Facebook, Libra, and the Long Game
stratechery.com
stratechery.com
Well that's certainly an understatement.
This is literally the only mention of government through-out the entire article. The only mention of banks is in the previous paragraph stating there are no banks in the coalition.
Banks and governments go together like peas and carrots, they also control pretty much everything and have for hundreds and thousands of years. This control is derived from a few places, but primarily from a monopoly on the control of the currency and the monopoly on coercive force.
No government is going to let FB and any coalition do an end run around their national currency and their banking institutions. They're also not going to partner with an international consortium to have them replaced with something they only partially control.
I really don't know why this isn't a larger part of this conversation. I think people need to be cracking more history books and less William Gibson and Neil Stephenson novels.
That's been the elephant in the room ever since Satoshi published its paper more than a decade ago. When I discuss with cryptocurrency enthusiasts I often get the impression that they think that banks are this kind of useless parasite body that somehow appears like mosquitoes around a pond in summer. That they only serve to basically operate ATMs, send you your Visa card and crash the market every other decade or so.
This is of course a gross misunderstanding of what banks are, what they do, why they do it and where they come from. In particular the idea that "bitcoin is going to kill banks" (a very common sentiment in my experience in cryptocurrency circles) is about as meaningful as "this new type of snowboard is going to kill ski resorts!". No it won't, it might change some things about how they operate but after the transition period it'll be business as usual. Cryptocurrencies don't come even close to replacing most of the services offered by banks. Actually, they don't even come close to replacing most of the services offered by actual currency.
It's this weird cognitive dissonance that you encounter in conspiracy theory circles: the banking system is this hellish beast that steals money from the honest middle-class worker, operated from a global circle of elites acting from the shadows and that must be destroyed at all cost to save humanity. How do you do that? By replacing their currency by your own, they'll never see that coming, those idiots.
You think destroying bank records will remove the power inequality from the system? Good luck with that, kid.
Power has money, but money isn't power. It's the table scraps the rest of us chase after. It's also why you can tax the rich all you want and it won't take their power away. The transactions that truly matter to them aren't usually denominated in dollars. Cash is Plan B at best.
Don't believe me? Look at stories about nouveau rich not being taken seriously. You have to work your butts off to get your kids taken seriously (if you aren't lucky or fast enough, your grandkids, assuming your kids haven't blown their inheritance by then). You don't know anybody, and you don't have anything they need. All you have is money.
Trump talked about this every time he filed for bankruptcy. I'm sure his buddies would have preferred he kept his big mouth shut.
Yeah because there are actual differences between new rich and the old rich.
I always considered two datapoints to be fulcral A) ease of use, which Bitcoin has never had and B) potential to be overtaken by an actual bank and twisted into whatever purposes it wanted due to the 51% error. That is, how hard would be it for JPMorgan or Deustche Bank to just buy 51% of Bitcoin and make it do whatever they wanted? I could never see the potential for either fact to be avoided, as much as the frothing Bitcoin-enthusiasts would like it to.
The reason I stayed in is because Bitcoin solved a seemingly intractable problem, it works in the real world, and it's survived and even thrived in the face of fierce attacks for a decade.
Yes, there are many shills who are delusional and ignorant. Yes, speculators and fraudsters are running wild.
None of that changes the fundamental characteristics that make this a fascinating and promising technology, network and social movement.
What fierce attacks has bitcoin faced?
Sure, lots of people mock and criticize it, but no real action has been taken. The people criticizing it have just as much influence (or maybe even less) than the delusional and ignorant true believers.
To me, a fierce attack would be regulatory action taken by various world governments, but that hasn't happened. To the contrary, even countries that probably should care (e.g. China, with its capital controls, and bitcoin mining seemingly used to evade them) appear not to. If anything, that shows just how insignificant bitcoin is.
My vague impression (I don't follow this closely) of US regulators is that they have given bitcoin reasonable or even slightly favorable treatment.
Bitcoin and crypto only survive because of trust. There was a time, especially on Bloomberg, when the news was constantly criticising it and sowing mistrust. "It's only used by hackers" or "hit men are murdering people for crypto on the dark web" or "terrorist are funding operations with crypto.". So there have been countless efforts to break the core of what makes a currency valuable.
Additionally, Bitcoin specifically is illegal in several countries, China being one of them. The US has also seized several piles of bitcoin and like they do with other seized assets they put it up for auction. These guys buy the stuff up cheap and immediately sell it. Now that's not a specific attack but it is damaging to prices. Lastly exchanges are requiring photo id to buy things now because of regulation which makes it even harder for people to get into. I can buy bullets and in some cases guns more easily.
So there is actually plenty, not to mention numerous attacks on the network in the early days. Who knows who was behind those.
At the end of that struggle, you still have a government in control of its financing, but the shape of it, borne through so many battles, is likely to be more efficient.
Bitcoin doesn't care how much of it you have, as it uses Proof-of-Work not Proof-of-Stake. The only thing that matters is you computational power. Now it is true that large banks could just buy lots of ASICs and try to beat the network, but that would mean a continued investment: As soon as they stop mining, the network would return to normal.
They can hurt bitcoin (not that cheap anymore) by making it unusable for a period of time, but unless they are willing to keep mining until everybody else stops, they won't be able to kill it.
As far as usability goes i don't think bitcoin is that hard: Download an app, scan a QR-code, send money. Not that complicated. The transaction rate is a problem, though.
I agree that some people are too enthusiastic about crypto, but I think it still has its place. It doesn't have to kill banks.
[1] https://www.theguardian.com/world/2005/feb/01/iraq.suzannego...
There is another possibility on Xaya and I believe Ethereum has implemented as well now. On Xaya they are called game channels. The idea is that you allow a side branching chain to develop between an arbitrary number of people, then when a game is over you inject the end of the side chain back into the main chain and verify it. They invented it for near realtime verification between consenting parties, then you only pay the main transaction fee when you get back on the main block instead of very every action. But that type of system doesn't have to be only done with games obviously, that could be applied to anything.
If you are interested more in it, you can check this video out. They have lots of documentation and tutorials for the network as well.
I don't think you understand bitcoin as well as you think you do. 51% attacks do not work like this.
So yes, 51% control could be usurped by a dedicated attacker - but the resources are no longer trivial. And as noted, this "control" doesn't buy you a great deal unless you keep it going for eternity, and for the time period you do have control all you can do is basically stop it working properly by preventing new transactions - rewriting history is exponentially more expensive the farther back you try to go.
If this were a big transaction, I might choose to wait for more than one confirmation before completing my end of the transaction. The longer I wait, the more expensive it becomes for you to conduct your 51% attack.
It really is prohibitively expensive, to conduct such an attack, when you consider a few other factors. I could double spend the money to myself, but after news of such an attack came out, the price likely could crash, reducing the prize.
