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After nearly a year of speculation, Facebook finally unveiled its secret blockchain project. On June 18, Facebook released the whitepaper for its long-awaited cryptocurrency and blockchain project, Libra.
The new cryptocurrency will be governed by a not-for-profit, Switzerland-based consortium called the “Libra Association.” Mastercard, PayPal, Visa, Stripe, eBay, Coinbase, Andreessen Horowitz and Uber are being hailed as the founding members of the Libra Association. However, the whitepaper reveals that Facebook plans to expand the association to around 100 members by the first half of 2020.
From the whitepaper of Facebook Libra:
“While final decision-making authority rests with the association, Facebook is expected to maintain a leadership role through 2019. Facebook created Calibra, a regulated subsidiary, to ensure separation between social and financial data and to build and operate services on its behalf on top of the Libra network.”
Facebook further revealed that in order to mitigate volatility fluctuations that characterizes many cryptocurrencies, Libra will be backed by a reserve of assets designed to give it intrinsic value, which makes it a stablecoin. These assets consist of a basket of bank deposits and short-term government securities that will be held in the Libra Reserve for every Libra crypto coin that is issued.
Facebook is already the world’s largest social media network after taking its sister companies like WhatsApp and Instagram into account. WhatsApp, for instance, saw 1.5 billion active monthly users in the fourth quarter of 2017. Having such a large audience gives Facebook a huge headstart over any other cryptocurrency out there.
Libra & Calibra: Cryptocurrency & Wallet to Reach 1.7 Billion without a Bank Account
Furthermore, Facebook has branded their product to reach the 1.7 billion adults of the world who remain unbanked. Facebook will attempt to achieve that through a new cryptocurrency wallet called Calibra. From the Calibra press release:
“For many people around the world, even basic financial services are still out of reach: almost half of the adults in the world don’t have an active bank account, and those numbers are worse in developing countries and even worse for women… The cost of that exclusion is high – for example, approximately 70 percent of small businesses in developing countries lack access to credit, and $25 billion is lost by migrants every year through remittance fees.”
While initially, Libra was only purposed to act as a means to transfer funds, the subsidiary will eventually expand its services to allow customers to use Libra for everyday activities such as paying bills and purchasing goods or services.
It’s important to note that unlike most other stablecoins, Libra is not pegged to any given national fiat currency, which means that the users will not always be able to redeem the token for a fixed amount of fiat. To tackle this issue, Facebook claims that the reserve assets for Libra have been chosen to minimize volatility. These reserve digital assets are held by a geographically distributed network of custodians to ensure decentralization. Even still, the Libra Association will manage the reserve but their ability to mint or destroy the crypto coin will be limited.
One thing is clear: With the new Libra crypto project, Facebook aims at the core of the entire economy, currency.