Libra White Paper
libra.org
libra.org
The "decentralized" can be parsed different ways. Facebook Libra is decentralizing the transactions but it does not decentralize the currency creation. (This partial decentralization happens because Facebook wants to peg Libra to stable asset reserves.) This is different from Bitcoin's idea of decentralizing both the currency creation _and_ the financial transactions.
We can see this distinction in its list of partners...
> Members of the Libra Association will consist of [...]
The bulleted list includes:
- transaction processors such as Mastercard/Visa, PayPal, Stripe, etc
- ecommerce marketplaces such as ebay, Uber, etc
- telecomm such as Vodafone
We see the industry that's noticeably missing: no banks mentioned such as JP Morgan Chase, Citi, HSBC, etc
That's because Facebook wants to be the "bank" in this new Libra economy. It wants to be the "Federal Reserve" that creates bank notes.
If I misunderstand Facebook's intentions and how it wants to position Libra in the financial world, please correct me.
Libra is Facebook Credits [1] rebooted. All that changed is the meme it’s attaching to, “cryptocurrency” being better at suspending consumers’ scepticism.
My posting history will show I'm skeptical of Facebook but setting my biases aside, I think there's still a real technical difference here.
I believe the old Facebook Credits required the transactions to go through Facebook's centralized servers. (The programming api for processing Facebook Credits communicated with Facebook's servers.) This would be similar to a customer holding Marriott Hotel points and she wants to give them to a friend; she would have to call up Marriott customer service and have them transfer the credits/points from her account to someone else's. The transactions can't happen without Facebook and Marriott getting involved. That's fundamentally different from Libra since its transactions are validated by external partner nodes.
Therefore, the Libra isn't a cryptocurrency in just a "meme" bandwagon sense; it's actually designed for decentralized transactions that don't require centralized Facebook servers.
Whether the public (and merchants accepting payments) finds that technical difference of any value and massively adopts it, I don't know.
So it's not going to be Facebook's centralized servers, but Facebook + their friend's centralized servers. There are some vague promises, but this will start out just as centralized as Facebook Credits.
https://twitter.com/SarahJamieLewis/status/11394299139229573...
> To ensure that Libra is truly open and always operates in the best interest of its users, our ambition is for the Libra network to become permissionless. The challenge is that as of today we do not believe that there is a proven solution that can deliver the scale, stability, and security needed to support billions of people and transactions across the globe through a permissionless network. One of the association’s directives will be to work with the community to research and implement this transition, which will begin within five years of the public launch of the Libra Blockchain and ecosystem.
“Facebook is expected to maintain a leadership role [in the Association] through 2019.” The Association (“an independent, not-for-profit membership organization, headquartered in Geneva, Switzerland”) holds title to the reserves, has a monopoly on coin minting and destruction, and has sole determination over new Association members (who each get one vote).
It’s Facebook Credits with co-branding.
Absolutely not. As someone heavily involved in social gaming and related payment solutions at the time, Facebook Credits were only intended for one-way transactions, from users to game publishers, with Facebook getting a 30% cut. You weren't able to transfer these credits to other users, so it was never any form of real currency.
As far as I know, they're missing because they refused to be part of the association:
>Originally the company had ambitions to get Wall Street involved, but found a lack of interest among institutional giants like Goldman Sachs and JPMorgan. It is still looking to have 100 members in the governing association, the person said.
https://www.theblockcrypto.com/2019/06/14/facebooks-cryptocu...
European Commission, 2017
I guess it's time to drop Whatsapp definitively.
“Every program attempts to expand until it can read mail. Those programs which cannot so expand are replaced by ones which can.”
If you'll allow me to riff on jwz, I think another law is applicable to social media:
"Every social media company will expand until it becomes a bank. Those social media companies which cannot so expand are replaced by the ones which will. A bank is meant in the sense that it will store and mantain things of value including favors, records, and money."
It feels like a federal reserve moment where a bunch of rich folk get together and again dictate the future of currency. Crypto was supposed to change that trend. Unfortunately the want of convenience will probably win out over any sort moralistic/idealistic standing and unless government steps in, it will probably be widely adopted.
Good luck with regulators. Especially regulators in the financial industry.
I don't really think that creating a Facebook account is satisfactory to cover KYC(1) and AML(2) rules, as a for example.