Not to mention opportunity cost. If you have the means to conduct a 51% attack it means you have a lot of capital and expertise. You could put those two together to make a giant pile of money through legitimate means, like operating a hedge fund. The risk is a lot less.
The only group that would be motivated enough and capable enough to perpetrate such an attack would be a state, and why would they bother when, like was mentioned elsewhere, they could attack bitcoin with the stroke of a pen, via regulation etc. It's waaay less effort.
Also, would like to note that Bitcoin can also function as store of value just like Gold.
Any news about Lightning? Is that running live now?
Completely wrong. There is a set of rules which define whether a Bitcoin block is valid or not, things like "the block's hash has this many zero bits" (simplifying a bit here, the actual rule is a bit more complex), "all transactions have a valid signature" (simplifying a lot here, it actually runs a sort of a small program) and "no transaction spends outputs which have already been spent". It doesn't matter how much Bitcoin you have or how much hash power you have, even if you have 100% of all Bitcoin and 100% of all hash power, if the block doesn't follow the rules it will be ignored by all validating Bitcoin nodes.
What having 51% or more of the Bitcoin hash power gains you is only that you can rewrite history. You can present a chain of blocks to other nodes, and later present a different "longer" chain of blocks to the same nodes, and they'll accept the "longer" chain and discard the older one. All these blocks, however, still have to be valid to be accepted.
You're being overly reductionist.
The functions of banks are great and valuable but they are disproportionately so. Why? Because they get free money from the Fed and are using fractional reserves.
Do you think the Bank's services would be as pervasive if the working class had a stable store of value for their work? I don't. Banks need competition and with Bitcoin and the crypto space, they finally got some serious competition.
Also, there are plenty of startups in the cryptocurrency space that ARE doing functions that banks offer. SALT is one that comes to mind quickly but there are plenty of others.
But you didn't actually tell the reader what banks _are_.
Care to elaborate?
There's some irony here.
Why do you believe this has any relevance at all? People want to buy stuff, not exchange bill with serial number #abcxyz with stuff.
And from my example you can easily understand why your assertion is quite wrong to begin with.
Because it solves the double spend problem [0] associated with digital currency without use of a centralized database.
I think that matters to people trying to avoid onerous capital controls or a government printing 31% of the money supply in a week [1]
[0]: https://en.wikipedia.org/wiki/Double-spending
[1]: https://www.bloomberg.com/news/articles/2019-02-05/venezuela...
I check for cool serial numbers fairly frequently but I couldn’t say I care about the exact bills. A five’s a five. That’s why currency is great.
That's the point of confusion. This is not an end around. This is about extracting tolls - slivers - from economic activity. They will all comply with the status quo, they will say what needs to be said, they will bow as they need to bow, they merely want to get their little cut on a billion transactions. It's nothing more than an attempt to layer another transaction processing fee-based system into/onto the global economy. There is no other point, it's why Facebook has partners like Visa interested.
These guys could not care less about replacing national currencies or doing an end run around of political control. In fact it's the exact opposite: they would want the regulators to make sure Libra is the standard that they can properly exploit, and raise the walls to other competition. That is how these companies always behave, it's rather obnoxiously predictable. They will be thrilled to work with regulators to keep things exactly as they are, with a little exception for their new baby parasite that gets 0.3% of everything (and please regulators, while you're at it, make it really hard to compete, make the regulations impossible for everybody else to comply with).
They do not want the political power, responsibility and conflicts that come with national currencies. They want the money, the fat juicy profits, that come with extracting high margin tolls. It's ideal to leave the national fiat currencies intact, so they can extract additional fees everytime people want to change their money. Libra is a rider, national currencies come and go.
Whether that's the intention or not doesn't matter, it has the potential to be and that is simply not acceptable.
When a developing world country like India needs to use monetary policy to stimulate their economy but those transmission mechanisms aren't working because a significant part of the economy is using Libra, that's a major threat to their sovereignty. It's digital colonialism.
https://www.washingtonpost.com/news/wonk/wp/2014/07/31/argen...
Just today, Nick Clegg, former Deputy Prime Minister of the United Kingdom, and currently Vice-President for Global Affairs and Communications at Facebook, explicitly asks for FB to be regulated [1]: "We need governments and policymakers to engage with issues like these and help set the parameters for us".
[1] https://news.sky.com/story/sir-nick-clegg-link-between-socia...
Could you explain that statement? I can’t help but counter that isn’t often the government’s control of money that enables the rise of authoritarian governments! Perhaps privatization of currency might strengthen democracy not undermine it.
At least with a government you have a shot at being ruled by something other than a private entity's self-interest.
In the U.S., there’s corruption and racism sure, but by and large money and power are congruent. The business community opposed Trumps’s response to Charlottesville because a rich black man stood up and said that’s not okay. That’s because democratic governments follow rules. You have green paper; here’s a coffee. Oh you’re black and it’s 1960? Let’s change the written rules so you can get coffee in any shop. Authoritarian governments have “rules” and rules. You have green paper? Too bad, you said something in newspaper and I am afraid of the government, so no coffee for you.
That’s what really grinds my gears about people breaking a societal paradigm like currency. Not just a fundamental misunderstanding of micro and macroeconomics (one guy on another thread said stealing money from a crypto exchange reduces the money supply and can be monetary policy), but also increasing the amount of societal chaos. How do you advance in life when common law will not protect your property?
How open a society is, are efforts mostly paid in blood by the plebians. Those who look down on others and want control are the ones who probably makes society more 'closed'.
Money is only a tool. A way to facilitate immoral exchange of earth's finite resources + human labour.
My leftist ideals would say, we shouldn't deny a fellow human access to food or a vacation just because he doesn't have anything in exchanges. Especially today that we have a problem of overbundance, and we are not even optimizing our production, but for profit.
The Anthropologist David Greaber in his book, we can observe this human compassion when in the park when some stranger kid is in danger, maybe drowning, we do not hesitate for a sec to help out, and we don't ask for anything in return.
Technically the oligopoly is overthrown. Practically, meet the new boss, same as the old boss.
FB isn't funding this project because it's a libertarian thought experiment. FB is funding it because it makes business sense.
FB's business model is using data to sell ads. Amazon.com's dominance in ecommerce- and it's entry into the ad market - puts pressure on FB's business if advertisers move their buys to Amazon.com. But I imagine if FB is able to directy connect social interactions to purchasing decisions, that's something that retailers that compete with Amazon are going to be interested in.
Mass fiat money are no more than 2 centuries old, in most places less than 60 years (see Bretton-Woods). They have to be tightly controled by state.
If the value of the coin come from the gold in it, why mint them instead of using the gold directly?
But coins show the insignia of the state (and usually the monarch) that minted it; this is an important symbol, and also a guarantee of purity and weight, at least nominally.
