FACEBOOK'S CRYPTOCURRENCY LIBRA, EXPLAINED

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Facebook has finally revealed the details of its cryptocurrency, Libra, which will let you buy things or send money to people with nearly zero fees. You’ll pseudonymously buy or cash out your Libra online or at local exchange points lượt thích grocery stores, & spover it using interoperable third-buổi tiệc nhỏ wallet apps or Facebook’s own Calibra wallet that will be built into WhatsApp, Messenger and its own tiện ích. Today Facebook released its Trắng paper explaining Libra and its testnet for working out the kinks of its blockchain system before a public launch in the first half of 20trăng tròn.

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Facebook won’t fully control Libra, but instead get just a single vote in its governance lượt thích other founding members of the Libra Association, including Visa, Uber và Andreessen Horowitz, which have invested at least $10 million each inkhổng lồ the project’s operations. The association will promote the open-sourced Libra Blockchain và developer platkhung with its own Move programming language, plus sign up businesses to lớn accept Libra for payment & even give sầu customers discounts or rewards.

Facebook is launching a subsidiary company also called Calibra that handles its crypto lớn dealings and protects users’ privacy by never mingling your Libra payments with your Facebook data so it can’t be used for ad targeting. Your real identity won’t be tied to your publicly visible transactions. But Facebook/Calibra and other founding members of the Libra Association will earn interest on the money users cash in that is held in reserve khổng lồ keep the value of Libra stable.


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Facebook’s audacious bid to lớn create a global digital currency that promotes financial inclusion for the unbanked actually has more privacy & decentralization built in than many expected. Instead of trying to lớn dominate Libra’s future or squeeze tons of cash out of it immediately, Facebook is instead playing the long-game by pulling payments inlớn its online domain name. Facebook’s VP of blockchain, David Marcus, explained the company’s motive và the tie-in with its core revenue source during a briefing at San Francisco’s historic Mint building. “If more commerce happens, then more small businesses will sell more on & off platkhung, and they’ll want to lớn buy more ads on the platform so it will be good for our ads business.”

The risk và reward of building the new PayPal

In cryptocurrencies, Facebook saw both a threat and an opportunity. They held the promise of disrupting how things are bought and sold by eliminating transaction fees comtháng with credit cards. That comes dangerously close khổng lồ Facebook’s ad business that influences what is bought and sold. If a competitor like Google or an upstart built a popular coin & could monitor the transactions, they’d learn what people buy và could muscle in on the billions spent on Facebook marketing. Meanwhile, the 1.7 billion people who laông xã a bank tài khoản might choose whoever offers them a financial services alternative sầu as their online identity provider too. That’s another thing Facebook wants to be.

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Yet existing cryptocurrencies like Bitcoin và Ethereum weren’t properly engineered khổng lồ scale to lớn be a medium of exchange. Their unanchored price was susceptible lớn huge & unpredictable swings, making it tough for merchants to accept as payment. And cryptocurrencies miss out on much of their potential beyond speculation unless there are enough places that will take them instead of dollars, và the experience of buying & spending them is easy enough for a mainstream audience. But with Facebook’s relationship with 7 million advertisers và 90 million small businesses plus its user experience prowess, it was well-poised lớn tackle this juggernaut of a problem.

Now Facebook wants lớn make Libra the evolution of PayPal. It’s hoping Libra will become simpler khổng lồ mix up, more ubiquitous as a payment method, more efficient with fewer fees, more accessible lớn the unbanked, more flexible thanks lớn developers & more long-lasting through decentralization.

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“Success will mean that a person working abroad has a fast & simple way lớn skết thúc money to family bachồng home, & a college student can pay their rent as easily as they can buy a coffee,” Facebook writes in its Libra documentation. That would be a big improvement on today, when you’re stuông chồng paying rent in insecure checks while exploitative sầu remittance services charge an average of 7% to sover money abroad, taking $50 billion from users annually. Libra could also power tiny microtransactions worth just a few cents that are infeasible with credit card fees attached, or replace your pre-paid transit pass.

