In June 2019, Facebook announced to the world its plans to launch Libra, a non-volatile cryptocurrency that aims to provide stability and credibility.
Facebook has had Libra in the pipeline for some time and put considerable resources into its development. The result is arguably the most ambitious crypto venture we have seen so far.
This is not your ordinary cryptocurrency release.
As of March 31st, 2019, there were 2.38 billion monthly active users on Facebook.
Facebook has free access to advertise and display Libra to every single one of those users. This is without a doubt a huge advantage that Facebook will have moving into the cryptocurrency space.
Billions of potential users and consumers instantaneously upon Libra’s release. All of them will be made aware of Libra and its uses – you can count on that.
It is without a doubt the single largest platform on the planet. Facebook has complete access and control over it giving their cryptocurrency the best chance we have ever seen to take over the cryptocurrency market.
But the scale of it all doesn’t stop there…
Facebook’s Plan for Libra
First and foremost, Libra is going to be a stable currency. That means it will not fluctuate in value and will prioritize stability.
There are many reasons Facebook have chosen to do this. Their biggest reason is it will enable consumers living in countries with volatile currency access to a stable currency.
The value consumers see in a cryptocurrency is crucial to its adoption and success.
Many people send money home to their families that live in less developed nations. The fees and costs of doing this will be significantly reduced through using Libra.
By appealing to all consumer markets, Facebook is increasing the likelihood that the cryptocurrency is used – and used regularly.
Widespread adoption is therefore more likely, something Facebook will want from their 2 billion plus users. This will undoubtedly give them enormous revenue and significant credibility in the cryptocurrency space.
With a huge company like Facebook behind a cryptocurrency you would think that would be enough weight for the crypto to succeed.
However, Facebook understands two important aspects of the crypto space that need to be dealt with:
Credibility and regulation.
Both of these issues are not easily solved and will require a plan on Facebook’s part. But with a stablecoin, they may be able to pull it off.
Let’s look at how you first solve credibility.
Cryptocurrency and Trust Issues
Credibility is the level at which you have trust in something. With cryptocurrencies, trust is one of the cornerstones that determine whether a coin will gain mass adoption or not.
There are three areas of credibility that Facebook need to address: Libra’s credibility to the consumer, Libra’s credibility amongst businesses, and Facebook’s credibility to the general public (which has taken enormous hits in recent years).
The consumer always comes first and in this scenario that means creating a cryptocurrency that is strong at its core. Without this, you run the risk of consumers simply not using your coin.
Facebook is so large that they really could make Libra too big to fail though, which is a concern. Hopefully we will see Facebook utilize their monumental resources to create and develop a crypto that propels the industry forward.
So the first credibility comes in the coin itself. This, however, is where we quickly turn toward the business side of things.
Creating a fundamentally strong cryptocurrency not only gives consumers trust, but businesses as well.
They will see the potential and want in on their slice of the pie. Facebook has actually created an organization, or “council” as they like to push in their white paper, that will serve to:
“facilitate the operation of the Libra Blockchain; to coordinate the agreement among its stakeholders… in their pursuit to promote, develop, and expand the network, and to manage the reserve.”
Now, some of the companies that are involved in this are serious players. Facebook is going all in on credibility.
Mastercard, Visa, Paypal, Stripe, Uber, eBay, Spotify, Vodafone, Coinbase. These are some of the founding members – you can see how much influence these companies have.
This is the arsenal that Facebook is putting behind their cryptocurrency and it is poised to take a huge step forward in the cryptocurrency market.
The question is, why is there so much firepower needed?
A lot of our content on cryptos4noobs runs into the recurring question of regulation and the part it is going to play.
Is it needed? Is it a good idea? Isn’t the point of cryptocurrency to not have regulation?
Well, times change and innovation occurs. We have always pushed for some level of regulation to be introduced, even something as simple as protecting the consumer from disingenuous, companies.
Facebook has actually gone to the length of directly addressing the issue of regulation in their white paper.
“Some projects have also aimed to disrupt the existing system and bypass regulation as opposed to innovating on compliance and regulatory fronts to improve the effectiveness of anti-money laundering. We believe that collaborating and innovating with the financial sector, including regulators and experts across a variety of industries, is the only way to ensure that a sustainable, secure and trusted framework underpins this new system.”
By directly addressing the regulation issue Facebook is recognizing the issues that a lack of regulation bring which governing bodies will want to see.
They are playing nice on the regulation front for two reasons really. One is because there are legitimate issues that need to be resolved with regulation.
The other reason is because Facebook needs to be seen playing by the rules and actually encouraging the creation of rules. They need to rebuild their public image of trust ever since the personal data scandal in 2018.
There will be no shortage of political lobbying, you can be sure of that, as Facebook looks to cement themselves in the crypto world.
Don’t forget, they own Instagram and Whatsapp as well.
Imagine paying friends and family over Whatsapp. Or how about purchasing items you see on an instagram post immediately, from anywhere in the world, with fast and cheap fee processing.
The potential for this is actually quite terrifying in its own way. But before it happens, regulation has to come to the forefront.
The perception of cryptos in some countries, like India, is not a favourable one. Discussions of making them illegal are a hot topic and Facebook will want to curb those ideas however possible.
Regulation is one of those ways.
Facebook will also want to see regulation due to the fact that they will be able to have an impact on what those regulations actually are! This will give them even more of a foothold in the cryptocurrency market.
This is why creating the Libra Association is such a big deal.
It is Facebook essentially showing the governing bodies of the world just how much money could be generated by their involvement.
Money makes the world go round and Facebook knows that better than anyone…
What Does the Future Hold?
The future looks full of Facebook influence. Moving into the crypto space is a logical step for Facebook – they have their own marketplace, are used by billions internationally, all of it online.
A currency that can be used online, quickly, and cheaply across all their platforms is a no-brainer.
With a view to release Libra in 2020, Facebook could very well take the cryptocurrency market to much higher levels.
The involvement of large corporations has its downsides. Many in the crypto space will not be happy by these big institutions becoming involved and rightly so.
We already know Facebook has abused their users’ information in the past. Now we are potentially pledging our finances to them as well?
These are slippery slopes to say the least.
U.S. lawmakers have actually just requested Facebook to halt the release of Libra, citing security and financial concerns.
However, what these large companies bring with them are resources and more talented minds to the crypto world. Enormous amounts of money will be invested (and have already been invested) into developing these technologies.
We will continue to see innovation and development of the technologies behind cryptos as a result of this. The hope is that it is not limited to a few companies.
Cryptocurrencies have been pushed forward by true enthusiasts and passionate supporters for their entire existence so far. Hopefully the involvement of big players does not eliminate the impact and passion of the crypto community itself.