I don't think you're considering a long enough time scale, the minting of coins with the likeness of rulers and symbols of the power of the state is as old as the concept of currency and rulers.
There have been instances where companies printed their own script and new non-authoritarian nations might struggle for a bit early on with competing banks, but it's always resolved and power is vested in the central authority.
The role of currency from the point of view of the central authority is more than just economic - it's symbolic, it's propaganda, it's confidence in that government expressed by every citizen through the very act of accepting their currency as valuable.
Universality of your currency is kind of the best selling point isn’t it?
Also, barter worked very well since forever, in which every product is a different "coin", it just doesnt scale physically, while digital currencies do.
China allows WeChat Pay and Alipay to be predominant methods of payment, so it's not obvious to me that new payment methods threaten governments.
What, precisely, is the threat?
And what, exactly, can governments do to stop companies from offering their own scrip?
Would they outlaw Venmo? Gift cards? Airline miles?
See usage of USD in developing nations.
1. I can see the US government and perhaps the Five Eyes (https://en.wikipedia.org/wiki/Five_Eyes) wanting this because it effectively reveals lots of global transactions they are not currently privy to w/o tedious work. I find it difficult to believe that all the relevant FiveEyes agencies have not been an integral part of this from the planning stage.
2. I dont see how small nations can really stop it. They can stop transfers to/from their own currency, but can they really stop closed loop Libra systems? For example, someone in Whateveristan does some work on E-Lance/Upwork and gets paid 100 Libra. They spend 100 Libra on goods online and gets it delivered -- how could the local government stop this?
2. the finance watchdog verifies that balance sheet must close to 0 for everybody when everything is accounted for - i.e. I have 100 libra and I want to buy a printer, there has to be somebody to deliver that printer and take the 100 libra; the gadget shop can't account for the printer disappearing from inventory without accounting for 100 libra coming in, and the chain thus complete. the only thing you'd be able to buy are services and goods outside regulated economy, so sex and drugs?
The mega banks and Goldman Sachs are the most powerful organizations in this country. Even Defense arguably served their interests in many cases.
I disagree. Politicians from many countries have shown a willingness to sell out their own nation. With a high enough time preference it's entirely possible.
It's also strange to me that there is no discussion about that. Money is not only a currency you can use to buy goods and services. In case of US dollar it's a powerful political pressuring instrument. Most of goods on international markets are exchanged in US dollar. That's why US can print dollars and the rest of the world is paying the inflation costs. Additionally, money issuer (in this case US) can forbid anyone to use their currency, so they can shutdown Libra when they want and how they want, if pressured enough.
[0]https://www.nytimes.com/2019/04/07/opinion/facebook-content-...
It seems that Libra is going to demonstrate exactly why only a decentralized design like Bitcoin’s or other similar cryptocurrencies has any chance of breaking that control. They will be much much harder to attack and shutdown once governments decide this competition in their monopoly of money is just not wanted.
Are you going to back up your argument or just state it like it's a fact?
This is the same authoritarian reasoning behind things like China's capital controls, though.
That looks like a pretty questionable line of logic, because, say for sake of argument, that it can be demonstrated from an economics objective that competitive private currencies produce higher levels of growth. Now the terrorists also have us hostage economically as we need to use monopoly government money as the only way to stop them!
Come on, it’s lazy thinking to believe that only centralized authoritarian control of currency is how to keep everyone safe from various bad actors, terrorists, criminals and rogue nations. My intuition says that just can’t be correct, otherwise let’s also just put cameras in everyone’s homes ... just in case.
There is such extremism in all cryptocurrency related discussions. Why in the world would there be anarchy if central bank monetary policy was no longer effective when private currencies are used or during a Free Banking period? Why does that follow at all, by what mechanism?
https://www.npr.org/sections/money/2012/12/07/166747693/epis...
Libra is going to be backed by top currencies (probably USD, EUR, JPY, GBP). Why wouldn't the USA like that? They get to invade other countries for free.
Most countries do not like the USD. And most of them are fighting it with capital controls. The US is imposing the liberation of these economies. Through both threats and cookies. Check the FATCA for example. There is no reciprocity and yet countries are implementing it.
Libra could help the US and friends get into other countries easily.
Any history books you would recommend?
Having a centralized currency is a reasonable thing, though the Fed is a private entity, it operates ultimately like other central banks.
The banks don't have any special power - if you want to open one, you can do that right now.
If they did have some special sauce, VC would be pouring it, and mostly, it's not.
Banks don't make their money or derive their power through the 'creation of money'.
FB's move into this arena is possibly more destabilizing than anything, hopefully, the opportunities will outweigh the risks.
A bank just opened and has $0 in the vault You give the bank $1000 The bank lends me $800
Your current bank balance = $1000 My current bank balance = $800 Total money in the bank = $1800
You might say that the money wasn't created because they can't afford to pay out $1800, but if for some reason at this point they need to pay back the $1000 they can ask another bank for a loan, and point to the $800 they're owed as collateral. On top of that, both the $1000 and the $800 would be insured against the failure of the bank by the federal government. This is a simplified example of course, but when the banking system is working normally it's hard to say that they don't make their profits on the creation of money.
https://www.npr.org/sections/money/2012/12/07/166747693/epis...
Libra is essentially an ETF. It's a vehicle that will take deposits from customers and invest them in interest-yielding securities and currencies. Unlike a bank, customers forfeit their right to gain interest from their deposits and it will instead service operating costs (and any money left over goes to founder members). Libra is effectively planing to receive deposits, manage money and process transactions, despite not even attempting to meet regulatory requirements (though they plan to "shape the regulatory environment"--their words). What's so innovative about this venture is its potential for further data harvesting and potential income streams. Facebook isn't going to harvest any data produced from this venture--that is unless the customer willingly gives it to them. Why would a customer willingly provide this access to Facebook? I think anyone using FB for the past decade can answer that question--those regular TOS updates are hard to follow.
Libra isn't so much a subversion of the existing order, as it as an act of financial engineering to service a social media company. What it "could be" doesn't justify what it already is.
Libra is not an ETF. Clearly it has different functionality and will be used differently by both Facebook and users. It would be more accurate to say that the risk profile should look to account holders like an ETF rather than a bank.
Unless of course you stand to benefit from the transactional data, which I'm not convinced this Calibra isn't a trojan horse for Facebook to get the data from.
Light touches of financial regulation (written by their lobbyists, in the most cynical case) will help Facebook immensely if they become a social payments platform.
If you want to pay your rent or split that bill with your friends using Libra, it seems reasonable that you might first need to do some Airbnb/fintech style identity validation with their friendly automated systems. Just a photo of your ID and a brief video, and you can have your Libra balance within 15 minutes.
