Fear, fantasy and the future: How would Facebook’s digital currency works?

Fear, fantasy and the future: How would Facebook’s digital currency works?

The noise and dissatisfaction comments around Libra, a digital currency announced by Facebook is strong and deafening.

With this trend, it is unlikely that the outliers won’t put up a strong fight –selfishly or otherwise. The question is: where is Africa in all these? The answer is simple. The continent is on the consumption side.

It is the target market for all innovation around the world, with Africa putting nothing forth other than free gifts of nature. That is where African countries play strong.

My instinct tells me that the world is worried about us indirectly. We would be subject to economic ridicule if Libra comes and fail.

But then, I also understand that demand and supply would allocate resources and determine prices.

While Facebook stands on the supply side and other economic agents on the demand side, let the regulators find a resting place to see how invincible hands would make adjustments.

A blockchain expert said, “Do you know those that are afraid about what is to become of Libra? It is the rich class.”They are afraid of what is to become of their economic status if Libra becomes successful.

“However, there is a possibility in the true sense of the digital currency functionality that there may be issues. That said, I have an

issue with Facebook”.Then, one needs to ask if there is no issues in the existing global economy currencies management.The Brettonwood agreement of 1944 locked all currencies to the dollar even when the United States is, as of today highly indebted compared with China, and other bellwether economies, the agreement has not been fully subjected to global review.

What this means is that nothing has changed. The world still maintains the status quo. Innovation can be disruptive and those below the ladder have nothing to be afraid of.

All the billionaires in the world may not feel comfortable, though. It is about the status quo! There is always a winning side.

The regulators are worried, unfortunately. But what happened to raising the regulation bars instead of demonising Libra? Control, that’s what the global economy needs. Suffice to say, Libra could be a move to Armageddon.

What is in the pipeline, really?

There are a few things that people and companies need to know about the next phase of disruption that would sweep the global economy and how people conduct transactions. It would not be a child`s play if Libra comes alive and properly implemented.

Facebook’s recent announcement about Libra, a digital currency, has been jeered, attacked, loved and criticise but one thing remains, the project has taken off; and like a meteor, it would land in the economic space in the first half of 2020 – the target date.

Unlike others, Libra is going to be backed by reserves of real assets. That is the Libra Reserve and supported by a competitive network of exchanges buying and selling Libra.

The drive

“We believe that the world needs a global, digitally native currency that brings together the attributes of the world’s best currencies: stability, low inflation, wide global acceptance, and fungibility. The Libra currency is designed to help with these global needs, aiming to expand how money works for more people around the world”, the promoter stated.

Libra is designed to be a stable digital cryptocurrency that will be fully backed by a reserve of real assets – the Libra Reserve and supported by a competitive network of exchanges buying and selling Libra.That means anyone with Libra has a high degree of assurance they can convert their digital currency into local fiat currency based on an exchange rate, just like exchanging one currency for another when travelling.

This approach is similar to how other currencies were introduced in the past: to help instil trust in a new currency and gain widespread adoption during its infancy, it was guaranteed that a country’s notes could be traded in for real assets, such as gold.

Instead of backing Libra with gold, though, it will be backed by a collection of low-volatility assets, such as bank deposits and short-term government securities in currencies from stable and reputable central banks.It is important to highlight that this means one Libra will not always be able to convert into the same amount of a given local currency (i.e., Libra is not a “peg” to a single currency).

Rather, as the value of the underlying assets moves, the value of one Libra in any local currency may fluctuate. However, the reserve assets are being chosen to minimize volatility, so holders of Libra can trust the currency’s ability to preserve value over time.

The assets in the Libra Reserve will be held by a geographically distributed network of custodians with investment-grade credit ratings to provide both security and decentralization of the assets.

The assets behind Libra are the major difference between it and many existing cryptocurrencies that lack such intrinsic value and hence have prices that fluctuate significantly based on expectations.

Libra is indeed a cryptocurrency, though, and by virtue of that, it inherits several attractive properties of these new digital currencies: the ability to send money quickly, the security of cryptography, and the freedom to easily transmit funds across borders.

