What's the counterargument to this?
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.
> 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.
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.
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.
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.
So that you can buy things in WhatsApp, like you can in WeChat.