And, just like that, Facebook has gained:
- a real identity to associate with that tracking pixel
- an extension of their network effects even further into the real-world, where you then need to maintain a (validated) account to participate in many common social transactions.
It has the potential to both slow the exodus of millennials and tie a slew of real identities to their accounts. If later on they get transaction data (I agree that this seems inevitable, weren't Google already buying it from CC companies?) or their currency grows to dwarf the dollar in global utility that's just icing on the cake.
For now, their model is still collecting valid + valuable personal data, then selling access to cohorts, and this plays right into that.
But what they invest in will be interesting: what happens when the next financial crisis comes ? When the dollar plunges ?
The developing world would hugely benefit from a scalable technology that can efficiently service digital transactions. The piece demonstrates this with how quickly WeChat Pay and Alipay penetrated China.
I can't imagine the possibility for prosperity when 3 billion consumers enter the global economy in a matter of years.
Alternative currencies were always going to have to compete (or at least deal with) with powerful governments, and all the most powerful governments are most easily manipulated by appealing to a mass audience.
The Facebook brand isn't capable of doing that right now. There's far more incentive for politicians to talk about breaking Facebook up than to encourage Facebook to embed itself in the financial lives of their constituents.
If a decision is made to breakup Facebook, spinning off Libra will be right at the top of the list. I can't see how it survives as a stand-alone technology without the support of Facebook's network effects.
I hear this a lot in cryptocurrency threads, and I vehemently disagree. There's no doubt that using "some other currency" (currency or cryptocurrency) is better than using a corrupt, authoritarian regime's currency. But there's also no doubt that being able to execute monetary policy is a huge advantage for any country. Read anything about currency manipulation or currency markets. Not being able to control the supply of currency your goods (or others' goods, i.e. petrodollars) are valued in is a huge disadvantage.
It feels like there's a huge political push to try and get the "developing world" (with all the hand-waving that's been applied to this term) onto cryptocurrencies, but that permanently puts them at a disadvantage compared to countries that can manipulate their own currency. I think selling this is short-term-ism at its worst.
And honestly? It's also vaguely colonial. I would love to hear from people in these countries what they think about cryptocurrencies, if anything. Cryptocurrency advocates saying, "we know what's best for you" is super troubling to me.
Why? Because assuming all other things being equal (convenience as medium of exchange etc.), an individual is always going to prefer holding currency that isn’t subject to inflation.
An individual is never going to generously allow their government to erode X% of their liquid cash voluntarily.
This future doesn’t require any crypto ‘dictating’ its money supply policy, it just requires at least one fixed supply crypto to exist in your country that is as convenient as existing cash / online payment to make governmental monetary policy useless.
The problem for governments is: the genie is out of the bottle regarding fixed supply.
Note that I’m not saying it’s good or bad that countries cannot effectively control money supply anymore but it seems inevitable they can’t in the long term.
And why should they spend a so wonderful asset? And what is the point of a currency that is always appreciating and nobody want to spend?
>>"The problem for governments is: the genie is out of the bottle regarding fixed supply."
Central banks don't target the quantity of money, they target the interest rate. The quantity of money is a function of the economic activity, as it should.
The idea that people is going to change to private currencies is a joke. The only thing a government have to do, in order to create demand for its currency, is accept only its currency as payment for taxes.
Fixed supply doesn't mean it will always appreciate.
It just seems like it today because the first fixed supply currency that can be transferred over the internet was only invented 10 years ago. It (or an equivalent, or a mix of equivalents) has to rise from 0 USD to X USD over time where X is "the value of global, fixed supply currency". When X is reached, it reverts to being the worst investment you can possibly make, useful only for buying higher yield assets or exchanging for food, shelter and stuff.
> The only thing a government have to do, in order to create demand for its currency, is accept only its currency as payment for taxes.
Just because I pay taxes in USD/EUR doesn't mean I can't store my cash in a fixed supply currency, and anyone who does this avoids inflation. And if everyone does this, government no longer controls the money supply.
(Let's just use BTC and USD)
Let's say yesterday milk was $2/gallon. But overnight, USD hyperinflated 50% and now it's $3/gallon. Yesterday, I invested 2 USD in BTC. Unless I can convince someone to give me 3 USD for my BTC, I can't buy a gallon of milk.
No rational person will help you avoid inflation like this, because they'd be losing money. They would have to think that the BTC they get from you will appreciate. In other words, they have to speculate.
So the only thing that you do by storing your cash in a fixed supply currency is speculate, and the only way you "avoid inflation" is if your speculation outpaces inflation.
--This is exactly the same as every other investment.--
But there's a huge difference: speculating in BTC helps no one (actually, it almost certainly helps super awful criminals like drug cartels and human traffickers). Please don't do this. Please invest your money in businesses that need it, or in real estate to help build homes, or in any one of a million ways that actually fuel economic growth and have the potential to help a human being.
> And if everyone does this, government no longer controls the money supply.
Why do you think this is a good thing?
This is exactly what would happen, no convincing required. Overnight 50% hyperinflation of the dollar would mean 2 USD worth of BTC/EUR/GBP/milk/anything bought yesterday could be sold for 3 USD today.
> Why do you think this is a good thing?
I’m not claiming it’s a good or bad idea. I’m claiming it’s an inevitable consequence of usable fixed supply currencies continuing to exist.
Ahh, but BTC doesn't belong in that list at all. The Euro and Sterling are backed by large, stable economies, used by each to value their exports. Milk is a commodity, which has intrinsic value (not to mention cost to produce, market, transport, regulate, and sell). BTC is an asset, but not anything like REIT or bonds, because it doesn't represent anything of actual worth. Or, skipping some steps, its only worth is that you can convince someone it will eventually have any value at all.
Cryptocurrencies are unique among all other assets in that, at the bottom of them, they are figuratively bankrupt and actually meaningless. There are no goods valued solely in BTC (even black market stuff is like "$100 / .0092 BTC") and no strong, stable economy backing it. At the end of the day, BTC basically says "someone will give you a lot of currency you actually care about for these zeroes and ones", and because those zeroes and ones have no additional value (i.e. it's not a cure for cancer or a TLS skeleton key), the proposition is literally worthless.
So yes. Normally that is what inflation means, but only for currencies that can actually purchase goods and services people want, or goods people actually want to consume, or services people actually want to use. Cryptocurrencies are none of those things.
It seems to me that you believe that when the economy stay the same and the supply of money grows, money loss value.
Then, the other side of the coin ;-) is that when the economy grows and the currency don't, it increases value.
>>"[--] And if everyone does this, government no longer controls the money supply."
Governments already don't control the money supply. If a bank gives a credit, it's creating money in the system.
After giving a credit (and creating money in the process), it needs to increase its reserves. If the government don't give it enough reserves it have to go to the inter-bank market, that will create demand for reserves, and that increase the interest rate.
If the government want to control the interest rate it can't control the quantity of money.
