Libra (cryptocurrency)

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Libra
Libra logo.svg
Denominations
Symbol
Development
White paperLibra whitepaper
Initial release2020 (projected)
Code repositoryhttps://github.com/libra/libra
Development statusAnnounced
Written inRust
Developer(s)The Libra Association, Facebook
Source modelOpen source
LicenseApache License[1]
Websitelibra.org

Libra is a permissioned blockchain digital currency proposed by the American social media company Facebook. The project, currency and transactions are to be managed and cryptographically entrusted to the Libra Association, a membership organization founded by Facebook's subsidiary Calibra and 27 others across payment, technology, telecommunication, online marketplace, venture capital and nonprofits.

As of July 2019, the currency and network do not yet exist, and only rudimentary experimental code has been released.[2] The launch is planned to be in 2020.[3]

History[edit]

Facebook vice president David A. Marcus moved from Facebook Messenger to a new blockchain division in May 2018.[4] First reports of Facebook planning a cryptocurrency, with Marcus in charge, emerged a few days later.[5] By February 2019, there were more than 50 engineers working on the project.[6]

Confirmation that Facebook intended a cryptocurrency first emerged in May 2019.[7] At this time it was known as "GlobalCoin" or "Facebook Coin".[8]

Libra was formally announced on June 18, 2019.[9][10]

A first version is projected to be released in 2020.[11]

On July 15, 2019, Facebook announced the currency will not launch until all regulatory concerns have been met and the "appropriate approvals".[12]

Currency[edit]

The plan is for the Libra token to be backed by financial assets such as a basket of currencies,[13] and US Treasury securities in an attempt to avoid volatility.[14] Facebook has announced that each of the partners will inject an initial US$10 million, so Libra has full asset backing on the day it opens.[15]

Libra service partners, within the Libra Association, will create new Libra currency units based on demand.[15] Libra currency units will be retired as they are redeemed for conventional currency.

Initial reconciliation of transactions will be performed at each service partner, and the blockchain's distributed ledger will be used for reconciliation between service partners.[16] The intent is to help prevent everyone but members of the Libra Association from trying to extract and analyse data from the distributed ledger.

In contrast to cryptocurrencies such as bitcoin which use permissionless blockchains, Libra is not decentralized, relying on trust in the Libra Association as "a de facto central bank".[17]

Libra Association[edit]

Facebook had previously established the Libra Association to oversee the currency, founded by 28 members in Geneva, Switzerland:[18]

The association hopes to grow to 100 members with an equal vote, while Facebook expects to "maintain a leadership role through 2019".[20]

Reception[edit]

The project has faced criticism[21][22] and opposition from central banks.[23] The use of a cryptocurrency and blockchain for the implementation has been questioned.[19]

US regulatory response[edit]

US regulators and politicians expressed concerns close on the mid-2019 announcement. Maxine Waters, Chairperson of the United States House Committee on Financial Services Committee asked Facebook to halt the development and launch of Libra, citing a list of recent scandals and that "the cryptocurrency market currently lacks a clear regulatory framework".[24] The U.S. House Committee on Financial Services Democrats sent a letter to Facebook asking the company to stop development of Libra, citing concerns of privacy, national security, trading, and monetary policy.[25]

Jerome Powell, chair of the Federal Reserve, testified before Congress on 10 July that the Fed had "serious concerns" as to how Libra would deal with "money laundering, consumer protection and financial stability."[26]

President Donald Trump tweeted on 12 July that "If Facebook and other companies want to become a bank, they must seek a new Banking Charter and become subject to all Banking Regulations."[27]

International regulatory response[edit]

French Finance Minister, Bruno Le Maire, told French radio station Europe 1 that Libra could not be allowed to become a sovereign currency. He warned French Parliament of his concerns about Libra and privacy, money laundering and terrorism finance. He called on the central bank governors of the Group of Seven to prepare a report on Facebook's plans.[23]

Bank of England governor Mark Carney said there was a need to keep an "open mind" about new technology for money transfers, but "anything that works in this world will become instantly systemic and will have to be subject to the highest standards of regulation."[23]

German MEP Markus Ferber warned that Facebook could become a shadow bank.[23]

The government of Japan has begun the process of investigating Libra and doing an analysis on the effect on Japan’s monetary policy and financial regulation. This will be done before the Group of Seven meeting in France between 24–26 August 2019.[28]

