The Libra cryptocurrency is the first move from a major technology giant to take on bitcoin, which launched just over a decade ago. But far from unsettling the established cryptocurrency industry, Facebook’s move into the space appears to have had a positive impact.
Bitcoin and other major cryptocurrencies like ethereum and ripple remained relatively stable following the announcement, with none shifting in value by more than 1 per cent.
It is unclear what the long-term impact of Libra will have on the wider cryptocurrency space, with Facebook’s currency not set to launch until some point in 2020.
Some crypto experts point to the fundamental differences between bitcoin and Libra, which suggest the new cryptocurrency poses no threat to the space bitcoin currently occupies.
As a corporation operating within local laws and jurisdictions, Facebook’s Libra does not offer the decentralized, semi-anonymous functionality that bitcoin and other cryptocurrencies like it provide.
“Facebook is essentially trying to create a stable medium of exchange that can be used for making payments across its networks and therefore across borders. Think the current functionality of Wechat, Venmo and PayPal but instead of transacting pounds and dollars, users will be transacting in Facebook’s Libra,” said George McDonaugh, chief executive of cryptocurrency and blockchain investment firm KR1.
“Facebook’s Libra will not compete with bitcoin but rather validates the underlying blockchain technology more than ever. Bitcoin is open, borderless, permissionless, censorship-resistant, publicly verifiable and immutable. Facebook’s coin cannot be any of these things.”
Rather than striving to supplant bitcoin or other cryptocurrencies, Libra is capitalizing on their technology to target the unbanked. Facebook estimates that 1.7 billion people operate outside of the financial system, and many more are not benefiting from its capabilities. For instance, in developing countries, fees associated with remittances, overdrafts, wire costs and ATM charges are eroding the hard-earned money from their citizens.
Noting many of the flaws in the financial system, Libra strives to make sending and receiving money simpler and more affordable for people around the world.
As Facebook explains in the the white paper explains, “we believe that many more people should have access to financial services and to cheap capital.”
However, many of Libra’s tenets, including its relatively centralized governing body made up of Facebook and its partners, the Libra Association, is anathema to the core beliefs of the crypto movement, something that differentiates Libra from many of its crypto counterparts.
Of course, a project as ambitious as Libra can’t come to fruition without impacting the broad crypto ecosystem. If the digital currency can live up to its goals, it could spur on awareness and acceptability for cryptocurrencies, raising adoption rates across the board.