>>"Just because I pay taxes in USD/EUR doesn't mean I can't store my cash in a fixed supply currency, "
You can do it already, for instance, buying gold. Note that the price of gold also move up and down. You can lost money buying gold and it will be not different with any other asset.
The government will always require taxes and utilities to be paid in their currency. So, every one will need to sell cryptos to fulfill those electricity bills and taxes. This sell pressure will carry on a inflation into cryptos.
Yannis Varoufakis said it best: the idea of apolitical money is a fiction and a dream. Money has always been associated to and controlled by governments. Bitcoin currently is actually heavily manipulated/moved by Tether which is controlled by Bitfinex.
China still can't stop its citizens accessing the open internet on VPN. North Korea still can't stop its citizens smuggling wikipedia into the country on USB sticks. Governments won't be able to stop citizens storing their wealth in fixed supply currencies.
> Bitcoin currently is actually heavily manipulated/moved by Tether
[citation needed]
Any links to support your last two assertions ? I'm interested in checking them out.
[0]: https://www.nytimes.com/2018/06/13/technology/bitcoin-price-...
"All other things being equal" will never happen. Too many things change. For example, maybe the world economy is on the brink of depression (2008), in which people would prefer their governments do something about the crisis, despite the risk of inflation. Or maybe you're trying to manipulate your currency to gain a trade advantage. Etc. etc. It's just not a useful thing to consider.
And although this is kind of anecdata, I'm perfectly happy for my (US) government to execute monetary policy that potentially devalues my savings and investments as long as it's justified. Hell I usually make it back with wage/benefit increases (although the same can't be said for most US workers) and interest on investments.
> This future doesn’t require any crypto ‘dictating’ its money supply policy, it just requires at least one fixed supply crypto to exist in your country that is as convenient as existing cash / online payment to make governmental monetary policy useless.
No one's saying what the future does or doesn't require. All I'm saying is that people who are extolling the virtues of a fixed currency should earnestly research why we moved off fixed currencies. There are a lot of really good reasons. No serious economist advocates for a return to a fixed supply of currency.
> The problem for governments is: the genie is out of the bottle regarding fixed supply.
This is comically untrue. It may be true in cryptocurrency circles, but it's absolutely not true in economic circles. It's an idea that's been widely considered and roundly dismissed as very bad. Its support in cryptocurrency circles is driven largely by libertarian ideology.
> Note that I’m not saying it’s good or bad that countries cannot effectively control money supply anymore but it seems inevitable they can’t in the long term.
On the contrary, countries that cannot effectively control money supply will continue to be at a disadvantage with countries that can. It's precisely because of its usefulness that countries will continue to employ it. What could possibly make you think otherwise?
I am not advocating for its return or extolling its virtues or claiming the world will be better or worse with fixed supply currency. I'm simply stating that a rational individual or business will avoid an X% tax on their stored wealth if they can legally do so.
I appreciate your anecdotal willingness to have your wealth devalued as a patriotic sentiment, but have to assume you are in a small global minority who would so if it can be avoided with the flick of a switch ('store my money in crypto') - consider countries where the tax is XX%, XXX%, XXXX% or even beyond (ie. Venezuela). Even X% is a rather large voluntary tax for US citizens with meagre savings.
> This is comically untrue. It may be true in cryptocurrency circles, but it's absolutely not true in economic circles.
It's true in the sense that fixed supply currencies exist today and usability will meet and eventually surpass 'traditional' currencies. The goodness or badness of the idea according to economists doesn't stop them existing today and won't stop them existing in the future.
> On the contrary, countries that cannot effectively control money supply will continue to be at a disadvantage with countries that can. It's precisely because of its usefulness that countries will continue to employ it. What could possibly make you think otherwise?
No government is going to voluntarily give up control of money supply but their mechanisms to do so are very limited in a world where every citizen and business stores their value in FixedSupplyCoin.
I'd also like to add something that I consider the elephant in the room. Haven't tech companies already proven themselves that they're willing to bend to governments' will in order to do business?
No authoritarian government will welcome Libra with open arms. If the currency won't bend to their will, then they will simply ban it and then it becomes (at best) a black market good.
There's also another issue: how do you value it so that it becomes useful to everyone? If I'm in Venezuela getting paid in bolivars then my money already has no power to begin with.
It will also be hard to manage for a lot of people. I doubt some average Joe in a poor country will want to complicate himself by buying something at 0.0000000231 Libra. It will require a lot of cognitive power to not get scammed.
What kind of “decision” are you imagining? I thought part of the point of cryptocurrencies is to remove power to even have these “decisions”. So I’m not sure what the scenario you imagine is.
What if Gold was used as currency easily, is there a problem that would occur?
There are decisions in cryptocurrency. and they are “democratically” made in the computing power sense, which means, as a less computationally powerful country, it might lose policy independence in the global voting.
For gold, there would be much less space for policies, both good and bad, and hence less benefits and problems at the same time. I think that’s one of the reasons why it’s not widely adopted anymore.
For people who don't trust banks (my inlaws don't keep any money in a bank because they don't trust it, so they are unbanked) -- I don't see anything about Libra or Cryptocurrencies that is going to make them trust it. "There's some super-complicated math that proves you own this money and no one can take it from you" just isn't the kind of thing that is going to convince my inlaws to trust it.
Libra hasn't released any pricing on their processing fees so it is all vaporware & unfounded guessing right now.
> there's also no doubt that being able to execute monetary policy is a huge advantage for any country.
I'm not confident about pretty much anything macroeconomic, but I do doubt the confidence of most talk about it. The U.S. was on the gold standard through the Industrial Revolution, for example.
How is this fundamentally different from an unelected monetary economist working at the IMF or Federal Reserve deciding they know what's best for millions of people in a country? Given that you're presenting a country that can manipulate their own currency as the superior choice.
I'm really not so sure that can be stated as some universal truth when it comes to things like the IMF.
Is there? There's a lot of discussion around it. But I've never seen a legitimate push.
I once saw a PR person talk about how you had to earn your way to allow yourself to be part of certain larger societal conversations. Start at grass roots, earn trust there, step up to communities, earn trust there, step up to local governments etc etc. Being big doesn't earn you anything out the gate. I liked this idea. However charitably you think about Facebook, I don't think you could possibly surmise that Facebook has earned its way to the conversation of its stated aims of helping people who can't get credit cards use digital currency.
I think Libra would have been marketed much better if it had been a separate company with FB taking a 51% controlling stake, and these other validators making up the rest.
Evidence points to a massive lack of co-ordination with this launch. Government relations (together with the relevant House and Senate committees) learned about the launch from the news briefing. This whole thing appears to be a shambling mess, born out of desperation more than ingenuity.
Libra is already “spun off”. FB only owns a tiny share.
