Facebook’s Libra coin: the truth behind the hype

Facebook has announced its
new Libra coin to much fanfare and media attention. But it’s fair to say that we
at Alphaville remain sceptical. So we’ve started a series
called ‘breaking the Zuck buck’, in which we examine Mark
Zuckerberg’s new baby and explain what we
think is wrong with it. Myth number one. A ‘blockchain’ is what will
allow Libra to function. Libra is meant to be
supported by what’s been called the Libra
blockchain, which is described as a decentralised
programmable database. But we’d argue that the
Libra blockchain is not, in fact, a blockchain, as some
of the defining characteristics of a blockchain are missing. Whereas in a normal blockchain,
like the one underpinning Bitcoin, blocks of transactions
are hashed down and added to a chain of other blocks,
hence the word blockchain, Libra will use neither
blocks nor a chain. Instead, Libra will be a ‘single
datA structure that records the history of transactions
and states over time’. Facebook says that because
it uses technology that’s associated with blockchains,
such as Merkle trees, Byzantine consensus protocols,
and other complex cryptography, it should be called
the blockchain. But we don’t think
Facebook should get to decide what
a blockchain means. And furthermore, it doesn’t
need a blockchain for what it’s trying to achieve. Myth number two. Libra is decentralised. So Libra says that it’s
a decentralised system, but we think calling
it that is a stretch. Unlike cryptocurrencies
such as Bitcoin, Libra won’t use the
proof of work mechanism that incentivises miners
to keep the network going. Instead Facebook, and the
other 27 founding partners of the Libra association,
will run their own nodes that validate Libra transactions. The partners include Uber,
PayPal, and MasterCard, and each one has paid
$10m for the privilege. Facebook says Libra will
move to a more decentralised permissionless
system in the future, but we don’t have any details on
how and when that will happen. Myth number three. Libra can magically reduce
cross-border payment fees. These fees are high,
not just because of technological issues, but
political and regulatory ones associated with the
complicated process of moving money from one
jurisdiction to another. Although it’s true
that many banks still charge extortionate rates
for cross-border transfers and remittance
payments, we already have many companies working
on making those fees lower, like TransferWise and Revolut. There’s no reason
to believe Libra can lower those costs further. And as long as people still
use central bank money as their primary
means of payment, they’ll still have to somehow
exchange that money into Libra, which will come with a cost. Myth number four. Libra is about
helping the unbanked. Facebook wants you to think that
the reason they’re doing all of this is because they want
to increase financial inclusion and to bring in the 1.7bn around
the world who remain outside the banking system. But it’s not clear how the
unbanked will be able to buy Libra if they have
no bank account, particularly if Labour wants to
keep regulators happy by doing proper checks on its users
to avoid money laundering. Libra is also unlikely
to help people in countries with rapidly
depreciating currencies, as those countries tend
to put in capital controls to prevent a run on their banks. Facebook has never shown
much interest in the unbanked before, and we’re not sure why
it’s suddenly so interested. Myth number five. Libra legitimises Bitcoin. Libra calls itself
a ‘low-volatility cryptocurrency’, but just as the
Libra blockchain isn’t a real blockchain, Libra coin isn’t
a real cryptocurrency either. That’s because it’s issued
by a centralised entity, doesn’t run on a
real blockchain, and rather than being subject
to the whims of crypto markets, is pegged to a basket
of fiat currencies. So it’s much more
akin to something like the Gemini
dollar, the stable coin issued by the Winklevoss
twins’ exchange. And it’s probably
not a coincidence that the twins’
longtime rival Mark Zuckerberg chose another star
sign for the name of his coin. Overall, we think that the
use of the words ‘blockchain’ and ‘cryptocurrency’
is more about PR value than substance, like
many such projects. For Facebook, maybe it’s
also about getting regulators to smile upon them.

58 thoughts on “Facebook’s Libra coin: the truth behind the hype”

  1. It's time for Mark Zuckerberg to present himself to the UK Parliament and answer serious questions and present evidence about the corruption and the part he played in the illegality in the 2016 "Brexit" referendum. Until then the UK government…..whichever we have…should actively block Libra.

  2. So Facebook is now going to bombard my People you may know list with libra folk. I already have Chinese and Kenyan. I ain’t met any of them before

  3. @jeminijoanna you clearly with the rest dont understand how coding actually works and how it will be intergrated. Stick to what you know. Leave tech to tech savy people.

  4. You can try to regulate what you want. Why else do you think people accept bitcoin on the dark web instead of using normal bank accounts. You making yourself look like an idiot.

  5. LIBRA AIRDROP: LIBRA ON DOBI EXCHANGE: IVE GOT 9 LIBRA COINS INSTANTLY https://bitcoin-archive.com/libra-facebook/

  6. Electroneum already banking the unbanked. See this channel for proof of #electroneum's sucess in Uganda

  7. Who said youtubing is easy? Do you want endless cash to do more of the things you love, like, shopping, traveling, being a rock star? Checkout 2KXO.com, dropping this New Years!!! 🔥🔥🔥

  8. But since he is white he is allowed to steal data and discriminate against colored people and women who dont behave ways he sees fit

  9. He literally made money off of selling private information potentially endangering national security and when you think about it enslaving its users.

  10. The scary thing about this is that no business was allowed to run their own currency before been raided by the FEDs, at least it's been like that in USA forever after the gold standard was eliminated.. But now all this rush all of the sudden for a new currency might be just the sign investors needed of the FED totally giving up on the US dollar.
    Paypal for example wanted to create something similar and got crushed, norfed also and got raided, it is absurd. If you are going to create a free alternative comleting currency you need to let every business do it instead of allowing it only for selected players.

  11. The first time I see an accurate and clear explanation of crypto related subjects on mainstream media! Congratulations Financial Times! 🙂

  12. Fascinating video, wow A "Fake Block Chain" leave it to Fake-book; they really love spying on their customers,. I believe they're doing this bc 1. they're behind the curve, 2. they're afraid of XRP, bc once Visa, Master Card Bankers, & CEO's Adopt XRP, Fake-book will be out in the cold without control.

  13. Libra is not Crypto in any way, shape or form. Avoid. If you have spare cash, buy BTC and sit on it. It will hit $220,000 by 2021.

  14. no money in 2020 happy life libra facebook 2020 has changed the face world until2020 🌈🌏🌈🌏

  15. Different from other kinds of coins,…..If you know what Libra Coin really is and if you or we buy and help Libra coin be popular, it means Zukerdorg alone will be the owner of Central Bank in the world = One world. Much Worse than what Roothchild family did. Worse than one government in the world. Do NOT let one man (whoever that is) control the world. That is WRONG. Dangerous. Crazy.

  16. The only thing that makes this trash coin popular is facebook,
    It has the worst characteristics of a coin., there are a lot of similar coins like this. Like ripple etc etc

  17. Why would I use real money to buy tokens which is what Libra really is. Converting my real money to tokens is no different from what I am doing right now except that instead of tokens, I get another type of real money, not tokens. Spending the converted money involves no risk whatsoever. Cryptocurrencies are nothing but a scam by the rich and powerful who have the wherewithals to manipulate prices for their own benefit at the expense of the gullible 90-99%! Libra is no different!

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