A white paper released by Facebook earlier this month has thrown the finance and technology world in a tizzy. This was done to unveil Facebook’s proposed cryptocurrency called Libra. Facebook also created a new coin to describe their digital currency – stablecoin. As per the white paper, Facebook has already put together a consortium based in Switzerland for this purpose.
Respected names like Mastercard, PayPal, Visa, Stripe, eBay, Coinbase, and Uber are part of this consortium. Facebook is expected to go live with Libra sometime next year. By then, it plans to increase the number of consortium members to 100.
An Overview of Libra
Libra is a digital currency that will be housed in a Libra blockchain. This is a native and scalable blockchain that has been developed for this purpose. The software used for creating the Libra blockchain is open source. This provides much-needed interoperability to the Libran financial ecosystem.
The good thing is that this digital currency will be backed by a reserve of assets. This will provide underlying value to Libra. It will also help to avoid volatility in the cryptocurrency market. The assets are primarily made of bank deposits and government bonds. The white paper also says that the consortium mentioned above will be operated on a not-for-profit basis.
How Libra Might Impact BTC?
Facebook has a captive user base of 2 billion, which is rapidly increasing every day. This only makes it a potential deep competitor to the huge numbers Bitcoin too enjoys. Facebook has always adhered to the law of the land (on paper at least), and for Libra too, is expected to do the same.
Libra will be governed by the consortium we mentioned above. As per the white paper, these entities would be spread geographically to ensure decentralization. This means that Libra will need to have a broad set of regulations that adheres to the laws of all the countries it operates. BTC, on the other hand, is associated more with countries with authoritarian regimes with falling currencies.
The Good News for Bitcoin
Unlike what was initially feared, Libra might end up doing better than harm to Bitcoin. Bitcoin has garnered widespread popularity in the last few years, but it has also been considered to be slightly on the wrong side of the straight and narrow.
With the launch of Libra, a sense of legitimacy will be associated with cryptocurrency. For the majority of non-believers, that was not the case with Bitcoin so far. Second, after the highs of 2017, as you might have read through Bitcoin news, traders went through a bad patch in 2018. This has put off several people from BTC.
With all the discussions about Libra, some interest in cryptocurrency might be revived. This might have a positive impact on Bitcoin as well. In fact, the emergence of Libra would help in underlining some of the positive uses of Bitcoin.
For example, Bitcoin was created as a shield against irresponsible fiscal behaviour. This could be from governments or central banks. That is why experts are hailing Libra as the catalyst that will cause the revival of bitcoin. Hardly something that can be seen as a threat.
So, far from being a threat, Libra is expected to give a leg up to the Bitcoin saga. We are reminded of a surge in Snapchat’s fortunes back in 2012. Facebook introduced Poke as a likely rival for Snapchat. But all it ended up doing was to make Snapchat more popular.
Libra will indeed be a strong player in the cryptocurrency game. But apart from growing itself, it will also be the reason for a rise in bitcoin’s fortunes. 2020 looks set to be a milestone year in the world of cryptocurrency and the finance and technology world can hardly wait.
Author: Ramendra Kishore
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