Facebook Libra

Brief timeline

• March 2018 Cambridge Analytica scandal
• May 2018 Facebook established a blockchain division
• December 2018 News that Facebook is building a cryptocurrency
• June 2018 Formally announced Libra and released whitepaper
• 2020 Launch

Why?

Reaching Out to the unbanked

• 2 billion people don’t have a bank account
• 20% of unbanked adults receive wages in cash
• India, target market for Libra, has 190 million unbanked folks

Why?

How?

• Mobile phone users in 2019 is 5.135 billion
• Internet users in 2019 is 4.021 billion
• Social media users in 2019 is 3.196 billion
• Facebook alone has 2.38 billion monthly active users

Extremely likely that Facebook will be able to convince their user-base to adopt Libra

How? - Coordination

What?

According to the white paper: “Libra is a simple global currency and financial infrastructure that empowers billions of people.”

What?

5 essential components/features:

• Built on a secure blockchain
• It is a stablecoin, backed by a reserve of assets
• Governed by the independent Libra Association
• Uses the LibraBFT consensus mechanism
• Smart contracts through “Move” programming language

What? - The Libra blockchain

• Not really a blockchain in the traditional sense
• Doesn't has blocks as core data structure.
• “decentralized, programmable database” instead
• Libra, like Ethereum, works on a gas model

What? - Stablecoin

• Backed by the Libra Reserve
• Backed by real assets
• Causes store of value (no or little volatility)
• Reserve assets will be used to
  • Cover costs of the system
  • Ensure low transaction fees
  • Pay dividends to the investors (The Libra Association)

What? - Libra Association

• The governing entity of the Libra blockchain
• Headquartered in Geneva, Switzerland
• Validates the network’s nodes
• Governed by the Libra Association Council, comprised of one representative per validator node
• Approval via a 2/3rd majority vote

Partners

Partners

• A lot of regulations and heightened scrutiny
• Negative comments about how everything is setup
• Causes some major partners to leave

PayPal, Visa, Mastercard, Stripe, eBay, and Mercado Pago

Future?

• Will it be successful?
• Will it ever see the day of light?

Chinese CBDC

Central Bank Digital Currency

Chinese CBDC

• Revealed in August 2019
• Unlikely to be blockchain-based
• Two-tier structure
  • Central bank issuing currency to banks
  • Banks circulate the currency amongst their customers
• 100% backed by central bank deposits

Why two-tier structure?

• PBOC doesn’t want to become consumer-facing
• Banks can leverage existing infrastructures
• If targeted directly, the scale of the infrastructure would be too large

Other reasons?

• Plan is to have “controllable anonymity”...
• Government could likely take a look at transactions
• Integration social credit system
• ... maintain power?