Following the news that the likes of PayPal, Visa, and Mastercard would no longer be supporting the project, many have begun to wonder if Facebook Libra was a bit farfetched. The goal was ambitious, to begin with, but could we be looking at the complete demise of the project before it even gets off the ground?
To answer this, let’s take a look at the massive user base Facebook looks to draw from and dive deeper into defining Libra.
What are the odds that Facebook will successfully convince its user base to adopt Libra? Can you see yourself using Libra?
To understand this probability, let’s dive deeper to uncover why Facebook is doing this in the first place.
Facebook as a platform for an inclusive economy
According to data from Statista, Facebook is the biggest social media network in the world, with over 2.41 billion monthly active users. An active user is defined as a person who logged in to Facebook in the last 30 days. During the second quarter report for 2019, the company reported 2.7 billion active users. These people logged in to at least one of the company’s core products (Facebook, WhatsApp, Instagram, or Messenger) each month.
We can talk about Facebook’s vast user base a lot, but can Libra really achieve widespread adoption?
The rationale is simple: Facebook wants to encourage a collaborative effort with a group of diverse organizations through the Libra Association. Each member will run a validator node, which forms the network that the Libra blockchain will run on. At this point, however, membership is still non-binding, hence the departures of PayPal, Visa, and others.
Chances of success
So, what’s in it for Facebook? Why does Facebook’s Libra coin have a high chance of success?
Around 70% of Facebook users can be found in developing markets, meaning that they’re not in the US, North America, or Europe. Facebook is looking to encourage these users to use its platform for e-commerce. The most prominent enabler of commerce for these users is financial services, like payment systems. Hence, the motivation to design Libra as a cryptocurrency that primarily functions as an alternative to fiat currency. Unlike fiat, Libra will not be subject to the very high inflation, and government control like most of the currencies already in use.
There are close to 100 countries regarded as high-inflation countries according to the World Economic Outlook. And you know what, much of those populations are already on at least one of Facebook’s platforms.
The bottom line: Libra has tremendous potential to succeed as a payment system. Facebook is already a super app, digital money and financial services are merely the next steps to cementing this status.
Facebook’s Libra initiative is aligned with its mission: to provide the tools that allow people to connect, and communicate. There are 90 million businesses already on Facebook. As such, economic empowerment could be the next successful venture for Facebook and its family of apps.
Financial infrastructure to empower the world
Libra’s whitepaper states that it is a simple global currency. The aim, to provide the financial infrastructure that will empower billions of people from around the world.
So, how do they intend to make such an impact?
The Libra whitepaper goes into brief detail of the plan to revolutionize the global financial infrastructure. In particular, Facebook identifies five key components, or features, of Libra, which will facilitate the realization of this goal.
- Building the Libra ecosystem on top of a secure, scalable, and highly reliable blockchain.
- Creating a stablecoin backed by a reserve of assets.
- Libra will be governed by an independent organization known as the Libra Association.
- Using the LibraBFT consensus mechanism.
- Smart contract coding will use the “Move” programming language.
By the time Libra launches in the first half of 2020, Facebook aims to have 100 members on the Libra Association. Once Libra goes live, all the final decision-making powers will lie with the association. However, Facebook will retain the leadership of the project throughout 2019. After the network launches, all members of the association will enjoy equal privileges, the same commitments, and similar financial obligations, as any founding member. All the members will also enjoy equal governing power. Facebook has built a digital wallet that Libra users can use. The digital wallet, Calibra, will facilitate transactions made in Libra through a mobile app.
The Libra blockchain
Is the Libra blockchain like any other?
No, Facebook’s Libra blockchain is not a blockchain in the traditional sense of the technology. In essence, Facebook sought to code their own chain to meet specific requirements:
- The ability to scale billions of accounts: In a nutshell, this involves high transaction throughput, low latency, and an efficient, high-capacity storage system.
- The ability to stay secure, ensuring the safety of funds and financial data.
- The flexibility to power the Libra ecosystem’s governance and future innovation.
Despite the withdrawal of several payment platforms due to regulatory uncertainty surrounding Libra and blockchain, the vision still remains clear. Facebook will still feel that they will be able to continue with the project and see it to fruition.
Will they be successful? Time will tell.