But they're many other examples in finance where the "better ask forgiveness than permission" will get you a go straight to jail, don't collect 200 libra on your way there card if violated.
(1) Know Your Customer
(2) Anti Money Laundring
There's also Matthias Krull[2]. Sentenced to ten years for money laundring.
[1] https://en.wikipedia.org/wiki/Raj_Rajaratnam
[2] https://www.swissinfo.ch/eng/criminal-conviction_former-swis...
I don't understand how they plan to make it work across jurisdictions. There are so many laws and rules when it comes to transmitting and storing money or derivatives.
Like I can transfer a billion dollars worth of BTC, no problem. But if I try to wire even $100K between two of my accounts in US and EU, all kinds of red flags go off and phone calls need to happen.
This is apparent in how their wallet Calibra is what requires KYC, not the crypto token itself.
I hope privacy is more important to the average Western Joe than it was to the Chinese. WeChat sounds like a dystopian nightmare.
It's like one to one copy of the traditional monetary system with speed of transactions improved. Low volatile assets they rely on are not real and therefore not guaranteed to stay low volatile. It may be decentralized technically but not socially or ethically.
I'm not a crypto backer - in fact I'm skeptical of the long term usefulness, but this isn't crypto, it's shitty PayPal. It's not decentralized, not removed from fiat, not anonymous and not trustworthy.
Its introduction reads like a goading of antitrust activists. (Facebook’s advantage as a cryptocurrency purveyor being its acumen with getting away with lawlessness.)
EDIT: Oh crap. It is Uber.
Uber is a Libra Association voting member.
The authors are listed in the PDF
... I notice now that it uses the gas mechanism from Ethereum. Less interesting than I thought.
"target launch in the first half of 2020."
"“Founding Members” upon its completion are, by industry:
Payments: Mastercard, PayPal, PayU (Naspers’ fintech arm), Stripe, Visa Technology and marketplaces: Booking Holdings, eBay, Facebook/Calibra, Farfetch, Lyft, MercadoPago, Spotify AB, Uber Technologies, Inc. Telecommunications: Iliad, Vodafone Group Blockchain: Anchorage, Bison Trails, Coinbase, Inc., Xapo Holdings Limited Venture Capital: Andreessen Horowitz, Breakthrough Initiatives, Ribbit Capital, Thrive Capital, Union Square Ventures Nonprofit and multilateral organizations, and academic institutions: Creative Destruction Lab, Kiva, Mercy Corps, Women’s World Banking"
Forget about the cryptography and "blockchain" this system will use. The real innovation here is financial in nature. Only it's not really an innovation.
I doubt today's race to negative interest rates will be kind to Libra validators, who will be demanding a fat payout sooner or later for the loss of business on highly lucrative credit cards.
There's only one way to fund this beast: fractional reserve and ever more risky investments. The temptation will be enormous. The justifications true and well-intentioned. The outcome predictable to anyone who has paid attention.
Think Tether, but orders of magnitude larger.
So this coin will be backed by a centralized reserve, and you would have to trust Facebook that the coins you own are backed by real money, with no way of verifying this. Tether works the same way, and they are just creating money out of thin air without actual dollars backing them up. I'm curious how Facebook will decentralize this reserve, or if they will even do this in the first place.
This is the material anti-trust lawsuits are made of, there is no way that nation states will allow private enterprises to gain that much power.
The best example of something impressive in that area is the concept of Two-sided markets, that comes with natural, customer-benefiting monopoly and even a justification for aggressive dumping baked-in in the model. I’m personally familiar with several of the contributors to that area and I can’t suspect that was ‘sponsored’ research but, Lord, you have to be lucky to get a Nobel prize to defend you.
Just a sleezeball move in my opinion to capitalise on the hard work the crypto community has been putting in to make safe trustworthy decentralised systems. That's in no way saying there isn't sleeze balls in the community, but there are real believers about the whole idea that have been working hard.
There are many legitimate uses for a cross-border currency that has a strong backer. There is a ton of services (like Skrill) that try to bridge the gap for a big portion of the world un-banked.
I say "legitimate" because the uses are fine within the US/EU (holding a "hard" currency like the USD). But many countries around the world prohibit that. If Facebook currency ignores that (given their size), they can access these markets.
This is, maybe, a trillion dollar market.