And it doesn’t matter who controls Libra if everyone thinks of it as ‘the Facebook money thing’.
I think the developing world is ahead of US & EU in this regard, card & bank account usage is bound to decline in the long run.
Libra will probably be a success, perhaps even a huge one.
The developed world does: "based on an analysis of SimilarWeb Android data, Jefferies analyst Brent Thill found daily average users for core Facebook have declined in the U.S., U.K., Germany and France over the last 12 months—although he notes sequential user growth across geographies in April and May. In the U.S., time spent on core Facebook and its photo-and-video-sharing platform Instagram also has declined over the last 12 months, with users spending sequentially less time on both apps most recently" [1]. Antagonism to Facebook not a niche issue.
Autocracies won't cede power to Zuckerberg. Poor democracies have no incentive to sign up to a cartel without rich countries' wealth. Without at least some OECD support, the project is DOA.
[1] https://www.wsj.com/articles/facebooks-pricey-ad-spend-may-n...
Of course they do. The cartel will easily bribe them - whichever politicians need incentivized - to leave the door open. They don't require much of an opening.
Visa is now worth more than every US or global bank - such as JP Morgan, HSBC or Bank of America - and worth more than twice what the largest tech company in Europe (SAP) is worth. Mastercard is worth 70% more than SAP.
These types of massive companies can trivially grease any and all wheels to embed themselves deeper into the global economy. What else do companies like Visa and Mastercard have to spend their extreme brand-bullshit margins on? If you're those guys, the only thing worth directing your flood of endless high margin profit at is to get locked deeper into the global economy. They can afford to purchase infinite lubrication for all practical purposes. Take Visa as an example. They have 50% net income margins - laughably extreme - because they have absolutely nothing else to do with their business other than collect the cash as it rolls in, and then look at ways to ensure their parasite position is perpetual and continues to expand.
It remains to be seen what it will happen to it in the developing world, but the reputation of Facebook won’t be an obstacle.
Unfortunately I feel like it might pick up and become a thing.
Is Libra a digital currency created and controlled by an oligarchy ("consortium") of mega-corporations? Yes.
Everything else is propaganda.
But it's controlled by Facebook and friends and the influence they would get over any decision is absolutely huge
The Validators Who, then, are the validators? Well, Facebook is one, but only one: currently there are 28 “Founding Members”, including merchants, venture capitalists, and payment networks, that meet two of the following three criteria:
More than $1 billion USD in market value or more than $500 million USD in customer cash flow Reach more than 20 million people a year Recognition as a top-100 industry leader by a third-party association such as Fortune or S&P These “Founding Members” are required to make a minimum investment of $10 million and provide computing power to the network. In addition, there are separate requirements for non-profit organizations and academic institutions that rely on a mixture of budget, track record, and rankings; a minimum investment may not be necessary. Libra intends to have 100 Founding Members by the time it launches next year.
Don't fool yourself, this whole thing has been carefully orchestrated to look like if it was an open community but it is very tightly controlled by Facebook and friends.
I will not touch this with a 100 foot pole.
Out of all of the good-will projects they could spearhead if they want to turn the tides of FB's reputation, they decide to try and supplant money. To me it just screams that it's one more domain they want to assert some control in.
I find it depressing.
And, if you believe that, I have a fine bridge in New York I'll sell you for a few Bitcoin.
I fully expect that even if the core of the cryptocurrency might actually be decentralized and not directly controlled by Facebook (and I don't believe that either, for the record) the practical implementation of this will give Facebook more than enough weight to shut anybody down if they so desire. A bit like how email is supposed to be decentralized but if these days gmail decides it doesn't want to play with you you're effectively screwed.
Facebook (and other tech giants) have absolutely nothing to gain from decentralization and privacy when their entire trillion dollar business model relies on siphoning as much data as possible. Anybody thinking that Facebook is somehow going to usher the golden age of cryptolibertarianism and the decentralization of money is frankly shortsighted. Then again, shortsightedness is a common symptom of libertarianism (or is it the other way around?).
I think we all agree that Facebook is incentivized to behave in certain ways, but if self-limitation is baked into the system, how does that matter?
This is a genuine question for which I would love an answer.
> And this is when this bet would pay off for Facebook (and the second point I missed in my earlier analysis): the implication that digital currencies will do for money what the Internet did for information is that the very long-term trend will be towards centralization around Aggregators. When there is no friction, control shifts from gatekeepers controlling supply to Aggregators controlling demand. To that end, by pioneering Libra, building what will almost certainly be the first wallet for the currency, and bringing to bear its unmatched network for facilitating payments, Facebook is betting it will offer the best experience for digital currency flows, giving it power not by controlling Libra but rather by controlling the most users of Libra.
Here's an easy scenario to imagine that shows how incentives would get misaligned: Facebook and the other validating nodes of Libra are financially compensated by interest from the collateral for Libra tokens. If Libra is successful in its mission, it will become a global currency that's stronger than the assets that underly its collateral.
When this happens, suddenly Libra being a collateralized stablecoin stops making sense. Kind of like when the US Dollar no longer needed to be backed by gold since it was a strong enough currency/unit of financial measurement on its own. The US then got rid of the gold standard and has since saved itself untold money in custodial expenses they would have been paying to hold all that gold.
The Association would never do this for the Libra however since it is literally how they are funding their own operation. Even if it's in the best interest of all Libra users, the centralized governance association with all of the authority to make this improvement would choose not to because it's not in their best interest to do so.
There's no leap of imagination there - it's just how power and incentives work.
I think the strongest argument towards the latter is the long-run aggregation theory one re: Calibra owning the most Libra users, and not having to own the underlying Libra system itself.
> Here's an easy scenario to imagine that shows how incentives would get misaligned: Facebook and the other validating nodes of Libra are financially compensated by interest from the collateral for Libra tokens. If Libra is successful in its mission, it will become a global currency that's stronger than the assets that underly its collateral.
> When this happens, suddenly Libra being a collateralized stablecoin stops making sense. Kind of like when the US Dollar no longer needed to be backed by gold since it was a strong enough currency/unit of financial measurement on its own. The US then got rid of the gold standard and has since saved itself untold money in custodial expenses they would have been paying to hold all that gold.
> The Association would never do this for the Libra however since it is literally how they are funding their own operation. Even if it's in the best interest of all Libra users, the centralized governance association with all of the authority to make this improvement would choose not to because it's not in their best interest to do so.
> There's no leap of imagination there - it's just how power and incentives work.
