Social media giant Facebook has unveiled its plans to launch its own cryptocurrency called Libra. The new currency is built on a blockchain system and will use a wallet called Calibra. And it’ll be unleashed on the world in 2020.
Libra could be a compelling alternative to the age-old banking system. You know, one of the few global systems that haven’t seen major innovation or globalisation since its inception. It could also be particularly helpful for people in developing nations who don’t necessarily have access to traditional banking services. The surge of ‘cheap’ smartphones and the use of Facebook and WhatsApp in developing nations could make them a viable market for Facebook’s new money.
Payments will supposedly be seamless, whether you’re transferring money to your own accounts, friends or family across borders — something many workers in South Africa struggle to do every month (and pay hefty fees on). Facebook reckons Libra transfers will be easy enough to manage too, with users having full access to their Calibra wallets in Facebook, Messenger and WhatsApp.
Libra isn’t just Facebook’s project. It’s backed by the Geneva, Switzerland-based Libra Association, a non-profit organisation with a list of founding members who will jointly make decisions over Libra. It is backed by massive industry leaders like Mastercard, Visa, PayPal, Stripe, eBay, Uber, Lyft and Spotify, among others. It even looks like South African firm Naspers has joined in the fun.
All the crypto jargon
If you’re at all up to scratch on your crypto-lore, you’ll know that currencies like Bitcoin and Ethereum change in value almost daily. This is not the case with Libra. Libra is based on something called a stablecoin.
A stablecoin is a special type of cryptocurrency that remains fairly stable because it’s pegged to the value of another fairly stable real-world asset… like the US dollar. The value of Libra will not be linked to the value of one single fiat currency (like the dollar), but its value should never fluctuate as much as something like Bitcoin does.
Libra is built on an entirely new blockchain and will be open-source. Which means anyone will be able to build products that use Libra. The first product built on this blockchain is Calibra — the Facebook-developed wallet app that’ll store all your Libra currency. Calibra is a subsidiary of Facebook, and the development of the wallet is under Facebook’s control… which does raise some privacy concerns.
How it’ll work
So, Facebook has designed the tool users will use to use their Libra currency, and it’ll integrate with Facebook’s Messenger and WhatsApp. Calibra will also be available as a standalone app and will allow users to sign up, top up their wallets with funds, and send, receive and pay with Libra, all from within the various apps.
To sign up, Calibra will require a KYC (know-your-customer) verification, which means that users will have to upload some sort of government-issued ID before they can start using the service. It’ll also have built-in fraud protection, password recovery, and multi-factor authentication, according to its website. Users will also have access to 24/7 customer support channels.
We all know Facebook hasn’t built up the best reputation regarding user privacy but Facebook has said that Calibra user account information or financial data will be stored separately from social media accounts. A Bloomberg report mentions that “[t]he company plans to keep financial data gathered from Libra users separate from Facebook user data. That’s why Facebook’s digital wallet will exist under the Calibra subsidiary, which will house user transaction data on separate servers…”
We’ll have to wait and see how this new currency is adopted once it launches, especially in developing countries. We have our suspicions that the target market will be people who are already in the cryptosphere and are informed about the way crypto functions. But Facebook may have an opportunity to really globalise safe and secure cheap money transfers. If you’re already convinced, head here to sign up.