The Swiss Federal Data Protection and Information Commissioner, that David Marcus told the US Senate would oversee privacy for Libra, said that it had not heard from Facebook at all.[29]

Privacy concerns[edit]

Industry observers have speculated whether Libra will provide meaningful privacy to its users.[30] Facebook's plan is to let its subsidiary Calibra manage Libra for Facebook users, and Facebook executives have stated that Calibra will not share account holder's purchase information with Facebook without authorization.[31] However, the system is also planned to include a friend-finder search function, and the use of this function will constitute permission for Calibra to combine the account holder's transaction history with their Facebook account.[16]

Implementation[edit]

Blockchain consensus[edit]

Libra will not rely on cryptocurrency mining.[19] Only members of the Libra Association will be able to process transactions via the permissioned blockchain.

Libra hopes to begin transitioning to a permissionless proof-of-stake system within five years;[10] although their own materials admit that no solution exists "that can deliver the scale, stability, and security needed to support billions of people and transactions across the globe through a permissionless network."[32][2]

Software[edit]

Libra's source code is written in Rust and published as open source under the Apache License with the launch on 18 June 2019.

Elaine Ou, an opinion writer at Bloomberg News, tried compiling and running the publicly released code for Libra. As supplied, the software did little more than allow fake coins to be put in a wallet; almost all of the white paper functionality is not implemented, including "major architectural features that have yet to be invented." Ou was surprised that Facebook "would release software in such a state.".[2]

Digital wallet[edit]

Facebook plans to release a digital wallet called Calibra in 2020, made available in Messenger, WhatsApp, as well as in a standalone app.[3]

Move[edit]

Move is the Libra blockchain's proposed smart contract and custom transactions language. It is planned to be a statically-typed programming language, compiled to bytecode.

The project gives this example of a Move peer-to-peer transaction script in the Move white paper:[33]

public main(payee: address, amount: u64) {
  let coin: 0x0.Currency.Coin = 0x0.Currency.withdraw_from_sender(copy(amount));
  0x0.Currency.deposit(copy(payee), move(coin));
}

See also[edit]

References[edit]