Your basing this argument on the fractional reserve monetary policy that the libra association is hedging against. I believe we are moving towards a world in which global currencies become the norm. There will be 2 types of global currencies, corporate currencies and decentralized currencies, aka Libra and Bitcoin. Both forms will have to have a mechanism that prevents inflation, Libra will do that by being fully backed, Bitcoin does that through Nakamoto consensus. With digital currencies it becomes possible to move your entire "cash" holdings in a matter of minutes, so a fixed supply currency like Bitcoin insures that Libra will never dilute it's supply because the barrier to exit the currency is so low. In democratic countries like the US the mechanic that prevents massive inflation is mostly voters' influence over the federal reserve. Of course it isn't perfect the dollar has been inflated ~300% since leaving the gold standard. With corporate global currencies we don't have such voting powers.
I don't think this is necessary in a mature crypto economy where digital currencies are being used more than fiat currencies.
I agree though that crypto monetary policy will play a huge role in the future though, and in the case of Libra, policy will be decided by the Libra Association. All I'm saying is that the Libra Association is not necessarily the best group to be making those decisions because collateralization is how they're funded. The US Fed doesn't have that same conflict of interest... they're paid by US taxes regardless of how their decisions turn out.
Or even just to have people use it.
I can’t afford to hold crypto right now because I don’t have any savings, only debt.
But if there was a crypto that had a stable price and which was accepted by merchants, and I perceived it as trustworthy I’d use it for my purchases instead of using a credit card or debit card.
Libra is not going to be it for me because I don’t trust Facebook and I don’t want them to have any involvement over my money. But I will admit that it has potential for a lot of the Facebook userbase to start using it.
It gives them their a payment processor they can put into WhatsApp to compete with WeChat in China. They know they can't do "Facebook Coin", so they are doing the nearest thing they can, a consortium.
Facebook has nothing to gain from decentralization when all their business depends on slurping up data? That couldn't be further from the truth. Reliance on selling personal data is a huge flaw in the business models of companies like Facebook and Google, and they're eager to diversify. Moving money around has been one of the top businesses to be in since the start of civilization, and it's an obvious target to diversify into.
Your last comment about libertarians being shortsighted is somewhat unrelated, but I have to disagree. That philosophy is all about avoiding expedient means of doing things if they have long-term consequences. Using the force of government is almost always the fastest and most effective way of accomplishing a goal, but the escalation of centralized power over time can lead to catastrophic results, and libertarian-minded people are willing to give up short-term benefits to avoid those long-term consequences. Likewise, businesses can also be short-sighted at times, but they do occasionally employ people who see that too much centralization can lead to collapse in the long-term, and the thinking behind Libra seems to reflect that mindset.
So that you can buy things in WhatsApp, like you can in WeChat.
I think Libra is a distraction from Facebook for people to forget Cambridge Analytica etc. FB may have unleashed this as a weapon for people to rally up or againast and Fb doesn't care if it succeeds or fails because it is a new category and doesn't affect it's bottomline.
Your botnet example is a non-sequiter. Since power in BFT protocols does not stem from the wasting of electricity, botnets have nothing to do with any possible attacks on a BFT system.
I'm assuming they implement countermeasures against simply running a bunch of VMs or containers masquerading as a large number of independent nodes, for example by looking for multiple connections from the same IP addresses or subnet. Otherwise botnets would indeed be unnecessary to carry out the attack—anyone could do it from home with a modest PC.
To me , the most interesting part is towards the end of the article (emphasis mine) > This applies even more to the Calibra wallet: Facebook promises not to mix transaction data with profile data, but that entails, well, trust ...
We all know how the promises turn out [2][3]
[1] https://en.wikipedia.org/wiki/Unified_Payments_Interface
[2]https://www.theinquirer.net/inquirer/news/3032946/whatsapp-a...
[3]https://www.forbes.com/sites/lensherman/2018/05/23/zuckerber...
The thing that really drove this point home for me was when I browsed to both websites. Browsing to the Calibra wallet website, the entire site broke because I have blackholed all Facebook and tracking domains through NextDNS. When I browsed to the Libra website to view the whitepaper, everything worked just fine. This is a great demonstration of who is in control of what.
That being said, I think this article also outlines the clear incentives as to why Facebook would like to promote Libra in the first place, which is the data they have the potential to gather through the Calibra wallet.
I’m sure the government will have something to say about that.
And since a certain amount of banking takes place hereabouts, that law has wider influence than New York.
This part though:
> ...while its members — who again, are the validators — do control the Libra protocol, Facebook does not control the validators. Which, by extension, means that Facebook will not control Libra.
That's true, but from my point of view, that distinction isn't too important.
In either case, there are a relatively very small number of individuals who control Libra in an opaque way.
By spreading the control out a little, I think it reduces short-sighted and single-perspective thinking, which is good, but it's still going to be run in a self-interested way for the handful of companies that control it and the executives that control those companies.
The author seems to be referring to the two different accounting models in crupyotcurrency: the coin model and the account model.
The coin (aka UTXO) model mimics physical cash. A transaction changes ownership of a digital token, leaving a chain of ownership in its wake. This is the model used by Bitcoin.
The account model credits and debits specific amounts from an account. This is the model used by Ethereum.
The author seems to imply that the speed of a network depends on which accounting model is being used.
It doesn't. In both cases, signatures must be validated, and this is the most costly computation. In neither case is the entire chain of transactions reloaded to verify a single payment. Instead, the most recent state is extended.
Transaction volume is largely a function of how open the network is and how trusted the parties are that write blocks. The more open the network to membership by arbitrary players, the slower it will be. The less trust in those writing blocks, the slower it will be.
Bitcoin users value censorship resistance and insist on validating their own blocks (or at least they should). The network is configured make this possible by, for example, setting a block size limit among other features.
Libra will need none of this. Validators will be implicitly trusted. What they say goes. A certain minimum hardware spec can be set and enforced, ensuring fast payment processing, at the expense of censorship resistance and openness.
Calibra would require full identity verification e.g. submitting SSN and a copy of your picture ID. Getting that info is way beyond what FB has about you now.
FB is in it for themselves. The consortium of third party players is for shielding themselves from anti-trust concerns
Within the designed protocols, yes, Facebook gets one vote equal to the the single vote of any other node.
Outside the system lens, Facebook brings this product to potentially 2.38 billion users. That dwarfs the value that any other validator can bring.
If Facebook becomes unhappy with what the consortium is doing, it can simply say "Hey, we're gonna stop using Libra, and start a new fork." So while they may not control other validator members, they can certainly strong arm them into falling in line.
"In practice, it is much more complicated: while a limited set of “validators” — aka miners — share a history of transactions in (individual) blocks that are chained together (i.e. a blockchain), what Libra actually exposes is the current state of the ledger. In practice this means that adding new transactions can be much quicker and more efficient — more akin to adding a line to a spreadsheet than rebuilding the entire spreadsheet from scratch."
How is this different than Bitcoin, and why does it require a different level of trust?
You are still trusting the validators (miners) either way, correct? And how is it more efficient?
