Cryptocurrency, the new digital asset that is designed to work as a medium of exchange that uses strong cryptography to secure financial transactions, control the creation of additional units and verify the transfer of assets.
Its safety is highly trusted for a simple reason. It uses a blockchain system. Blockchain means that as it continues to grow a list of records which are linked and secured using cryptography. Each block contains a hash pointer as a link to the previous block, a timestamp and transaction data. To be able to modify the data, all of the data in all of the existing ledger has to be changed at the same moment. This method is the reason why it is very secure.
The cryptocurrency was under the limelight because of the highly controversial bitcoin. Bitcoin’s price rose drastically in a short period of time. Making it one of the most sought after investing medium for a short period of time.
The variety of cryptocurrency that exists in the market has not stop facebook to plan on releasing one. There are a lot of pro and cons surrounding the plan of releasing libra to the market.
The project itself is not associated with Facebook. Although, many assumed so. Facebook is one of the co-founders of libra association. The other founders are reportedly MasterCard, Visa, PayPal, Uber, eBay, Vodafone and Mercy Corps. This means that Facebook would not be able to to have direct control over libra.
The association turns out to be the monetary authority for the cryptocurrency. An official statement from the association stated that Libra is made in the hope to empower billions of people. They stated that there is an estimated number of 1,7 billion adults who do not have any existing bank accounts will be able to use the currency. 2020 is the year of the cryptocurrency libra launch.
Facebook has previously made another virtual currency called credits. Credits are used to make payments on games played on facebook.
Libra is designed to make easier and cheaper for people to transfer money online which will benefit one of the biggest social media platform, Facebook.
On the other hand, by taking facebook as one of the founders Calibra hopes to earn people’s trust. Over time, they would start offering more financial services and generate other revenue streams for the company.
The issue that most of the people feel when it comes to facebook involvement in Libra is the fact that facebook might obtain some personal data to later send much more targeted ads to its users. The company has not had a good track record in its users’ policy.
But The Association stated that there will no personal data that have to be submitted to use Libra. Libra, which is owned by Calibra – a facebook subsidiary will not be able to share its data with Facebook. By law, this helps authorities prevent money laundering.
What makes Libra different from other cryptocurrencies?
All of the cryptocurrency exist in a digital platform and are recorded using the blockchain system. However, unlike other cryptocurrencies whose value swings and is unpredictable, Libra indicates that they would have crafted the system in such a way that the value that it holds is stable.
They stated that the would include bank deposits and governments securities obtained from central banks. The new cryptocurrency Libra value would then be created by the power of the association to buy more bank deposits and government securities. The more people who would want to use libra, the more power the association will have to do so.
New cryptocurrency Libra is projected to draw investors away from other cryptocurrencies. In turn, this will push down their prices. If succeeded, Libra will change how the whole financial market structures itself, bitcoins values, financial charges that are being levied, how international transactions that are conducted and even the usage of blockchain technology.
What is the status of this project now?
Libra is meeting resistance from regulators in the US and China. The United States Financial Services Committee wants Facebook to proceed slowly with this project and wait for appropriate regulations governing cryptocurrency to be set in place.
There is fear from the US Treasury that Libra might be used for money launderers and terrorist because of its decentralization.
Meanwhile, the united states official stance has not been given out officially. There is hesitation that libra might disrupt the US dollar performance hence reducing its veto power over global financial transactions.
China is not being supportive of the libra project either. They have invested resources, efforts and time to replace the US dollar in the commerce industry. Facebook libra might jeopardize the result that has been achieved so far. Not to mention, Libra has the potential to disrupt AliPay and Tencent. Both are companies that handle mobile payments.
It is not only facebook, but Walmart is also looking into a similar project. It is stated in Wallmart patent filling that its digital currency looks to provide a free or inexpensive place to store funds. Unlike Libra, Wallmart is planning to tie the digital currency to a national currency such as dollars.
Cryptocurrency might not be applied in the near future. On the contrary, as long as the financial technology evolves, the digital currency will still remain as one of the alternative to providing secure, faster and much more affordable financial instruments.