MarketForces Africa team of experts’ review of the Libra document shows that the digital currency poses risk to global banking. The implementation would change how people, companies, government and other establishment conducts transactions.
It was agreed at the roundtable that Libra is coming, if it is not stopped but it is unlikely that there would not be power gang ups against the digital currency as industry`s regulation is weak to curtail large scale influence it may have. It is not a new thing in general but the unfair advantages that come with it through Facebook`s global footprint. Other crypto or digital currencies would fight back, as they jostle for space and relevance.
Blockchain experts at brainstorming session said that banks may need to take insurance cover for the risk Libra poses for the sector. Just like Facebook took the world by the storm, Libra has greater chance to succeed as its sets to go live in the first half 2020.
Financial services operators, the central banks around the world are already jittery to see the rise of the red sun. There have been yellow sun in Africa, but this would be very unusual because of; not just Facebook brand but as well as it scale.
Who owns Libra?
Contrary to popular views, Libra is a holy gang up of technologies giants. The idea is bigger than Facebook itself but the tech giants would play a key role. Using Facebook to project this has strategic intention. Good brands sell fast even most deadly ideas. Though Facebook would play key role in the implementation, there are baskets of interests that are pushing Libra to the global front.
According to the whitepaper released, Libra is a product of an association that will play different roles towards the realisation of Libra`s objectives. The association’s membership is formed from the network of validator nodes that operate the Libra Blockchain. Members of the Libra Association will consist of geographically distributed and diverse businesses, nonprofit and multilateral organizations, and academic institutions.
It was revealed that the initial group of organizations that will work together on finalizing the association’s charter and become “Founding Members” upon its completion are, by industry -Payments: Mastercard, PayPal, PayU (Naspers’ fintech arm), Stripe, Visa. Also included is Technology and marketplaces like Booking Holdings, eBay, Facebook/Calibra, Farfetch, Lyft, Mercado Pago, Spotify AB, Uber Technologies, Inc.
Telecommunications giants include Iliad, Vodafone Group while the Blockchain is backed by Anchorage, Bison Trails, Coinbase, Inc., Xapo Holdings Limited
Also, Venture Capitalsits which include Andreessen Horowitz, Breakthrough Initiatives, Ribbit Capital, Thrive Capital, Union Square Ventures are playing key roles just as Nonprofit and multilateral organizations, and academic institutions that include Creative Destruction Lab, Kiva, Mercy Corps, Women’s World Banking are involved.
“We hope to have approximately 100 members of the Libra Association by the target launch in the first half of 2020”, the report noted.
The journey into 2020 begins yesterday
Mathematically, in the next 12-months, something great would happen, all things being equal. Libra is expected to be officially launch. That the association target date. But not that it will be easy. There is privacy issues yet to be settled. The tone at the United States Congress, divergent but strong to kill Libra.
With their investigations, and their position as result of Facebook breaches, the U.S Congress don’t really trust Mark Zuckerberg platform as it has become obvious that they are scared about the future. The narrative, albeit familiar, is “can we trust the future unto Facebook`s Libra hands”?
It is all about staying ahead of disruption because it can be massive and brutal at the same time. It is better if it failed to scale through than to catch up with businesses like banks, and individuals in tight webs.
Classical economic school of thought (Market works best when left alone with minimal government intervention)cannot be more right about scale, size and advantages that comes with free market rationality in the new world economic order, given the ongoing disruption in the ecosystem. But reactions show that half of the world population may not be really ready to experience the move.
There are many advantages to using blockchain and cryptocurrencies. Facebook`s Libra understands this first hand and willing to explore it to the benefit of the people. Libra project is anchored on these unique albeit cost effective and efficient processes advantages.
For Facebook, Libra would leverage on its existing platform with about 3 billion. This is more than 40% of the world’s population. The leverage, combine with associated economic of scale would means a low entry cost for Facebook, though the company had initially shows it is bearish on Blockchain or crypto currency.
Disruption is not coming. It has berthed with just an idea conceived by the Technologies giants across the world. Like Facebook, the future of Libra seems realisable with the plan on the table. The mission is simple. To enable a simple global currency and financial infrastructure that empowers billions of people, Facebook said.
According to white paper released by Facebook, Libra plans is anchored on the need for a new decentralized blockchain, a low-volatility cryptocurrency, and a smart contract platform that together aim to create a new opportunity for responsible financial services innovation.
There is always a problem to be solved.
Facebook`s Libra thinks that the advent of the internet and mobile broadband has empowered billions of people globally to have access to the world’s knowledge and information, high-fidelity communications, and a wide range of lower-cost, more convenient services.
These services are now accessible using a $40 smartphone from almost anywhere in the world. This connectivity has driven economic empowerment by enabling more people to access the financial ecosystem.
Libra document explains that working together, technology companies and financial institutions have also found solutions to help increase economic empowerment around the world.
It however noted that despite this progress, large swaths of the world’s population are still left behind-1.7 billion adults globally remain outside of the financial system with no access to a traditional bank, even though one billion have a mobile phone and nearly half a billion have internet access.
For too many, parts of the financial system look like telecommunication networks pre-internet. Twenty years ago, the average price to send a text message in Europe was 16 cents per message. Now everyone with a smartphone can communicate across the world for free with a basic data plan.
It stated that back then, telecommunications prices were high but uniform, whereas today, access to financial services is limited or restricted for those who need it most — those impacted by cost, reliability, and the ability to seamlessly send money.
