Social networking giant Facebook has announced a new digital currency called Libra. This has the Tech and finance worlds buzzing. Facebook says this digital currency aims to make it as easy to send money around the world, as it is to send a photo. The currency is set to be managed by a non-profit organization in Switzerland.
Facebook says Libra is intended to provide financial services to the billions of people around the world who don’t have access to traditional banking. The goal is to reserve real money to make the whole currency more stable unlike bitcoin, which is obviously very volatile. So if you put in in dollar or some other currency into the wallet you’ll get a dollar or the equivalent out.
Facebook is partnering with 27 other organizations companies non-profits to start Libra as an open source currency.
The companies reached are MasterCard and Visa which could help merchants accept the currency. To Uber and lyft, to nonprofits that focus on financial inclusion for the unbanked. Libra can be kept in a digital wallet available in Messenger or WhatsApp, as well as a standalone app.
It’ll run on Facebooks own version blockchain technology, a type of encrypted network used by cryptocurrencies like bitcoin. Unlike volatile bitcoin, the value of Libra will be backed by a financial reserve for it.
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Facebook has set up a subsidiary called Calibra to handle the transactions in a bid to reassure users concerned about privacy. Facebook says financial information will be handled separately from social network data.
According to David Marcus, former president of PayPal “we heard people loud and clear they don’t want their financial data commingled with their social data and they certainly don’t want their financial data of being used for ad targeting and all these things and so that’s what we’re doing weighted basically Facebook Inc. will not have access to financial data you’ll have inside of calibra”
Facebook won’t have full control of Libra. Facebook is just a member of the Calibra association made up of 28 founding partners which VISA, PayPal and Spotify among others are. Libra is slated to officially launch in early 2020.
What is the Difference Between Libra and Bitcoin?
Facebook is now holding your dollars and you have to trust Facebook to hold on to those dollars and keep track of a ledger. let’s say you bought $20 of the Libra tokens cost of $10 for a nice digital chat on Facebook and all the sudden you’ve got another $10 left in Libra pockets, again you have to trust Facebook that they are going to keep that ledger and be honest about that. That’s a big difference from what a cryptocurrency is. it’s about trust.
So when you talk about the difference between this and bitcoin, bitcoin has less trust involved. You don’t need to believe that anybody is going to check your ledger. You can do-it-yourself and you hold on to yourself.
What Libra is doing is creating a digital version of the US dollar, yen, euro. It’s like a stable coin, but you still have all the characteristics of a fiat currency. Bitcoin is digital gold and in many opinions, it is probably a lot better than gold, because there is no trust of a 3rd party involved.
In the end, Facebook still has many regulatory procedures to go through before we see this. 2020 will really be hit with tech as many have stated it as their delivery timeline.