Bitcoin uses Proof of Work. Consensus is decentralized. Anyone can do some "work" (hashing in this case). If they find the magic number to get the right hash, they get rewarded by the Bitcoin protocol itself. This is also the only way new Bitcoins are created. It is only when one of these magic numbers gets found that transactions get added to the Bitcoin ledger (every 10 minutes). The rule is that the longest ledger chain wins so everyone is running in parallel. You don't need to own any Bitcoin to do mining to get "free" Bitcoin. The trust is decentralized (in terms of control) and no one can prevent anyone else from validating Bitcoin transactions as long as you follow the same rules as everyone else.
I understand Proof of Stake vs. Proof of Work. But what Ben says about only "publishing the current state of the ledger" doesn't seem to relate to whether PoS is used. It's certainly not inherent to PoS that the entire blockchain isn't published.
Maybe he's just confused about how PoS works (but I somehow doubt that). I understand how PoS makes things more efficient by entrusting a single validator (or any small subset of validators) rather than having essentially a contest, and I understand why this is also inherently less trustworthy than PoW.
But Ben never mentions Proof of Stake anywhere in his explanation, just that the blockchain's "current state" is the only thing "exposed".
I'm juse trying to understand what he's getting at there.
Who can be a validator (miner) is controlled by the consortium, and therefore the blockchain algorithm doesn't need be to as computationally expensive as bitcoin's proof of work, which is designed to contend with the fact that anyone can be a miner.
Instead it can just serve the purpose of enabling a distributed ledger.
Since this is something similar to a old school money lenders table over which exchanges took place, we shall adopt the Old Italian word for table, banca, and call it a "bank"!
Is this a problem for Paypal?
For a decentralised system, you're on your own. It's not clear which one Libra really is.
And yeah, I mean "lose all your money due to a 0 day in your browser".
How would Libra ever work if general population using it have the normal level of computer security?
I foresee a headline like: "$20m worth of Libra stolen due to newly found security flaw. Facebook says 'sucks to be you, it's irreversible'".
(or is the protocol different, and it is reversible? How? Who controls that?)
I think it is silly that they think this will become big among the unbanked (in countries like India) when they can do only 1000 transactions per second. Nuts! Don't you think so?
But Facebook does control Libra just by virtue of providing infrastructure. They're also part of the consortium. So again, why is the author trying to make it seem like Facebook has no control?
People say that "Fintech threatens the banks" but almost all Fintech companies partner with the banks in one way or another.
Look at the companies involved with Libra and see that none of them are banks.
Libra will still have a lot of money on deposit with the banks, but it might be the first Fintech that will really bypass them.
The Libra membership list is kind of meaningless, given that none of the partners seem to have any interest of promoting the project... mainly Zuck just asked these companies "Hey, you want to be on a list for a tech project for some free PR?" and until we hear more from the partners there's no reason to take this list seriously.
So maybe they're happy to shut up for now, let Zuck take the regulatory flack, and if it seems like Libra will take off on FB's efforts, they're positioned to benefit from adoption.
Please show me a citation of where is says concretely that Visa/Uber/etc have handed $10M to this project. The Libra project so far is just wishful thinking about things that maybe, might possibly happen sometime.
However, since these rules are supposed to apply to everyone who wants a seat at the Libra Association, I do assume that Uber and Visa are paying the fee.
"Visa announces intent to join the Libra Association"
FB probably wants to tap into user payment records and that's why they push this.
Other than that, I can't think of a use case.
As the article nodes, it would be a mistake to assume that that is only Facebook. What Libra does is actually similar to Stellar and Ripple, which are also based on permissive BFTs.
Since I've used Stellar, I know a bit more about how that is structured. In short, in Stellar, anyone can start a validator and start validating transactions. This is commonly done by people with a need to validate transactions for scaling reasons. Every validator is configured with a list of other validators that they trust and a consensus quorum that needs to be reached between those for a transaction to be acceptable.
The flip side is that for your transactions to be acceptable to others, they'd have to trust you. In practice these sort of bi-directional trust relations only happen on a need to have basis; for example because you and your business relations are swapping the same tokens with each other and have a business need to trust each other's work. The extended network of mutually trusting validators that trust each other directly or indirectly is the basis for the consensus. After some incidents with the Stellar network halting its consensus, Stellar is actually moving to reduce the reliance of the network on their own validators. The recent outage in May was actually root caused by several non SDF owned validators going down. This sounds bad but it is actually a safety feature: stellar will prefer partition tolerance and consistency over availability. Ethereum and Bitcoin have had issues with favoring availability over consistency. If you are running a bank, that is kind of a big deal.
Libra is launching with a quite broad consortium that each will run validators. I imagine that like in Stellar, each of those validators will eventually be able to start trusting other validators at their own discretion. I'm assuming that that is what Facebook means when they say they will eventually open up.
It seems like initially this will be tied to deals with Calibra, which is a subsidiary of Facebook and which is responsible for hosting the reserve that backs the Libra, and other stable coins that will be running on the network. A key difference with Stellar, which is run and controlled by a foundation representing its members, Calibra is instead a commercial entity owned by Facebook. Presumably the consortium members have some kind of contractual agreement with Calibra about this. In other words, Facebook as a owner of Calibra is a bit more special than everyone else. I imagine they also hold patents, trademarks, etc. as well. To be clear, the software itself is Apache licensed.
Like many, I wrote up my own thoughts on Libra and wrote a lengthty article. You may find it here: https://dev.to/jillesvangurp/libra-blockchains-and-the-meani...
In short, what they are doing makes sense practically, technically, and legally. People are obviously talking a lot about legislation currently and Facebook's motivations. My impression is that governments are mostly still applying and interpreting existing laws when it comes to blockchains and are actually quite slow in responding in a coherent and timely fashion with new laws. My guess is that Facebook and others are counting on this and are looking to create a financial reality where shutting this down becomes economically more difficult. In short, once they are moving lots of money around, shutting them down becomes impractical.
But on the other hand, I can’t help but think that a gay CEO who grew up in Alabama really cares about privacy.
Services is the only part of the business that may have more than small growth levels left in it.
I'm not enthused about supporting anything that worsens the global climate crisis and its irresponsible of large companies to support cryptocurrencies with its terrible power usage right now.
I guess like gambling chips or video arcade tokens, the lack of belief that it's real money might confuse some people into spending it more freely.
Another thing is is that they can take all the money that's paid into Libra and run a hedge fund with the reserves because they can write their terms and conditions so they can do whatever the heck they want with the "reserves" and not tell anyone what they're doing.
Another benefit is that they can facilitate illegal commerce on facebook by letting people conduct cross border transactions outside of AML/KYC land that a PayPal like system would require.
They can also tie identities to coin transactions to analyze transactions for further ad targeting.
Did I miss anything?
Compare cos fighting this to those not like cash app which are building on top of bitcoin.