People here have been ignoring crypto because they don't understand the effects on closed economies. Small online-banks have failed because of difficult regulations and name recognition. Facebook might make it because they have a strong brand, big audience and can battle whole countries.
Here’s what I think: any alternative currency tied to the USD (meaning a currency without intrinsic value) is DOA. The next generation currency cannot be tied to resource constraints.
That, once again, is a very America centric view. A place where banks must be even worse than taxis.
Within the Euro area (and associated coutries, like Switzerland), at least, SEPA transfers are quick and cheap, if not free.
Edit to add: Even the developing world has fast and efficient money transfer schemes. Look up M-PESA, for example.
FedWire transfers are instantaneous and cheap if not free at many institutions. The “bank transfers are slow and expensive” argument is financially illiterate.
> Keynes was able to make his proposal the official British proposal at the Bretton Woods Conference but it was not accepted. Rather than a supranational currency, the conference adopted a system of pegged exchange rates ultimately tied to physical gold in a system managed by the World Bank and IMF. In practice, the system implicitly established the United States dollar as a reserve currency convertible to gold at a fixed price on demand by other governments. The dollar was implicitly established as the reserve by the large trade surplus and gold reserves held by the US at the time of the conference.
They also say in 5 years will provide full(r/w) access to the public clients/nodes...I wouldn't hold my breath.
It has "fraud" prevention built in, charge backs, compliance etc...how would that work on a public blockchain? I believe they lie and they know it will never be released as a public/permisionless blockchain.
All full nodes on that blockchain are going to be owned by FaceBook. FB will be able to see all transactions and take money from people they don't like.
The fact that they print the money can only be good because that's how a stable coin is supposed to work, right?
There’ll be no privacy from overlord FB and everything will be more or less at their behest.
See the Libra blockchain paper, section 8:
> We anticipate that many payment transactions will occur off-chain, for example, within a custodial wallet or by using payment channels [45]
And social infrastructure?
A global federal reserve in the making
This is not it.
I’m not sure we can push the envelope that far, but it’s worth trying to get there.
That in and of itself isn’t a terrible thing necessarily, but I guess I’m failing to see the utility it provides.
OTOH, Facebook is big enough to push this into much larger adoption than existing cryptocurrencies have managed. If they do that, and if Libra is eventually opened enough that it can be traded on the open market without a “trusted” intermediary, then we might at least see the infrastructure, public acceptance, and public understanding of what cryptocurrencies are significantly improve. That could lead to a stronger ecosystem in general.
Personally, I’m trying to figure out if I can have an “account” that is truly anonymous. If so, then I’ll pay attention and study it more. If not... well, then I’ll ignore this unless and until that is possible.
Currently the fastest BFT implementation is BFT-SMaRt: https://github.com/bft-smart/library
Whitepaper: "We did not consider proof-of-work based protocols due to their poor performance and high energy (and environmental) costs"
Right...
From the looks of it, it’s not anything completely new and relies on standard human voting and management structures.
>A Founding Member that does not comply with the Founding Member eligibility criteria can be removed by a supermajority vote of the council. The recording of this vote on the Libra Blockchain will remove the member's node from the consensus algorithm.
So given this, the things working in Libra’s favor are an immediate, global social network for distribution.
Against it would be lack of innovation on the governing front (i.e. prone to internal politics) but this is probably more of a long term problem.
[1] https://libra.org/en-US/association-council-principles/#asso...
https://www.vox.com/2018/1/30/16950926/facebook-mark-zuckerb...
They know very well what they do.
And the value will fluctuate based on the trust in the ability to convert it reliably to cash/other currencies. So there's no real peg to anything, as described previously.
Soon 'The Libra Reserve' will hold only a 10th of the total Libra Coins in circulation (fractional reserve). A global federal reserve in the making.
It seems that by dialing up the trust in their validator nodes (to something significantly greater than the trust you might have in a bitcoin node, but also significantly less than 100% trust), they are able to decrease the work involved in the consensus protocol, reducing energy usage.
1) They do not live near a bank 2) They don't meet some minimum threshold of money 3) Discrimination - The are part of some social or ethnic group that the banks won't touch
Is there a German word for thinking something is trite and gross on one hand while investing with the other? I'm that German Word
This is what gets me the most: "We believe that a global currency and financial infrastructure should be designed and governed as a public good." It's very rich coming from Facebook who could have made itself a public good a decade ago.