…Or it could be globally ignored by consumers who see it as too much hassle for too little reward, or too unfamiliar and limited in use to lớn pull them into the modern financial landscape. Facebook has built a reputation for over-engineered, underused products. It will need all the help it can get if wants to lớn replace what’s already in our pockets.

Here’s our zero-buzzword breakdown of Libra:

How does Libra work?

By now you know the basics of Libra. Cash in a local currency, get Libra, spend them like dollars without big transaction fees or your real name attached, cash them out whenever you want. Feel miễn phí to stop reading and nói qua this article if that’s all you care about. But the underlying technology, the association that governs it, the wallets you’ll use and the way payments work all have a huge amount of fascinating detail to them. Facebook has released more than 100 pages of documentation on Libra and Calibra, and we’ve pulled out the most important facts. Let’s dive in.

The Libra Association — crypto’s new oligarchy

Facebook knew people wouldn’t trust it to lớn wholly steer the cryptocurrency they use, and it also wanted help lớn spur adoption. So the social network recruited the founding members of the Libra Association, a not-for-profit which oversees the development of the token, the reserve of real-world assets that gives it value và the governance rules of the blockchain. “If we were controlling it, very few people would want lớn jump on and make it theirs,” says Marcus.

Each founding member paid a minimum of $10 million khổng lồ join and optionally become a validator node operator (more on that later), gain one vote in the Libra Association council and be entitled lớn a mô tả (proportionate khổng lồ their investment) of the dividends from interest earned on the Libra reserve into lớn which users pay fiat currency to receive Libra.

The 28 soon-to-be founding members of the association and their industries, previously reported by The Block’s Frank Chaparro, include:

Payments: Masterthẻ, PayPal, PayU (Naspers’ fintech arm), Stripe, VisaTechnology và marketplaces: Booking Holdings, eBay, Facebook/Calibra, Farfetch, Lyft, Mercabởi Pago, Spotify AB, Uber Technologies, Inc.Telecommunications: Iliad, Vodafone GroupBlockchain: Anchorage, Bison Trails, Coinbase, Inc., Xapo Holdings LimitedVenture Capital: Andreessen Horowitz, Breakthrough Initiatives, Ribbit Capital, Thrive sầu Capital, Union Square VenturesNonprofit & multilateral organizations, & academic institutions: Creative sầu Destruction Lab, Kiva, Mercy Corps, Women’s World Banking

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Facebook says it hopes lớn reach 100 founding members before the official Libra launch and it’s open to anyone that meets the requirements, including direct competitors lượt thích Google or Twitter. The Libra Association is based in Geneva, Switzerland & will meet biannually. The country was chosen for its neutral status và strong support for financial innovation including blockchain công nghệ.

Libra governance — who gets a vote

To join the association, members must have a half raông chồng of hệ thống space, a 100Mbps or above dedicated mạng internet connection, a full-time site reliability engineer & enterprise-grade security. Businesses must hit two of three thresholds of a $1 billion USD market value or $500 million in customer balances, reach trăng tròn million people a year and/or be recognized as a top 100 industry leader by a group like Interbr& Global or the S&P..

Crypto-focused investors must have more than $1 billion in assets under management, while Blockchain businesses must have sầu been in business for a year, have sầu enterprise-grade security and privacy và custody or staking greater than $100 million in assets. And only up khổng lồ one-third of founding members can by crypto-related businesses or individually invited exceptions. Facebook also accepts research organizations lượt thích universities, và nonprofits fulfilling three of four qualities, including working on financial inclusion for more than five years, multi-national reach khổng lồ lots of users, a top 100 designation by Charity Navigator or something like it and/or $50 million in budget.

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The Libra Association will be responsible for recruiting more founding members to lớn act as validator nodes for the blockchain, fundraising lớn jump-start the ecosystem, designing incentive programs to lớn reward early adopters và doling out social impact grants. A council with a representative from each thành viên will help choose the association’s managing director, who will appoint an executive sầu team và elect a board of five to lớn 19 top representatives.

