What is Libra?

Facebook cryptocurrency: Libra

Facebook has a grandiose plan – to create its own digital currency and name it Libra (i.e. Freedom). If at least a third of the entire 2 billion army of social network users starts using this coin, then it will quickly outstrip the US dollar in popularity.

This is a digital coin with which users can send or receive money. Moreover, they will be able to pay for goods and services within the social network, as well as outside it. All transactions will be carried out on the blockchain. Initially, Facebook planned to launch the project in 2020 in conjunction with partners such as Mastercard, PayPal Holdings and Uber. However, Paypal has already stated that it does not want to participate in this event and prefers to concentrate on its own financial services.

Libra is a Stablecoin

Facebook creates an electronic “wallet” called Calibra, through which it will be possible to buy Libra for fiat money. Some projects are already developing alternative solutions. The exchange rate will fluctuate, but not much. It is assumed that Libra will be a stable coin – stablecoin. Such cryptocurrencies are not prone to sharp price changes, significantly limiting the practical use of bitcoin and many other digital assets.

The cost of stablecoin is usually tied to the value of another non-volatile asset. Many projects maintain the value of their coins by securing reserves — similar to how governments provided their money with gold until this system collapsed. The most popular stable coin at the moment, Tether, is pegged to the US dollar; its price in dollars, as a rule, changes by only a few cents.

What will be different with Libra?

Facebook promised to tie Libra to an asset basket, which will include the dollar, euro, pound and yen, Singapore dollar, as well as low-risk securities, such as US treasury bonds.

Facebook formulates its USP (unique selling proposition) as the ability to send money as easily and quickly as a text message. However, such services have been invented and implemented by other companies. It is possible that blockchain would allow Facebook to process transactions for 1.7 billion adults on the planet who do not have access to banking services. In high inflation countries such as Venezuela, buying Libra can be a way to save savings from impairment.

Why do you need Facebook?

The company is going through hard times: revenue growth is falling, and Libra can open up new opportunities in the field of payment services and trade. Facebook partners have their own motives: if Libra revolutionizes the payment business, Mastercard will probably want to participate. However, potential partners have to consider increased bias on the part of politicians and regulators.

Importance of stablecoins

Stablecoins are considered a bridge between the cryptocurrency world and traditional money, because they facilitate the conversion. JPMorgan Chase & Co. develops a stable coin (JPM Coin) for its customers. The Bank intends to use it for making internal payments; He believes that stablecoins and blockchains will eventually replace traditional payment systems. Libra takes this concept to a new level.

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