The following is a guest post by Thyagarajan Gopalakrishnan. If you’d like to submit a guest post to Money Q&A, be sure to check out our guest posting guidelines.
Cryptocurrencies have all been the rage for a few years now. The way the value of Bitcoin grew in the last few years has made people look up and take notice. Not just Bitcoin, others like Ethereum, XRP etc have also grown in a big way.
Earlier there used to be crypto exchanges where you could buy and sell cryptocurrencies but now you have exchanges where you deal not only with cryptocurrencies, but you can even trade in stocks, as this eToro review proves. True that eToro fees are slightly different, but such exchanges are the way forward where you can do all your trades in one exchange. With so much happening in the crypto world, it was but natural for big players to enter the digital currency scene and we have a new player Facebook.
Facebook has announced that they will be launching a new digital currency in 2020 and they have named it Libra. Libra has long been a Roman measurement of weight and in fact, the Pound sign L is derived from this Roman measurement. It is believed that Facebook’s platform will help the digital currency to grow.
The banking sector feels threatened by this new endeavor as it can really change the way we bank and transact online. There are many question marks about regulation and Facebook is making every effort to address that.
Libra has been created using blockchain technology, the same technology that powers Bitcoin and other such cryptocurrencies. The aim of Facebook is to make Libra reach everyone in the world who does not have a bank account. Facebook has said that the currency will be managed by a collective that would be known as the Libra Association.
The association would be not for profit and would be located in Switzerland. Facebook will also not take up a leadership role once the currency is live, the votes will be shared by founding members like Uber, Paypal, eBay, Spotify, Lyft, Thrive Capital, Andreessen Horowitz, Visa, and Mastercard.
Though Facebook has not mentioned how it is going to be launched, it is generally believed that it will be a two-fold approach where users can buy the currency or Facebook and partners will provide free handouts to start the process. Facebook will be launching a digital wallet which has been christened Calibra.
Calibra will help users to send the currency to anyone with access to a smartphone. It is also expected to be launched in Facebook Messenger and WhatsApp too. Facebook is looking at people using the currency when they make payments to vendors, they daily use such as while buying groceries, etc. Other founding members may also start using the currency for all their transactions in the future, so the future seems bright.
If you are thinking about the safety of the currency, then we can say that there are concerns. Mostly it is privacy concerns and people want to know if their private data would not be compromised. Facebook has stated that they will use the best safety practices that banks and credit card companies utilize.
Facebook has also told that if any user is defrauded then Facebook will refund the money lost. Since the technology is open source the developer community will constantly be looking into it for flaws and vulnerabilities. Facebook plans to charge a small fee per transaction to keep the currency afloat.
The main concern for many is whether the private data of individuals would be shared by Facebook. Facebook says it is not possible as they are different platforms and people can use pseudonyms on crypto networks so that they can hide their real identities.