Each member, including Facebook/Calibra, will only get up lớn one vote or 1% of the total vote (whichever is larger) in the Libra Association council. This provides a màn chơi of decentralization that protects against Facebook or any other player hijacking Libra for its own gain. By avoiding sole ownership and dominion over Libra, Facebook could avoid extra scrutiny from regulators who are already investigating it for a sea of privacy abuses as well as potentially anti-competitive behavior. In an attempt lớn preempt criticism from lawmakers, the Libra Association writes, “We welcome public inquiry and accountability. We are committed lớn a dialogue with regulators and policymakers. We nói qua policymakers’ interest in the ongoing stability of national currencies.”

The Libra currency — a stablecoin

A Libra is a unit of the Libra cryptocurrency that’s represented by a three wavy horizontal line unicode character ≋ lượt thích the dollar is represented by $. The value of a Libra is meant lớn stay largely stable, so it’s a good medium of exchange, as merchants can be confident they won’t be paid a Libra today that’s then worth less tomorrow. The Libra’s value is tied lớn a basket of ngân hàng deposits & short-term government securities for a slew of historically stable international currencies, including the dollar, pound, euro, Swiss franc and yen. The Libra Association maintains this basket of assets và can change the balance of its composition if necessary to offphối major price fluctuations in any one foreign currency so that the value of a Libra stays consistent.

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The name Libra comes from the word for a Roman unit of weight measure. It’s trying lớn invoke a sense of financial freedom by playing on the French stem “Lib,” meaning không tính phí.

The Libra Association is still hammering out the exact start value for the Libra, but it’s meant to lớn be somewhere close khổng lồ the value of a dollar, lỗi or pound so it’s easy to lớn conceptualize. That way, a gallon of milk in the U.S. might cost 3 lớn 4 Libra, similar but not exactly the same as with dollars.

The idea is that you’ll cash in some money and keep a balance of Libra that you can spkết thúc at accepting merchants & online services. You’ll be able khổng lồ trade in your local currency for Libra và vice versa through certain wallet apps, including Facebook’s Calibra, third-các buổi tiệc nhỏ wallet apps & local resellers like convenience or grocery stores where people already go to lớn top-up their điện thoại data plan.

The Libra Reserve — one for one

Each time someone cashes in a dollar or their respective local currency, that money goes into lớn the Libra Reserve sầu & an equivalent value of Libra is minted and doled out lớn that person. If someone cashes out from the Libra Association, the Libra they give baông xã are destroyed/burned & they receive the equivalent value in their local currency baông chồng. That means there’s always 100% of the value of the Libra in circulation, collateralized with real-world assets in the Libra Reserve sầu. It never runs fractional. And unliked “pegged” stable coins that are tied khổng lồ a single currency like the USD, Libra maintains its own value — though that should cash out to roughly the same amount of a given currency over time.

When Libra Association members join và pay their $10 million minimum, they receive sầu Libra Investment Tokens. Their mô tả of the total tokens translates inlớn the proportion of the dividend they earn off of interest on assets in the reserve. Those dividends are only paid out after Libra Association uses interest lớn pay for operating expenses, investments in the ecosystem, engineering research and grants lớn nonprofits and other organizations. This interest is part of what attracted the Libra Association’s members. If Libra becomes popular và many people carry a large balance of the currency, the reserve will grow huge and earn significant interest.

The Libra Blockchain — built for speed

Every Libra payment is permanently written inkhổng lồ the Libra Blockchain — a cryptographically authenticated database that acts as a public online ledger designed to lớn handle 1,000 transactions per second. That would be much faster than Bitcoin’s 7 transactions per second or Ethereum’s 15. The blockchain is operated và constantly verified by founding members of the Libra Association, which each invested $10 million or more for a say in the cryptocurrency’s governance và the ability to operate a validator node.