Just as people can use their phones to message friends anywhere in the world today, with Libra, the same can be done with money — instantly, securely, and at a low cost.

In my discussions with stakeholders, I got to understand that the impact is going to be massive and drastic, and that is why people

and companies need to take cover, now. Some schools of thoughts don’t subscribe to change in the status quo. The good news is; that change is never permanent, it is incremental. By that, change doesn’t assume stagnancy, it always changes.

Libra in your hand

Understanding new developments around the global economy and financial technologies are key to living in the future. You cannot wave it off. There have been issues. Facebook, who could have thought that the tech giant secretly loves Blockchain and Cryptocurrency. Hey, that is not personal. It is commercial.

So, don’t get worked up if Facebook has refused you an opportunity to advertise blockchain/crypto on its platforms.

That’s what size does to the market!

If you see Libra as an issue, the right thing is to understand it and take your informed position.

After all, you cannot solve a problem you dont understand. The idea is succinct, intention is cleared.

There is nothing that is new from the concept apart from the fact that Facebook is leading the project, now.

Then, everyone is jittery about possible impacts in the global economy.

According to the whitepaper, the goal of the Libra Blockchain is to serve as a solid foundation for financial services, including a new global currency, which could meet the daily financial needs of billions of people.

This would be achieved through the process of evaluating existing options, , Libra association  decided to build a new blockchain based on these three requirements:

Ability to scale to billions of accounts, which requires high transaction throughput, low latency, and an efficient, high-capacity storage system.

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Highly secure, to ensure safety of funds and financial data. Also, flexible, so it can power the Libra ecosystem’s governance as well as future innovation in financial services.

The promoters said that the Libra Blockchain is designed from the ground up to holistically address these requirements and build on the learning from existing projects and research — a combination of innovative approaches and well-understood techniques.

The highlights of the three decisions regarding the Libra Blockchain:

1. Designing and using the Move programming language.

2. Using a Byzantine Fault Tolerant (BFT) consensus approach.

3. Adopting and iterating on widely adopted blockchain data structures.

In its explanation of the terms, it said “Move” is a new programming language for implementing custom transaction logic and “smart contracts”on the Libra Blockchain.Because of Libra’s goal to one day serve billions of people, Move is designed with safety and security as the highest priorities.

It stated that Move takes insights from security incidents that have happened with smart contracts to date and create a language that makes it inherently easier to write code that fulfils the author’s intent, thereby lessening the risk of unintended bugs or security incidents.

Specifically, Move is designed to prevent assets from being cloned.

It enables “resource types” that constrain digital assets to the same properties as physical assets: a resource with a single owner

can only be spent once, and the creation of new resources is restricted. It revealed that the Move language also facilitates automatic proofs that transactions satisfy certain properties, such as payment transactions only changing the account balances of the payer and receiver.By prioritizing these features, Move will help keep the Libra Blockchain secure.

“By making the development of critical transaction code easier, Move enables the secure implementation of the Libra ecosystem’s governance policies, such as the management of the Libra currency and the network of validator nodes.

“Move will accelerate the evolution of the Libra Blockchain protocol and any financial innovations built on top of it. We anticipate that the ability for developers to create contracts will be opened up over time in order to support the evolution and validation of Move”.

It explained that to facilitate agreement among all validator nodes on the transactions to be executed and the order in which they are executed, the Libra Blockchain adopted the BFT approach by using the LibraBFT consensus protocol.

It is said that this approach builds trust in the network because BFT consensus protocols are designed to function correctly even if some validator nodes —up to one-third of the network-are compromise or fail. This class of consensus protocols also enables high transaction throughput, low latency, and a more energy-efficient approach to consensus than “proof of work” used in some other blockchains.

MarketForces thinks you don’t have to be worried because, in order to store transactions securely, data on the Libra Blockchain is protected by Merkle trees, a data structure used by other blockchains that enable the detection of any changes to existing data.

In it comparison,it said 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.

This implementation simplifies the work of applications accessing the blockchain, allowing them to read any data from any point in time and verify the integrity of that data using a unified framework.

