Mark Zuckerberg, co-founder and CEO of Facebook, announced plans to introduce a unique digital currency in 2020 called Libra.
The reactions were mixed at best. Although Facebook claims that Libra is the answer to providing the masses with economic empowerment, others point out that it is a regulatory nightmare with the potential to give even more Big Brother power to Facebook (if it even gets off the ground first).
However, Libra may seem like a totally strange idea to the average person. So here are answers to some of the burning questions about it.
What Is Libra And How Will It Work?
Libra is a proposed digital currency developed by Facebook and designed to run on its own blockchain, a computer server network or “nodes.” Blockchains are digital, public transaction manifests in the cryptocurrency world. It is the responsibility of each node to validate and maintain these operations.
Typically, the main objective behind blockchain innovation was to make it available to everyone by having no transaction expenses and maintaining privacy by using a public directory, but also protecting the anonymity of users. So it’s no wonder that some doubts have been raised by the Facebook venture into blockchain. And now, Libra is not precisely going to meet its true definition.
Unlike other successful cryptocurrencies, Libra will be linked to a collection of fiat currencies supported by countries issuing them, including the U.S. dollar, euro, yen, and others. Facebook claims a stock of actual resources, including a bank deposit basket and short-term government securities, will also support it.
The flip side of this scheme is that Facebook would maintain interest gained on those reserve resources, given if the company is not an investment fund manager, making this a very dubious move.
So why is Facebook now attempting to start a cryptocurrency? In addition to creating more popular cryptocurrency, backers claim they see this as an alternative to a significant economic problem.
What About Privacy Concerns?
“It’s hard not to be skeptical from a privacy perspective,” Perry said. For example, Facebook will not import contacts or any of your profile information, according to the Libra white paper, but it will ask you to do so.
Given the rocky past Facebook has with user data and privacy, not everyone is persuaded that they will stick to their words.
Considering Facebook’s revenue depends largely on connecting advertisers with the right consumers, by offering this new service, we can’t help but ask what’s eventually in it for the company.