by Daniel Clarke & Jesse Knutson — Maicoin Institutional Sales
THIS IS NOT INVESTMENT ADVICE
Before reading this please understand it’s 8pm here in Asia. Whilst reading through the white-paper & some related links, it is possible that we have misinterpreted information due to the time of day we were reading it! I am sure the U.S press will come at this with fresh eyes and do it justice however we were keen to make a first stab at it in Asia hours.
Post the release of the Libra white-paper I have to say I am not super excited. It feels like most of the interesting stuff was leaked prior to the white-paper. It also feels like just another stablecoin (Of which there are many already) looking to leverage the Facebook network user base but not much more.
It’s not that I don’t think Libra Coin will succeed to some extent, but it has nothing to do with Bitcoin. In much the same way that Bitcoin Cash & Bitcoin SV endeavoured to “change” Bitcoin (And attempt to, but so far fail to threaten it’s crypto dominance) to allegedly adhere to the founding principles of creating a truly scalable payments system, Libra attempts the same exercise but supported by a massive network of existing users. This makes it a bigger threat to Bitcoin Cash & Biotcoin SV than it is to Bitcoin, a crypto currency that is more focused on being a reliable store of value (SoV) at it’s core, and scaling on payments via side chains like Lightning.
The most exciting thing for Bitcoin and crypto enthusiasts is that Libra will be supported by a “competitive network of exchanges buying & selling Libra” which on the face of it sounds bullish for exisiting crypto currencies but without further details thats hard to accurately predict.
Facebook Launches “Libra” Coin
“Libra Coin” is Facebook’s first direct foray into the world of crypto currency. Typically companies that have abused user data privacy would not be obvious candidates to be trusted with our money, however Facebook with its near 2bn users believes otherwise.
Libra Coin As a StableCoin
Facebooks “Libra Coin” falls into a classification of digital assets known as stable-coins. This describes a digital token typically (but not always) backed 1:1 by traditional FIAT money or in Libra coins model by currencies & government securities.
What’s the difference between stablecoins & Bitcoin?
Stable coins are typically issued by a central authority/company & can only be created & redeemed with the centralised authority. The central authority can monitor and unwind any transaction at any time. Bitcoin is a peer-to-peer permission-less network with no central authority where transactions once executed are for all sense & purposes final.
Unlike Bitcoin, stable coins backed by FIAT like Libra, would experience the same inflationary value destruction over time as their pure FIAT counterparts. Bitcoin who’s total supply is capped at 21mn coins and therefore a deflationary asset over time is programmed to avoid this value destruction.
What we knew before todays announcement?
Facebook had dozens of partners signed up to the “Libra Association” & looking to back the Libra Blockchain.
They were targeting a working launch in early 2020.
It’s coin would be backed by a reserve of “real assets” aimed at targeting a crypto currency with “stability, low inflation, global acceptance & fungibility”.
The blockchain would be open sourced under an Apache 2.0 License with the test net going live June 18th.
What’s new post the announcement? Not much.
- The mission is “A simple global currency and financial infrastructure that empowers billions of people”.
- Libra Blockchain will be open to everyone: any consumer, developer, or business can use the Libra network, build products on top of it, and add value through their services.
- The project is run by a regulated subsidiary called “Calibra” to maintain separation between social & financial data but Facebook will maintain a leadership role through 2019.
- Libra (The currency) of the Libra Blockchain (A fully permissioned centralised blockchain at least initially — Goal to change to permission- less after 5Yrs+ ha!) is backed by a reserve of real assets called the “Libra Reserve” (Bank deposits & government securities).
- The goal of the Libra Reserve is to ensure its value will remain relatively stable over time (Mine; Difficult to achieve as it’s looking for currencies & government securities from “reputable central banks” in a world where central banks are quickly losing credibility by the day).
- Interest on reserve assets will not be paid back to users which is similar to other stablecoin models. Any yield will be used to cover ecosystem costs amongst other things.
- Libra will be supported by a competitive network of exchanges buying & selling Libra. (Mine;This is probably the most interesting development. Does this mean that customers of existing crypto currency exchanges will be able to buy & sell Libra against other crypto & FIAT pairs? If thats the case then it’s fair to assume some Libra users, new to crypto currency will find their way to Bitcoin & other digital assets. However until we know which exchanges & how this will look its difficult to make predictions).
- Is it actually a blockchain? Maybe not according to the FT “Unlike previous blockchains, which view the blockchain as a collection of blocks of transactions, the Libra Blockchain is a single data structure that records the history of transactions and states over time”.
- The Libra Blockchain will use LibraBFT consensus protocol allowing functionality to proceed even if 1/3 of network fails or is compromised. It is governed by the independent Libra Association (Expected to consist of 100~ key global partners initially).
- Smart Contract functionality can be programmed by a new intuitive language called “Move”. I wouldn’t get too excited yet.
- The FT noted “It isn’t at all clear why you would possibly need a blockchain, or anything calling itself a cryptocurrency for this purpose (China’s social media-turned-payments giant WeChat Pay — who Facebook is surely trying to compete with on a global level — doesn’t use the blockchain).
- Libra Blockchain is pseudonymous allowing users to have multiple addresses that are not linked to their real world identity (Mine; Nothing ground breaking here as centralised authority will have complete oversight for regulatory reasons amongst others).
Whilst today’s announcement may have just confirmed many of the leaks in the past few days, we remain excited about it’s development & the direction it takes over the coming months & years. Having Facebook join the crypto movement should be a day for crypto users to celebrate for now.