June 19, 2019
On Tuesday, Facebook revealed plans of launching a new cryptocurrency called Libra.
It will be managed by an association of corporate investors and non-profit members and is expected to launch in the first half of 2020. Here’s everything you need to know about the new cryptocurrency.
Who’s in the Libra Association?
The Libra Association is a independent 28-member non-profit organization rooted in Geneva, Switzerland. It will be tasked with overseeing major decisions about the cryptocurrency. Some major members of the association are: Mastercard Inc, Visa Inc, Spotify Technology SA, PayPal Holdings Inc, eBay Inc, Uber Technologies Inc, and Vodafone Group Plc, Andreessen Horowitz, and Thrive Capital. The minimum investment to join the association is $10 million, though the requirement is excluded for non-profit members like Kiva. The association’s goal is to have 100 members by launch. Each group will have one vote on vital decisions. Facebook will also be a member through Calibra, a new subsidiary that will provide Libra’s digital wallet.
What is the technology behind Libra?
Libra transactions will be operated and recorded through a blockchain (a shared ledger of all transactions upheld by a network of computers). Entities authorized by the association will be the only ones allowed to run the computers, whereas cryptocurrencies such as Bitcoin does not have an entity in charge. The software will be “open source” so that companies not part of the association can build applications on to it. The association aims to remove these restrictions within five years of the launch of Libra.
How will the coin work?
Libra is set to be a cryptocurrency backed by real-world assets that will include bank deposits and short-term government securities. The coin will be held by custodians in a network. This structure was created to build trust between users and the governing entities as well as stabilize the price of the coin. Though Libra prices will not always match with the values of their underlying assets, the project asserts that users should have a “high degree of assurance” of converting coins into traditional currency according to the exchange rate. Libra is set to trade on a network of exchanges that have yet to be specified.
How will the wallet work?
Both merchants and individuals will be able to use Calibra to access, store, send, and receive the cryptocurrency. Calibra will release as its own app for use on smartphones and will also be implemented as a button in Facebook’s Messenger and also in WhatsApp products. Facebook is seeking to make Calibra available across all of its applications, as well as eyeing it as a checkout option for Instagram transactions. Libra executives want customers to purchase the coin through Calibra by a linked bank account or at physical locations such as cash transfer spots or convenience stores. Calibra engineers will be involved in creating the blockchain, though Facebook intends to keep the wallet and coin as separate entities. Calibra currently has around 100 employees who are mostly based in Menlo Park, California, at Facebook’s headquarters and Tel Aviv.
What about privacy and security?
Every customer wanting to use Libra will have to pass a “know your customer” process, which will verify users’ identities in order to prevent financial crimes. The process will require users to share a government ID and other personal information upon signing up for the coin. According to Facebook, users who lose their phones or passwords will be able to receive support from Calibra as well as refunds if their coins are ever stolen through fraud. User information will only be shared with Facebook and third parties with customer consent or in “limited cases” such as law enforcement requesting the information. Facebook said that they will not use Calibra data to improve advertisement targeting.
– MK. II