  1. ^ "Libra Software License". Github.
  2. ^ a b c Ou, Elaine (20 June 2019). "I Tried Using Facebook's Libra Blockchain. It Didn't Work". Bloomberg News.
  3. ^ a b https://www.engadget.com/2019/06/18/facebook-calibra-libra-cryptocurrency-digital-wallet/?guccounter=1
  4. ^ Liao, Shannon (2018-05-08). "Facebook is creating a mysterious blockchain division". The Verge. Retrieved 2019-06-21.
  5. ^ Gartenberg, Chaim (2018-05-11). "Facebook reportedly plans to launch its own cryptocurrency". The Verge. Retrieved 2019-06-21.
  6. ^ Popper, Nathaniel; Isaac, Mike (2019-02-28). "Facebook and Telegram Are Hoping to Succeed Where Bitcoin Failed". The New York Times. ISSN 0362-4331. Retrieved 2019-06-21.
  7. ^ Andriotis, AnnaMaria; Hoffman, Liz; Rudegeair, Peter; Horwitz, Jeff (2 May 2019). "Facebook Building Cryptocurrency-Based Payments System". The Wall Street Journal. Retrieved 18 June 2019.
  8. ^ Social Media Monopolies and Cryptocurrencies: Facebook's Proposed Coin. Cybersecurity, Privacy, & Networks eJournal. Social Science Research Network. (SSRN). Accessed June 19 2019.
  9. ^ Isaac, Mike; Popper, Nathaniel (18 June 2019). "Facebook Plans Global Financial System Based on Cryptocurrency". The New York Times. Retrieved 18 June 2019.
  10. ^ a b Constine, Josh (18 June 2019). "Facebook announces Libra cryptocurrency: All you need to know". TechCrunch. Retrieved 19 June 2019.
  11. ^ "Facebook Unveils Libra Cryptocurrency, Sets Launch For 2020". NPR.org. Retrieved 2019-06-19.
  12. ^ Bain, Ben; Weinstein, Austin (2019-07-16). "Facebook Says Libra Won't Launch Until Regulators Satisfied". Bloomberg News. Retrieved 2019-07-16.
  13. ^ Caroline Binham, Chris Giles, and David Keohane (June 18, 2019). "Facebook's Libra currency draws instant response from regulators". Financial Times.CS1 maint: Uses authors parameter (link)
  14. ^ Duffy, Clare. "Facebook wants to make cryptocurrency mainstream. Here's how". CNN. CNN. Retrieved 18 June 2019.
  15. ^ a b Jeff John Roberts (2019-06-18). "Facebook Announces Project Libra, Its Wildly Ambitious Plan to Bring Cryptocurrency to the Masses". Fortune magazine. Retrieved 2019-06-19. The Libra blockchain—like other blockchains—will provide a tamper-proof record of transactions on the network. But, unlike Bitcoin and other public blockchains, only authorized bodies—in this case, foundation members—will be allowed to run a node.
  16. ^ a b Robert Hackett (2019-06-18). "Facebook Cryptocurrency: Calibra's Privacy Implications". Fortune magazine. Retrieved 2019-06-19. People who use Calibra will have to trust Facebook's internal firewalls and security measures, of course. And there's a lot of data here that hackers and snoops might like to access. In order to abide by standard "know-your-customer" and "anti-money laundering" laws, Calibra will have to verify people's identities through a thorough process, collecting government-issued IDs and other personal details and documentation. It will be incumbent upon Calibra to keep this data confidential and secure.
  17. ^ Brandom, Russell (June 18, 2019). "Facebook's cryptocurrency has a trust problem". The Verge.
  18. ^ "Libra Association | A not-for-profit organization". libra.org.
  19. ^ a b c Cellan-Jones, Rory (June 18, 2019). "Why Facebook wants to be money's future". BBC News.
  20. ^ Morse, Andrew. "Here's what you need to know about Libra, Facebook's cryptocurrency". CNET.
  21. ^ Kaminska, Izabella (18 June 2019). "Alphaville's Libra cheat sheet". Financial Times. Retrieved 18 June 2019.
  22. ^ Kaminska, Izabella (18 June 2019). "Zuckerberg: The man who would be monetary king". The Financial Times. Retrieved 18 June 2019.
  23. ^ a b c d Marsh, Alastair (18 June 2019). "France Calls for Central Bank Review of Facebook Token". Bloomberg News. Retrieved 18 June 2019.
  24. ^ Wong, Queenie (2019-06-18). "US lawmaker wants Facebook to halt its Libra cryptocurrency project". CNET. Archived from the original on 2019-06-19. Retrieved 2019-06-19.
  25. ^ "Committee Democrats Call on Facebook to Halt Cryptocurrency Plans". U.S. House Committee on Financial Services Democrats. 2019-07-02. Archived from the original on 2019-07-03. Retrieved 2019-07-03.
  26. ^ Popper, Nathaniel; Isaac, Mike; Smialek, Jeanna (2019-07-10). "Fed Chair Raises 'Serious Concerns' About Facebook's Cryptocurrency Project". The New York Times. Retrieved 2019-07-11. |archive-url= is malformed: timestamp (help)
  27. ^ Murphy, Hannah (12 July 2019). "Donald Trump hits out at Facebook's Libra and bitcoin". Financial Times. Retrieved 2019-07-12.
  28. ^ Hill, Paul (2019-07-13). "Japan becomes the latest country to investigate Facebook's Libra". Neowin. Reuters. Retrieved 2019-07-15.
  29. ^ https://www.cnbc.com/2019/07/16/fdpic-says-facebook-has-not-contacted-about-libra-data-protections.html
  30. ^ Jeff John Roberts (2019-06-18). "Facebook's Project Libra: 5 Things to Know About the Cryptocurrency". Fortune magazine. Archived from the original on 2019-06-18. Retrieved 2019-06-19. So, in theory, only Calibra will have a record of your transactions. But many Calibra users may decide to use its integrated Facebook friend-finding feature, and if they do, their data will be combined.
  31. ^ Jacob Passy (2019-06-19). "Why Facebook's Libra coin could become a big pain in your wallet". Market Watch. Retrieved 2019-06-19. Libra will be a “stablecoin,” linked to the value of other currencies, unlike other cryptocurrencies like bitcoin BTC, -4.27% Consumers who use Facebook’s Messenger service, WhatsApp or a stand-alone app will be able to access Libra through a digital wallet managed by new Facebook subsidiary Calibra.
  32. ^ "Libra White Paper | Blockchain, Association, Reserve". Libra.org.
  33. ^ "Move: A Language With Programmable Resources · Libra". developers.libra.org. Retrieved 2019-06-19.

External links[edit]