backed by underlying low-volatility assets.
Notable security changes in the “Libra v2.0” white paper include limits on unhosted wallet balances and transactions (unhosted wallets are often used by criminals) and reduced accessibility to the network, at first, allowing entry to regulated crypto companies only.
Will Libra Coin be Mineable?
Libra or Libra stablecoins will not be mineable. The stablecoins are created due to market demand and when fiat currencies or bonds are placed in reserve. Libra Association members will act as node validators on a permissioned blockchain, Early ambitions to transition into a permissionless system in around 5 years were abandoned under Libra v2.0 changes.
Will Libra Affect Bitcoin?
Bitcoin is a decentralised currency that appeals to cryptocurrency users in a way that Libra does not. Bitcoin is a way for users to be their own bank and complete control their own finances. It’s also has a price speculation component to it.
Libra has the power of Facebook and the convenience of a payment system that lives in Messenger or WhatsApp, and will probably work great for everyday payments.
As of 2020 they are not really competing for the same market. But if Bitcoin’s lightning network gains traction, they might in the future.