The Libra Blockchain is pseudonymous and allows users to hold one or more addresses that are not linked to their real-world identity.This approach is familiar to many users, developers, and regulators.

The Libra Association will oversee the evolution of the Libra Blockchain protocol and network, and it will continue to evaluate new techniques that enhance privacy in the blockchain while considering concerns of practicality, scalability, and regulatory impact.

For more details, read the technical paper on the Libra Blockchain.

Detailed information is also available on the Move programming language and the LibraBFT consensus protocol. We’ve open-sourced

an early preview of the Libra testnet, with accompanying documentation. The testnet is still under development, and APIs are subject to change.

“Our commitment is to work in the open with the community and hope you will read, build, and provide feedback”.

The Libra Association

To make the mission of Libra a reality — a simple global currency and financial infrastructure that empowers billions of people — the Libra Blockchain and Libra Reserve need a governing entity that is comprised of diverse and independent members.

This governing entity is the Libra Association, an independent, not-for-profit membership organization, headquartered in Geneva, Switzerland.

Switzerland has a history of global neutrality and openness to blockchain technology, and the association strives to be a neutral, international institution, hence the choice to be registered there.

The association is designed to facilitate the operation of the Libra Blockchain; to coordinate the agreement among its stakeholders — the network’s validator nodes — in their pursuit to promote, develop, and expand the network, and to manage the reserve.

The association is governed by the Libra Association Council, which is comprised of one representative per validator node.

Together, they make decisions on the governance of the network and reserve.

Initially, this group consists of the Founding Members: businesses, nonprofit and multilateral organizations, and academic institutions from around the world.

All decisions are brought to the council, and major policy or technical decisions require the consent of two-thirds of the votes, the same supermajority of the network required in the BFT consensus protocol.

Through the association, the validator nodes align on the network’s technical roadmap and development goals.

In that sense, it is similar to other not-for-profit entities, often in the form of foundations, which govern open-source projects.

As Libra relies on a growing distributed community of open-source contributors to further itself, the association is a necessary vehicle to establish guidance as to which protocols or specifications to develop and to adopt.

The Libra Association also serves as the entity through which the Libra Reserve is managed, and hence the stability and growth of the Libra economy are achieved.

The association is the only party able to create (mint) and destroy (burn) Libra. Coins are only minted when authorized resellers have purchased those coins from the association with fiat assets to fully back the new coins.

Coins are only burned when the authorized resellers sell Libra coin to the association in exchange for the underlying assets.

Since authorized resellers will always be able to sell Libra coins to the reserve at a price equal to the value of the basket, the Libra Reserve acts as a “buyer of last resort.”

These activities of the association are governed and constrained by a Reserve Management Policy that can only be changed by a super majority of the association members.

In these early years of the network, there are additional roles that need to be performed on behalf of the association: the recruitment of Founding Members to serve as validator nodes; the fundraising to jumpstart the ecosystem; the design and implementation of incentive programs to propel the adoption of Libra, including the distribution of such incentives to Founding Members; and the establishment of the association’s social impact grant-making program.

An additional goal of the association is to develop and promote an open identity standard. We believe that a decentralized and portable digital identity is a prerequisite to financial inclusion and competition. An important objective of the Libra Association is to move toward increasing decentralization over time.

This decentralization ensures that there are low barriers to entry for both building on and using the network and improves the Libra ecosystem’s resilience over the long term.As discussed above, the association will develop a path toward permissionless governance and consensus on the Libra networkThe association’s objective will be to start this transition within five years, and in so doing will gradually reduce the reliance on the Founding Members.In the same spirit, the association aspires to minimize the reliance on itself as the administrator of the Libra Reserve.

So, this is it

The goal for Libra is a stable currency built on a secure and stable open-source blockchain, backed by a reserve of real assets, and governed by an independent association.Our hope is to create more access to better, cheaper, and open financial services — no matter who you are,

where you live, what you do, or how much you have.

“We recognize that the road to delivering this will be long, arduous, and won’t be achieved in isolation — it will take coming together and forming a real movement around this pursuit.”We hope you’ll join us and help turn this dream into a reality for billions of people around the world”, the whitepaper stated.

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