With virtual money, Facebook bets on disrupting the world, again

Facebook does not intend to make money from the new Libra virtual currency or its own digital wallet Calibra but hopes to build
Facebook does not intend to make money from the new Libra virtual currency or its own digital wallet Calibra but hopes to build a platform for new financial services

Facebook's ambitious plan for a virtual currency has the potential to disrupt the way people store, spend and send money and open up new business opportunities for the world's leading social network.

The Libra cryptocurrency unveiled Tuesday by Facebook with two dozen partners aims to bring financial services and online commerce to more than a billion "unbanked" people.

Facebook's plan could potentially be as disruptive as its original mission of connecting the planet, and puts the company on a new track as it shifts its emphasis away from being the world's "town square."

"If successful, Libra could have benefits for consumers and in reducing the transaction costs of electronic payments, but the success of Libra is not guaranteed," said John Belau, a senior fellow at the Competitive Enterprise Institute, a nonprofit policy group in Washington.

"Like other cryptocurrencies, it will face many challenges of which the most important is establishing trust in a community of users."

Facebook and its partners in the nonprofit Libra Association, which will manage the virtual coin, plan to use real assets to keep the currency stable and avoid wild swings of prior crypto assets like bitcoin.

Chart showing main developments in Facebook's history and the increase in active users since 2004
Chart showing main developments in Facebook's history and the increase in active users since 2004

Overcoming skepticism

Facebook will need to overcome skepticism about the project as it seeks to regain public confidence after a wave of scandals over data protection and privacy.

"There has been great hype about (cryptocurrencies) for a number of years, but none of the currencies have broken through into major usage," said Darrell West, who heads the Brookings Institution's Center for Technology Innovation.

"Most people are not comfortable with virtual currencies and don't have the kind of trust that is required for . Facebook's privacy challenges won't make it any easier for the company to break through into popular acceptance."

Caitlin Long, a former Wall Street executive who blogs about blockchain, a public ledger for bitcoin, said Facebook left many questions unanswered.

Facebook "didn't lay out its regulatory strategy... but I think the #crypto industry just gained a powerful new ally in our quest to fix outdated laws that stand in the way of progress," Long said on Twitter.

"I do worry about other govts viewing #Libra as a giant data honeypot for govt surveillance & tax reporting purposes. Will you encrypt customer spending history so you can't see it or report it to govts? You didn't answer that."

Facebook's move into cryptocurrency comes with the leading social network moving toward CEO Mark Zuckerberg's vision of shifting
Facebook's move into cryptocurrency comes with the leading social network moving toward CEO Mark Zuckerberg's vision of shifting away from being a "digital town square" to small-group messaging and payments

What's the business plan?

Libra, set to be rolled out in 2020, will be independent of Facebook and the new digital wallet Calibra won't share data with the social network for advertising.

Facebook indicated it won't take a cut of transactions from Libra or Calibra, and that it simply wants to build a platform for new financial services.

But analysts say there are multiple opportunities for Facebook, which reaches some 2.7 billion people on its core social network, and other services such as Instagram, Messenger and WhatsApp.

"We believe this is a major initiative for Facebook, and one that has the potential of putting the company front and center in areas beyond advertising, including commerce and ," said analyst Youssef Squali of SunTrust Robinson Humphrey in a research note.

"It positions the company as one of the key actors at the center of the cryptocurrency development, and a main architect of the future of this emerging and important trend."

The Facebook digital currency Libra will live on smartphones and open up new services and money transfer options to people witho
The Facebook digital currency Libra will live on smartphones and open up new services and money transfer options to people without bank accounts

Partners in the Libra Association include a variety of organizations including financial firms like PayPal, Visa and Mastercard, the crowdfunding platform Kiva, the relief nonprofit Mercy Corps, ridesharing companies Uber and Lyft and investment firms such as Thrive Capital and Andreessen Horowitz.

Some argue the Facebook initiative can open up new possibilities that have not yet been contemplated.

"What's super exciting is what money, what digital cash, can evolve into," said Lou Kerner, managing partner at the investment firm CryptoOracle.

"The possibilities are really infinite and we're at the very very early days today. So my guess is that Facebook is going to compete by adding additional features that we can't even begin to comprehend today."


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Facebook takes on the world of cryptocurrency with 'Libra' coin

© 2019 AFP

Citation: With virtual money, Facebook bets on disrupting the world, again (2019, June 18) retrieved 19 July 2019 from https://phys.org/news/2019-06-virtual-money-facebook-disrupting-world.html
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User comments

Jun 18, 2019
Let's see, first you have a handful of companies running this, so it is NOT decentralized and it is corporations, not people behind it. It is not censorship resistant. Second, you have it tied to a basket of fiat currencies, and they tout stability? The central banks have been destabilizing fiat for more than a century (the dollar has lost 99% of its value). So what is the point of this crypto? Control and data for facebook and the politicians.

Just wait until people are banned and shadow-banned for their views and can't use their money. Since it is centralized, that will be easy. Political pressure or public pressure will become too much.

This crypto buys NO benefit over credit cards, PayPal etc. Bitcoin etc are much better choices.

Jun 18, 2019
While I agree Bitcoin is a much better choice than libra, damp leaves would be an even better choice.

Jun 18, 2019
*** HELL NO!!!!!!!!!!! ***

Stay the hell away from Facebook, their Libra and the SquidBoy.

Give a good look at the real established crypto currencies like Bitcoin, Litecoin, Ethereum, Zcash, Dash, Ripple, Monero, Bitcoin Cash, NEO, Cardano, EOS and more.

Jun 18, 2019
Most of the first and biggest cryptocurrencies were based on government intelligence agencies leaning forward to occupy a field they perceived might grow. To do so they used hash functions and other methodologies that were presently hackable by US, UK and Russian intelligence, but nearly impossible for others to hack. We saw the same thing when DES was introduced.

They never learn. The problem with introducing cryptographic standards that are just on the border of what the most sophisticated organizations can hack and what no one else can hack is that in five or ten years, as technology improves, some 12 year old hacker in eastern Europe is manufacturing counterfeit bitcoins by hacking the hash and fooling enough nodes.

Libra is just the next iteration to occupy the same field with more brands and money.

What's real would be a cryptocurrency with an RSA algorithm where "nodes" solve 100,000 digit prime number discovery operations for security instead of a cheesy hash.

Jun 19, 2019
Cryptocurrency for the unbankable? The unbankable often are within dollars of missing rental payments, car payments, whatever. The ups and downs of cryptocurrency is not something they can deal with.

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