Facebook is finally ready to talk about its blockchain plans. The company has come out today to announce that it is developing a global cryptocurrency, called Libra, will launch in 2020 alongside the underlying blockchain-based network that will support it.
“Blockchain and cryptocurrencies have a number of unique properties — they are decentralized, globally accessible, low cost, and safe. But the existing blockchain systems have yet to reach mainstream adoption,” reads Facebook’s blog post.
Unlike Bitcoin, the currency is designed not to be a speculative asset, but instead a form of digital money backed by a reserve of assets. Facebook hopes that users will one day be able to use Libra as payment for online and offline services. At the beginning, the company imagines Libra will be used mainly to transfer money between individuals just the way we use Mobile Money. The end goal is to create the first truly mainstream cryptocurrency: a decentralized global form of payment that is as stable as the dollar, can be used to buy almost anything, and can support an entire range of financial products — from banking to loans to credit.
Libra partners
According to the Verge, Facebook has also formed the nonprofit Libra Association with 27 other partners to oversee Libra and its development. The partnership includes venture capital firms, nonprofit organizations, crypto firms, and massive corporate financial, telecommunications, and technology service providers, including Coinbase, Mastercard, Visa, eBay, PayPal, Stripe, Spotify, Uber, Lyft, and Vodafone. Those organizations will also contribute to what is known as the Libra Reserve, the asset pool that will ensure every unit of Libra currency is backed by something of intrinsic value rather than by simple scarcity, as Bitcoin is.
The success of Libra could represent one of the most consequential products Facebook has ever released — both for the company and for the world. It could offer a compelling alternative to the existing banking system, particularly in Africa.
Beyond the obvious financial incentives, Facebook is making an effort to tie Libra into its global mission of connecting the planet. The company says that 1.7 billion people, or 31 percent of the global population, currently have no bank, with no access to modern financial services. Offering those people free and lower-cost banking services could have immense benefits to their well-being, the company says.
How Calibra works
Facebook also has a business incentive to build on top of the Libra blockchain, and it’s launching its own subsidiary to do just that called Calibra. Calibra will live inside of Facebook Messenger and WhatsApp at launch, but will also have a standalone iOS and Android app.
Facebook says it wants to work with the financial sector on this, and not compete directly against it. “You’ll see banks on this between now and next year, because if we bring on another billion people, they’ll need savings accounts, loans, and things banks are very good at. The social media company also plans to drastically reduce money transfer fees and transaction fees through Calibra, a welcome move in an industry that has historically preyed on the financially vulnerable.
The willingness of Mastercard and Visa to be a part of the Libra Association is evidence enough that even companies that reap massive profits from the status quo (high transaction costs) see the potential in Libra.
