This week, Facebook and 27 other partners announced a plan to launch a new digital currency it hopes will "transform the global economy." The currency, named Libra, is being developed by Facebook, but the company intends to share control with a consortium of organizations, including venture capital firms, credit card companies, and other tech giants.
Here is a quick dive into what Libra is, how it works and the organization's aimed to be in control of the digital asset.
What is Libra?
According to information on Libra's official website, Libra is "a simple global currency and financial infrastructure that empowers billions of people". Libra is a digital asset built by Facebook and powered by the same blockchain technology used by Bitcoin, Ethereum and other cryptocurrencies.
Libras mission is to make moving money around the world easy and cheap for everyone no matter where you live, what you do, or how much you earn. According to Facebook, Libra will carter for the 1.7 billion unbanked people around the world who do not have access to a bank account or any form of financial inclusion.
How will Libra work?
When the cryptocurrency launches in 2020, anyone can buy the currency through any wallet app that holds Libra, including Facebook's own digital wallet known as Calibra which is already signing people up for early access. The digital wallet allows users to send be able to send money to anyone with a smartphone. It will also be available in Facebooks apps like Messenger, WhatsApp, and Instagram.
Once Libra launches, users will need to provide a government-issued ID for KYC to set up an account. Users will be able to convert their local currency (US Dollar, Euro, etc.) into Libra and then store that balance of Libra in their Calibra wallet electronically. In terms of converting real-world cash, they'll also be able to head brick-and-mortar shops like grocers or convenience stores to top up their balance, much like people can now with top-up phone pay-as-you-go phone plans.
Facebook has set up an independent Switzerland based non-for-profit organization known as "Libra Association" to govern the currency. The Libra Association is made up of Facebook and 27 other partners (mostly large corporations) including MasterCard, Visa, Paypal, and eBay.
The governing body of the Libra Association is the Libra Association Council, which is comprised of a representative of each member of the association. Operating and policy decisions of the council require various voting thresholds depending on the importance of the decision.
Each member has committed a minimum of $10 million to join and the total number of Libra Association member is expected to be 100 before its launch in 2020. Each $10 million investment entitles one vote in the council, subject to a cap.
Libra Association Founding Partners
Eventually, Facebook hopes Libra will be accepted as a form of payment, and other financial services will be built on top of its blockchain-based network.
Facebook developing a cryptocurrency with support from powerful companies like Visa, MasterCard, and PayPal is a real validation for cryptocurrency that these are full of potential, hold great promise.