Page 53 - Payout Magazine Online Volume 10.01

Why Libra?
The name Libra was decided because it
refers to the basic Roman measurement of
weight. Plus, the abbreviation of lb comes
from Libra, and even the fancy £ symbol is
taken from the letter “L” in Libra.
How Will Libra Work?
Like Bitcoin, the granddaddy of all
cryptocurrencies, Libra will run on a modified
version of blockchain technology.
Blockchain technology provides the
infrastructure for all cryptocurrency
exchanges to occur. It creates a digital,
unchangeable record of every payment that
has ever happened in a cryptocurrency.
The critical aspect of a Blockchain is that Libra to achieve everything it is setting out
it has no central server. Instead, it operates
over a network of peers. No single server is
responsible for any transaction on its own.
Instead, hundreds of computers on a peer-
to-peer network lend their computing power
to perform the operations.
The decentralized nature of Blockchain
serves a couple of purposes. Firstly, the
design enhances security because there is
no central server where all the information
is stored. Even if hackers could access the
network, the data they have access to will
be minimal. Secondly, a global peer-to-peer
network means that governments have no
central body they can target to impose their
will.
In short, Blockchain is the ultimate tool
for sticking it to the man, the banks, and the
state.
Is Libra a Real Cryptocurrency
Facebook’s insistence on calling Libra a
cryptocurrency has caused some ripples in
the cryptocurrency sphere of influence. Not
all agree that it should qualify as a bonafide
member of the cryptocurrency family.
For starters, anyone can set up a Bitcoin
node and join the network. Libra, on the other
hand, will only run on nodes controlled by
Libra Association members (i.e., Facebook,
Uber, PayPal, and others).
Of course, transactions will be a collective
effort, and none of these companies will
have a vote on how they are processed and
verified. This concept slots nicely into the
definition of what makes a cryptocurrency.
There are die-hard libertarians who believe
that a controlling group of corporations goes
against all that Blockchain enthusiasts hold
dear. There’s a justifiable concern that the
Libra Association may not hold up under
the weight of a government attempting to
impose its will on Libra – such as blocking
a transaction.
Facebook has released an official reason
for why they have settled on this design,
which is that the model used by Blockchain
does not have sufficient power to provide the
“global financial infrastructure” needed by
to do.
Another claim by Facebook may also help
to validate Libra as a cryptocurrency. Once
the currency is launched and circulating
in the wild, the company will withdraw its
leadership role, and all association members
will receive equal votes when governing Libra.
Why Should Libra Be Centralized?
Centralizing Libra transactions will
help to increase speed and scalability. A
decentralized system creates a more secure
environment that is protected against
hacking and is less vulnerable to shutdowns.
The Visa payment system can handle
about 24,000 transactions per second. In
comparison, the Bitcoin blockchain is only
capable of seven payments per second.
When it first goes live, it will be expected
that Libra will be able to handle up to 1,000
transactions per second.
According to Libra’s white paper, Libra will itself as an unaccountable and arrogant
be moving from the current proposed model
(permissioned Blockchain) to a completely
decentralized model referred to as a
“permissionless blockchain.” We will have to
trust that this will happen because there are
no guarantees.
Is Volatility a Problem?
Maybe.
Fortunes have been made and lost
throughout Bitcoin’s turbulent history. Bitcoin
prices have surged between around $1,000
in 2017, to approximately $20,000, with huge
dips and swings in between.
It’s not the most stable platform on which
to purchase your morning coffee. Your cup of
joe could increase in price by tens of dollars
in a matter of seconds before the struggling
Blockchain network catches up with the
transaction.
Facebook wants Libra to be used as
a currency rather than an investment (or
speculative) platform, which is why they have
declared it to be a “stablecoin.”
What the heck is a “stablecoin,” and what
does it mean for users of the platform?
Basically, just like every American dollar used
to be tied to the value of gold in Fort Knox,
the value of a Libra will be associated with
real-world assets.
The Libra Association plans to hold
low-risk government securities to ensure
the stability of every Libra virtual coin in
circulation. When users trade Libra for real-
world cash, that cash value will be added to
the Libra Association’s reserves.
Whatever your feelings about
cryptocurrencies, Facebook’s proposed
entry will mean interesting times are ahead
for the global financial sector. France has
made it clear that only governments should
print money and is warning about the
potential for Libra to be used as funding for
illegal operations.
England has also stated that Libra will
only be allowed if it meets their stringent
standards. Lawmakers in the US and EU are
vocal about how much trust can we truly
place on a company that has already proven
monopoly.
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