When a transaction is submitted, each of the nodes runs a calculation based on the existing ledger of all transactions. Thanks to a Byzantine Fault Tolerance system, just two-thirds of the nodes must come lớn consensus that the transaction is legitimate for it to be executed and written to lớn the blockchain. A structure of Merkle Trees in the code makes it simple to lớn recognize changes made to the Libra Blockchain. With 5KB transactions, 1,000 verifications per second on commodity CPUs và up to 4 billion accounts, the Libra Blockchain should be able lớn operate at 1,000 transactions per second if nodes use at least 40Mbps connections & 16TB SSD hard drives.

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Transactions on Libra cannot be reversed. If an attachồng compromises over one-third of the validator nodes causing a fork in the blockchain, the Libra Association says it will temporarily halternative text transactions, figure out the extent of the damage and recommend software updates lớn resolve the fork.

Transactions aren’t entirely miễn phí. They incur a tiny fraction of a cent fee khổng lồ pay for “gas” that covers the cost of processing the transfer of funds similar khổng lồ with Ethereum. This fee will be negligible lớn most consumers, but when they add up, the gas charges will deter bad actors from creating millions of transactions khổng lồ power spam và denial-of-service attacks. “We’ve purposely tried not to lớn innovate massively on the blockchain itself because we want it lớn be scalable & secure,” says Marcus of piggybacking on the best elements of existing cryptocurrencies.

Currently, the Libra Blockchain is what’s known as “permissioned,” where only entities that fulfill certain requirements are admitted lớn a special in-group that defines consensus và controls governance of the blockchain. The problem is this structure is more vulnerable to attacks & censorship because it’s not truly decentralized. But during Facebook’s research, it couldn’t find a reliable permissionless structure that could securely scale lớn the number of transactions Libra will need lớn handle. Adding more nodes slows things down, và no one has proven a way khổng lồ avoid that without compromising security.

That’s why the Libra Association’s goal is to move to lớn a permissionless system based on proof-of-stake that will protect against attacks by distributing control, encourage competition and lower the barrier to lớn entry. It wants to lớn have at least 20% of votes in the Libra Association council coming from node operators based on their total Libra holdings instead of their status as a founding member. That plan should help appease blockchain purists who won’t be satisfied until Libra is completely decentralized.

Move sầu coding language — for moving Libra

The Libra Blockchain is open source with an Apabịt 2.0 license, & any developer can build apps that work with it using the Move sầu coding language. The blockchain’s prototype launches its testnet today, so it’s effectively in developer beta mode until it officially launches in the first half of 2020. The Libra Association is working with HackerOne khổng lồ launch a bug bounty system later this year that will pay security researchers for safely identifying flaws and glitches. In the meantime, the Libra Association is implementing the Libra bộ vi xử lý Core using the Rust programming language because it’s designed khổng lồ prevent security vulnerabilities, and the Move language isn’t fully ready yet.

Move was created khổng lồ make it easier lớn write blockchain code that follows an author’s intent without introducing bugs. It’s called Move sầu because its primary function is khổng lồ move Libra coins from one account to another, và never let those assets be accidentally duplicated. The core transaction code looks like: LibraAccount.pay_from_sender(recipient_address, amount) procedure.

Eventually, Move developers will be able lớn create smart contracts for programmatic interactions with the Libra Blockchain. Until Move sầu is ready, developers can create modules và transaction scripts for Libra using Move sầu IR, which is high-màn chơi enough khổng lồ be human-readable but low-màn chơi enough lớn be translatable inkhổng lồ real Move bytecode that’s written to the blockchain.

The Libra ecosystem and the Move language will be completely open khổng lồ use & build, which presents a sizable risk. Crooked developers could prey on crypkhổng lồ novices, claiming their phầm mềm works just the same as legitimate ones, & that it’s safe because it uses Libra. But if consumers get ripped off by these scammers, the anger will surely bubble up to Facebook. Yet still, Calibra’s head of product tells me, “There are no plans for the Libra Association lớn take a role in actively vetting ,” Calibra’s head of sản phẩm Kevin Weil tells me.

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Even though it’s tried to distance itself sufficiently via its subsidiary Libra and the association, many people will probably always think of Libra as Facebook’s cryptocurrency & blame it for their woes.