Facebook is planning on launching its own cryptocurrency called Libra.
For a long time, people in the Bitcoin community have hoped that it could reach mass adoption, that everyone would start using it and abandon fiat currency. That hasn’t happened yet.
Is it possible that a multinational corporation like Facebook could take this technology and use their existing user base to introduce it in a way that’s user friendly, and dominate the whole market? And if they do, what’s the worst that could happen?
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Facebook & the Cryptocurrency Market
So, Facebook coin. Facebook has about 2.8 B users worldwide, FB also owns WhatsApp and Instagram. Whatsapp has 1.5 B users, Instagram 1 B users. Imagine if they could connect all of these users in a worldwide financial network, using a coin which is tied to the US dollar.
People say with such a large userbase, Facebook could immediately compete with PayPal’s 277 MM users, venmo’s 40 MM users. It’s not necessarily that simple. As we can see, FB messenger already has a payment option. I’ve never used it. I’ve never heard of anyone using it. Most Facebook users say they would not use their payment system.
However, for this network wide coin, it might be different. Whatsapp has 200 MM users in India alone. For a long time, we thought that Bitcoin and cryptocurrency’s primary market would be remittances.
The problem seems to be, in a lot of the world it’s difficult to spend crypto or convert it into cash. With all those users just in India, and Facebook’s possible political influence, they might be able to literally create a whole economy.
The proposed name for the coin is “Libra”, which I think is going to be confusing for millions of Spanish speakers around the world, because to them, “libra” means “pound”. Imagine starting a new payment service and just calling it Dollar or Euro. Would that be really brilliant, or really stupid?
At first people were speculating that Libra would be something like a Starbucks loyalty card. Now they’re saying it’s more likely that it will look like Bitcoin or Ether. The question is, what do they have to gain from making this look more like a cryptocurrency than a PayPal system, or like their current Facebook payment system. One answer is, Libra can piggyback off all the existing infrastructure of cryptocurrency. Exchanges around the world can implement support for Libra, and their project benefits while externalising the majority of the costs.
Facebook probably won’t want to give up too much control. Libra probably wouldn’t be a “true” cryptocurrency like Bitcoin. It will look more like Ripple or Stellar Lumens – systems where they can still shut down your account if they feel like it.
This presents some interesting opportunities:
- They could reward users for viewing ads, similar to Brave browser and Basic Attention Token.
- Incentivise merchants to accept coins by giving discounts on FB ads when they pay with Libra.
- FB is talking to Visa and Mastercard about making physical Libra cards. Real world integration, again taking advantage of existing payment systems.
- Visa and Mastercard recently announced an increase in their processing fees, which creates space for an Libra pay app similar to ApplePay or GooglePay.
In some ways, this project could be really cool. Maybe it would open up the possibility of a lot of money flowing into India and other countries, without impediment, allowing those countries to create more of their own wealth.
There’s also a lot of ways this could go very wrong.
Security Risks
There’s an article from CCN entitled “Only an idiot would use Facebook’s shady cryptocurrency.” It lays out some clear reasons why you shouldn’t trust Facebook with money:
- The Cambridge Analytica scandal. This was a breach of trust; a lot of user data was given to a third party, possibly allowing Trump to win US election.
- It was discovered that Facebook stored its passwords in plaintext for about 7 years. That means certain employees would have been able to open the file and log into anybody’s account, especially in the years before FB implemented additional security measures.
- The issue of FB censorship. Of course they shut down Infowars, Milo Yiannopoulos, Louis Farrakhan. But a lot of people out there complain of five day bans or 30 day bans for sharing off-colour memes. I was put in FB jail for a week for a comment I’d written maybe 7 years prior. In many cases, there’s no appeals process. With so many people using Facebook, with Facebook being one of the primary portals people use to discover news and other information, it’s not hard to see how this could be abused for political purposes.
FB encourages you to use SMSing and eventually financial services in their messenger app. Then you get put in FB jail. Imagine giving this organisation the power to control your money, and then getting cut off. And when your funding gets cut, does the Zuck give a duck’s left nut?
Economic Risks
Facebook wants to make sending money free. The question is, how do they make money from this? One way would be, they open an exchange so people can convert FB coins into their local currency and charge a fee for it.
But if I put on my tinfoil hat for a second, I’d look at the case of Tether.
Tether started out with the promise of backing every token 1 to 1 with USD, but recently changed their website to a much vaguer wording, saying every token is backed by assets. They’ve been very evasive about being audited, and the wording is so vague that we might even assume that that the assets that back many of the tethers, are other tethers.
With Tether having established their place as the premium stablecoin in the economy, and now removing the USD backing, they’ve become a de facto central bank within cryptocurrency. If FB were to pull a similar trick, it could make them the single most powerful entity within cryptocurrency, possibly with power even to rival the biggest central banks in the world.
I have to ask if Facebook would do this, considering the legal risk they’d face – possibly endless lawsuits relating to fraud.
On the other hand, this is like the story about a guy who borrows a million dollars to buy a tank. You ask him, how is he going to pay back the million dollars? He says, “Pay it back? I don’t have to pay it back – if they ever come to collect, I have a tank.”
Likewise, once you control the money supply, what could a few lawsuits mean to you?
The steel foil version of this theory is, Facebook wouldn’t have to deal with any lawsuits, because they have the support of powerful hidden interests to create a one world currency.
So, what do you think? Would you use Libra? Do you think other people would use it? If they do, are they at risk of putting a buttload of power in the hands of an alleged extraterrestrial reptilian alien overlord? Leave a comment, ask a question.
Thank you
Thanks for pressing like and subscribe, checking the description, being a crypto bro or crypto sister and connecting with me on all social media.
As always, have a look around and notice the freedoms and opportunities this wonderful world affords you, and stay grateful!
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Cryptonomics – Facebook’s Crypto World Domination – The Libra