Libra Coin: A Guide To Investing

Libra is a cryptocurrency that Facebook plans to launch in 2020. Unlike Bitcoin, Libra's value is tied to government-issued currency like the US dollar or the Euro. This means that Libra is not a cryptocurrency that you buy to trade on the market in the hope of making money – it will be more like exchanging a dollar for a Euro. To keep and exchange Libra, users will require a wallet, an app that might be integrated into other apps. Facebook's subsidiary Calibra will be a founding member of the nonprofit Libra Association, which will manage the coin alongside other financial services firms.

Libra is a stablecoin

Stablecoins are cryptocurrencies with values tied to assets such as the US dollar or gold. They are a stable, scalable, and secure means for transactions and aim to mimic traditional, stable currencies. They are not subject to the extreme price volatility that other cryptocurrencies experience.

Libra is pegged to a group of "low-volatility assets, including bank deposits and government securities" in multiple currencies. While there is a Libra Reserve, Libra doesn't seem pegged to its value. Instead, the reserve acts as a kind of lower bound on Libra's value.

Libra's value will be tied to hard assets, including various currencies such as the US dollar and the Euro. This is unlike other cryptocurrencies like Bitcoin, which are not linked to government-issued currency.

Facebook unveiled the Libra project in June 2019, announcing its vision for the global stablecoin. It is important to note that Libra is not decentralised and is controlled by the founding coiners.

It's tied to government-issued currency

Facebook's Libra coin is a cryptocurrency that is tied to the value of other currencies, specifically a "market-value basket of several trusted currencies". This includes government-issued currencies like the US dollar, the Euro, and the Singapore dollar. This is in contrast to other cryptocurrencies like Bitcoin, which are not tied to any government-issued currency.

By tying its value to these currencies, Libra aims to avoid the extreme volatility associated with other cryptocurrencies. This means that, unlike with Bitcoin, you're not buying Libra in the hopes that it will grow 100 times in value. Instead, it's more like exchanging a dollar for a Euro. The value of one Libra coin will be somewhere around one dollar, one Euro, or one pound, and this won't change dramatically unless some major world currencies dramatically change.

Libra's value is also tied to hard assets, including various currencies and short-term government bonds. This further stabilizes the price of the currency.

The Libra Association, which governs the Libra Blockchain, includes reputable partner companies such as Mastercard, Visa, PayPal, Uber, and many others. These companies work together to ensure that payment processes are faster, more accurate, and safer than existing financial technology by using Blockchain Technology.

Facebook's Calibra, a subsidiary that focuses on financial services, will manage the digital wallet that consumers will use to access Libra. Calibra will be a founding member of the nonprofit Libra Association, which will manage the coin alongside other financial services firms.

Facebook's Libra coin has received mixed reactions from both the crypto and mainstream media. While Facebook has the potential to pave the way for global adoption of blockchain technology, given its massive user base, it has also faced regulatory pressures and concerns about privacy and data sharing.

It's not decentralised

Libra, now known as Diem, was a cryptocurrency created by Facebook and launched in 2020. It was designed to be a simple, low-fee, blockchain-based digital currency. However, it is important to note that Libra was not fully decentralised.

Decentralisation is a key feature of blockchain technology, which underpins cryptocurrencies like Bitcoin. In a decentralised blockchain, anyone can run a node and participate in processing and verifying transactions. This structure enhances security and guarantees that governments cannot block transactions by pressuring a central authority.

In contrast, Libra's blockchain was managed by the Libra Association, a group of 28 members, including Facebook, Uber, PayPal, Visa, and Mastercard. Only the servers of these members could run Libra's nodes, meaning that the ledger of transactions was not accessible to everyone. This centralisation of control sets Libra apart from truly decentralised cryptocurrencies like Bitcoin.

Facebook's justification for this centralised model was the need for speed and scale. They argued that a fully decentralised model would not be powerful or fast enough to deliver a global financial infrastructure. However, this decision also meant that Libra was vulnerable to regulatory pushback and concerns about money laundering, consumer privacy, and financial risks.

While Facebook and the Libra Association intended to eventually transition to a fully decentralised blockchain, this plan never came to fruition. In 2022, the Libra blockchain was sold to Silvergate Capital Corporation, and the cryptocurrency was wound down.

It's not for speculation

Libra is a cryptocurrency that Facebook plans to launch in 2020 or later. It is a "stablecoin" with its value tied to government-issued currency like the US dollar or the Euro. This means that Libra's value will remain stable and not fluctuate like other cryptocurrencies such as Bitcoin.

Unlike Bitcoin, you don't buy Libra to trade on the market and speculate on its value increasing. Libra is designed to be a means of exchange, similar to exchanging a dollar for a Euro. It is aimed at people without bank accounts or credit cards, providing them with access to a digital currency.

Facebook's subsidiary, Calibra, will manage Libra through a digital wallet. Calibra will be a founding member of the nonprofit Libra Association, which will oversee the coin alongside other financial services firms. Facebook intends to allow multiple developers to create their own digital wallets for Libra, which could be integrated into existing apps.

While Libra has the potential to revolutionize digital currency and financial transactions, it is not intended for speculation. Its value will be stable and tied to government-issued currencies, so purchasing Libra will be more like exchanging one currency for another rather than investing for potential gains.

It's aimed at the unbanked

Libra is a cryptocurrency created by Facebook and 24 other partners, including Visa, Uber, and Mastercard. It was first announced in June 2019 and was originally planned to launch in 2020. However, due to regulatory challenges and pushback from government entities, the project has faced delays and changes.

One of the key focuses of the Libra project is to target the unbanked population, particularly in emerging markets where traditional financial structures are weaker and national currencies are less stable. Facebook's messaging app, WhatsApp, has billions of users in the developing world, but these users don't generate much income for the company, and many of them don't even have bank accounts. Libra aims to bring these users into an economy that Facebook can tap into.

International remittance fees for sending money are high, often around 6.7% of the amount sent. Mobile money is the cheapest channel, with fees of around 3.3%, but even then, the poorest and least connected people pay the most. Libra's mission, as stated by Facebook, is to enable a simple global currency and financial infrastructure that empowers billions of people.

However, Facebook has faced criticism for a lack of clarity on how exactly Libra will bank the unbanked. While the company has stated its commitment to financial inclusion, it has not provided specific details or a concrete plan to achieve this goal.

The Libra white paper, which outlines the project, does not include information on how it will address the unique challenges of banking the unbanked, particularly in developing countries. Obtaining a bank account can be challenging for people in these regions due to factors such as lack of documentation or not having enough money to maintain a minimum balance. Additionally, three-quarters of the unbanked population don't have internet access, which raises questions about how they will access and use Libra.

Facebook's plan to address these issues remains unclear, and there are concerns that the company is underestimating the complexity of the problem. Banking the unbanked requires a deep understanding of local conditions and a ground-up approach that is tailored to the specific needs of each region.

Despite the challenges, Facebook and its partners in the Libra Association remain committed to the project. They believe that Libra can reduce fees for international money transfers and provide access to financial services for those currently excluded from the traditional banking system. However, it is important to note that Libra has faced significant regulatory hurdles and opposition from central banks and government entities, which have raised concerns about privacy, money laundering, and threats to monetary sovereignty.

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