On June 18, Facebook officially launched the whitepaper for its new Libra project. The project has sparked a lot of reactions, both among the crypto community and the politicians.
Defined as a global digital currency, the Libra will be based on bank reserves in several currencies and other financial instruments such as bonds.
The new currency will be managed with an organization that will include a total of 100 members. So far, the founders of the Libra Association include 28 companies such as Mastercard, PayPal, Visa, Stripe, eBay, Coinbase, Andreessen Horowitz and Uber. Each member of the association must invest at least $ 10 million in the project.
The Libra is an open-source blockchain that also introduces the Move programming language for intelligent contracts. The Libra Testnet will run in beta mode until launch in the first half of 2020.
The Libra Blockchain is managed by the nodes and each founder member operates a validator node. For now, only founding members have access to blocked permission. The plan is that in 5 years, the system becomes less-suited with the development of the network.
The Libra Association will have the role of attracting collaborators to accept the Libra as a method of payment.
The ultimate goal is to send money or pay as easy as sending a Facebook message.
Facebook also launched a new subsidiary called Calibra, which will develop services associated with the new currency. The first product will be a digital wallet that will allow the storage, transfer and spending of Libra cryptomonas. The wallet will be available in Messenger, WhatsApp, and as a standalone application.
Users of the wallet will have to go through the KYC / AML process, and Calibra will not be available in countries where cryptomonas are forbidden.
Critics in the crypto community
“Unlike existing blockchains that see blockchain as a collection of transaction blocks, Libra Blockchain is a single data structure that records transaction history and their status over time.”
So Libra is a database with updated entries and a history of past changes. In fact, technical specifications go further, clarifying that it is a “decentralized and programmable database”.
Cypherpunk Jameson Lopp explained that, while operating at a high level, like most blockchains, Libra transactions do not require blocks because it is a licensed system.
Because validators are generally supposed to be good actors, the system does not have to protect themselves against the attacks of some bad actors.
“Since Libra runs an authorized system, it can use a more efficient consensus algorithm that does not need lots of transactions because transaction history is far less likely to be rewritten.”
This “not exactly blockchain” will be managed by 100 validators, including Facebook, through a proof-of-stake system. Validators are large companies and corporations with numerous clients who have made significant investments in the project.
“One ring to rule them all”
Even Nouriel Rubini, known for his critical attitude toward cryptomonas such as Bitcoin, commented negatively on the Facebook project:
“It started as a privately owned, licensed, not-trustless, and centralized oligopoly club. It’s ridiculous to call it a “blockchain”. Like all DLT entreprise projects, it uses the blockchain label to attract and control billions of users. A scam based on monopoly “
the economist said.
Analyst Peter Todd put the issue in even simpler terms
“Libra is a non-downloadable centralized database, implemented with an internal chain that users need to trust and do not require validation. Basically, they propose a private asset-backed coin. It will pose a major challenge for central banks. “
FB’s Libra is an unscalable centralized database, implemented with an internal chain that users must trust and are not going to validate.
But politics! They are proposing a private currency backed by assets. Hell of a challenge to central banks.
– Peter Todd (@peterktodd) June 18, 2019
Andreas Antonopoulos is of the same opinion:
“Facebook’s Libra project is not a competitor for open, public, free-of-charge, borderless, neutral and courageous blockchains. It will compete against both retail banks and central banks. It will be fun to see what will happen. “
John Carvalho, CTO of Bitrefill, said:
“They certainly try to create an illusion of decentralization, but they actually created a cartel with an entry fee. They exploit the enthusiasm generated by the term “blockchain” to create a cooperative payment system with a maximum of 100 members. “
Carvalho, however, stressed that modern banking systems are working pretty well for what Facebook is trying to do. This has been demonstrated by the success of mobile payment systems such as Venmo and WeChat. Basically, Libra has been created from convenience – to simplify the integration of such a payment system into Messenger and WhatsApp. He said that most of the 2.6 billion users are likely to use the service just because their applications have already been downloaded.
However, Carvalho warned in turn.
“Libra is trying to get the success that WeChat has had in the Orient. However, they will have great difficulty in persuading governments to tolerate the idea. “
Political and Governmental Reactions
The US government does not seem to have a positive reaction to the new project.
Republican Patrick McHenry, member of the House of Representatives’ Financial Services Committee, has called for a hearing on the Libra project. Committee chairman Maxine Waters has called for the development of the Facebook crypto project until the details are clarified.
Waters referred to the previous controversy over Facebook data policies. She also admitted that the new cryptomon is “a continuation of uncontrolled intrusion” into people’s lives.
“Regulators should see this project as an alarm signal. We need to address seriously the issues of national confidentiality and security, cyber security risks and trading risks generated by cryptomonas,
“In view of the company’s troubled past, I ask Facebook to cease any measure of developing a cryptomono until Congress and regulators have the opportunity to examine this issue and take action.”
European politicians also reacted negatively to the new criptomonade Facebook
In an interview with Europe 1, French Finance Minister Bruno Le Maire said the Libra should not be seen as a substitute for traditional currencies:
“We can not allow Libra to become a sovereign currency. It can not and must not happen. “
Le Maire also urged the G7 to produce a Facebook project report for the July meeting. The Group of Seven (G7) is a group consisting of Canada, France, Germany, Italy, Japan, the United Kingdom and the United States.
Markus Ferber, a German member of the European Parliament, has called for the Libra approach with caution and skepticism:
“Facebook, with more than 2 billion users, could become a shadow bank. Regulatory authorities should be very careful. “