“All over the world, people with less money pay more for financial services. Hard-earned income is eroded by fees, from remittances and wire costs to overdraft and ATM charges. Payday loans can charge annualized interest rates of 400 percent or more, and finance charges can be as high as $30 just to borrow $100”; Libra whitepaper stated
When people are asked why they remain on the fringe of the existing financial system, those who remain “unbanked” point to not having sufficient funds, high and unpredictable fees, banks being too far away, and lacking the necessary documentation.
Blockchains and cryptocurrencies have a number of unique properties that can potentially address some of the problems of accessibility and trustworthiness. These include distributed governance, which ensures that no single entity controls the network; open access, which allows anybody with an internet connection to participate; and security through cryptography, which protects the integrity of funds.
Existing blockchain and capacity to staying ahead
But the existing blockchain systems have yet to reach mainstream adoption. Mass-market usage of existing blockchains and cryptocurrencies has been hindered by their volatility and lack of scalability, which have, so far, made them poor stores of value and mediums of exchange.
Some projects have also aimed to disrupt the existing system and bypass regulation as opposed to innovating on compliance and regulatory fronts to improve the effectiveness of anti-money laundering.
Facebook’s Libra whitepaper noted that; “We believe that collaborating and innovating with the financial sector, including regulators and experts across a variety of industries, is the only way to ensure that a sustainable, secure, and trusted framework underpins this new system. And this approach can deliver a giant leap forward toward a lower-cost, more accessible, and more connected global financial system”.
Libra is liberal!
Not many people that the introducion of Libra into the global economy would affect greatly know what is coming. As such, it is my pleasure to introduce this digital currency to you.
According to the Whitepaper released on Libra, the Libra`s association is of the view that the world truly needs a reliable digital currency and infrastructure that together can deliver on the promise of “the internet of money.”
It desires that people should be able to secure financial assets on their mobile devices, simple and intuitively. Moving money around globally should be as easy and cost-effective as – and even more safe and secure than – sending a text message or sharing a photo, no matter where you live, what you do, or how much you earn.
It rekons that new product innovation and additional entrants to the ecosystem will enable the lowering of barriers to access and cost of capital for everyone and facilitate frictionless payments for more people.
“Now is the time to create a new kind of digital currency built on the foundation of blockchain technology. The mission for Libra is a simple global currency and financial infrastructure that empowers billions of people”, Facebook`s whitepaper revealed.
To get deeper understanding of the trend, the whitepaper revealed that Libra is made up of three parts that will work together to create a more inclusive financial system: It is built on a secure, scalable, and reliable blockchain; It is backed by a reserve of assets designed to give it intrinsic value; and it is governed by the independent Libra Association tasked with evolving the ecosystem.
The Libra currency is built on the “Libra Blockchain.” Because it is intended to address a global audience, the software that implements the Libra Blockchain is open source — designed so that anyone can build on it, and billions of people can depend on it for their financial needs.
“Imagine an open, interoperable ecosystem of financial services that developers and organizations will build to help people and businesses hold and transfer Libra for everyday use.
“With the proliferation of smartphones and wireless data, increasingly more people will be online and able to access Libra through these new services. To enable the Libra ecosystem to achieve this vision over time, the blockchain has been built from the ground up to prioritize scalability, security, efficiency in storage and throughput, and future adaptability”, Facebook noted.
The report stated that the unit of currency is called “Libra.” Libra will need to be accepted in many places and easy to access for those who want to use it. In other words, people need to have confidence that they can use Libra and that its value will remain relatively stable over time.
“Unlike the majority of cryptocurrencies, Libra is fully backed by a reserve of real assets. A basket of bank deposits and short-term government securities will be held in the Libra Reserve for every Libra that is created, building trust in its intrinsic value. The Libra Reserve will be administered with the objective of preserving the value of Libra over time.
It was revealed that the Libra Association is an independent, not-for-profit membership organization headquartered in Geneva, Switzerland. The association’s purpose is to coordinate and provide a framework for governance for the network and reserve and lead social impact grant-making in support of financial inclusion.
It was stated that this white paper is a reflection of its mission, vision, and purview.
It was also gathered that Facebook teams played a key role in the creation of the Libra Association and the Libra Blockchain, working with the other Founding Members. While final decision-making authority rests with the association, Facebook is expected to maintain a leadership role through 2019.
“Facebook created Calibra, a regulated subsidiary, to ensure separation between social and financial data and to build and operate services on its behalf on top of the Libra network. Once the Libra network launches, Facebook, and its affiliates, will have the same commitments, privileges, and financial obligations as any other Founding Member.
“As one member among many, Facebook’s role in governance of the association will be equal to that of its peers. Blockchains are described as either permissioned or permissionless in relation to the ability to participate as a validator node. In a “permissioned blockchain,” access is granted to run a validator node. In a “permissionless blockchain,” anyone who meets the technical requirements can run a validator node. In that sense, Libra will start as a permissioned blockchain.
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“To ensure that Libra is truly open and always operates in the best interest of its users, our ambition is for the Libra network to become permissionless. The challenge is that as of today we do not believe that there is a proven solution that can deliver the scale, stability, and security needed to support billions of people and transactions across the globe through a permissionless network”.
One of the association’s directives will be to work with the community to research and implement this transition, which will begin within five years of the public launch of the Libra Blockchain and ecosystem.
“Essential to the spirit of Libra, in both its permissioned and permissionless state, the Libra Blockchain willbe 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.
“Open access ensures low barriers to entry and innovation and encourages healthy competition that benefits consumers. This is foundational to the goal of building more inclusive financial options for the world”, the whitepaper revealed.