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Libra Coin White Paper Review

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“Libra’s mission is to enable a simple global currency and financial infrastructure that empowers billions of people.”

Today Libra.org has open to the public Libra’s White Paper on his website. This awaited event is possibly the most awaited piece of news of the crypto world this year.

The Problem

Libra’s team sees the advent of the internet has empowered billions of people with access to knowledge, information and a wide range of low-cost services. But despite these services are accessible using a $40 smartphone, billions of people remain outside the financial system with no possibility to access them, due to the expenses incurred to have a bank account and the costs of money transfers.

Blockchain and cryptocurrencies

The team regards blockchain technology and the crypto world as the solution to the problem of the cost, but sees right now there is no cryptocurrency with mass-market usage, due to volatility and lack of scalability.

The Opportunity

This section is a list of their beliefs about what has to be done

  • People should have access to financial services and control their hard-earned money
  • Instant open and low-cost money movements that will boost commerce
  • Decentralised governance is the way to go
  • Global currency governed as a public good
  • They have the responsibility to help advance this solution.

Libra

They are introducing Libra as the “internet money”.

“The mission for Libra is a simple global currency and financial infrastructure that empowers billions of people”

According to their statement, Libra is made up of three parts working together:

  1. Built on the reliable and open-source Libra Blockchain
  2. Backed by a reserve of assets to give it “intrinsic” value.
  3. Governed by the independent Libra Association.

Validation

Initially, the only block validators will be the group of 28 Founding Members of the libra association which includes:

Payments: Mastercard, Paypal, PayU, Stripe, Visa

Tech companies: Booking Holdings, eBay, Facebook/Calibra, Farfetch, Lyft, Mercado Pago, Spotify AB, Uber Technologies

Telecoms: Iliad, Vodafone Group

Blockchain: Anchorage, Bison Trails, Coinbase Inc, Xapo Holdings Limited

Venture Capital: Andreessen Horowitz, Breakthrough Initiatives, Ribbit Capital, Thrive Capital, Union Square Ventures

Non Profit: Creative Destruction Lab, Kiva, Mercy Corps, Women’s World Banking

Source: LibraWhitepaper_en_US.pdf

Their goal, long term, is to ensure that Libra will be “open and permissionless”, but they are asking the help of the community to achieve that within five years from the public launch of the Libra Blockchain.

The Libra Blockchain

To meet the Libra objectives they have decided to build a new blockchain with three requirements:

  • Able to scale to billions of accounts, high transaction throughput
  • Highly secure
  • Flexible for future innovations

These requirements will be fulfilled using three technology tools:

  • The Move Programming Language
  • Byzantine Fault Tolerant (LibraBFT) consensus protocol
  • Using widely known blockchain structures

Security and Privacy

To secure transactions Libra Blockchain uses Merkle Trees (hash trees) as protection. This is a well-known data structure used by other coins. What they claim is new to Libra Blockchain is that instead of viewing a blockchain as a collection of blocks, they see it as

“a single data structure that records the history of transactions and states over time”.

Interestingly, they claim their blockchain is pseudonymous, allowing users several addresses not linked to their real-world identity. That means it is not entirely anonymous, although they say they will continue working to “enhance privacy” at the same time they consider “regulatory” practicality and scalability.

This is the link to the technical wiki about Libra, which includes sections to its Blockchain, the Move Language, and the LibraBFT protocol.

They have also included a link to a test Libra site for programmers to inspect, analyse and develop upon it with a permissive license by the Apache Software Foundation.

The Libra Currency and Reserve

“Libra is designed to be a stable digital cryptocurrency that will be fully backed by a reserve of real assets — the Libra Reserve — and supported by a competitive network of exchanges buying and selling Libra.”

To help to achieve this goal Libra will be backed by “a collection of low-volatility assets, such as bank deposits and short-term government securities in currencies from stable and reputable central banks”. That will mean the Libra aims to be a kind of indexed currency whose value exchanged to a local currency may vary.

They assert that interest in the reserve assets will be used to pay the costs of the system, pay dividends to initial investors and support future developments and growth.

The document about the reserve says Libra will be fully backed, meaning every new coin will be backed by an equivalent value of real assets. The reserve will come from investors and users.  On the investor side, they will incentivise in Libra coins founding members, to encourage adoption by users, merchants and developers. On the user side, for every new created Libra coin there will be an equivalent fiat transferred to the reserve.

The reserve may change its asset basket but their goal, according to the document, is to fully back all Libra coins available. It is also understood that Libra’s availability is not bounded, as it happens to bitcoin: “supply is not restricted by outside factors.”

The Libra Association

The Libra Association is the governing entity of the Libra Cryptocurrency. It is said to be an independent, not-for-profit organisation, with headquarters in Geneva, Switzerland. The Libra Association is governed by the Libra Association Council, with is comprised by one representative per validator node, and initially consists of the group of founding members. The Libra Association is also the entity that will manage the Libra Reserve. For more info, they provided this page.

What’s next?

Their plan is for the Libra Coin to be launched mid-2020.  Before that, they have published the open source project for developers to analyse and experiment.

Currently, they are working on the Libra Blockchain prototype to bring it to a production-ready state.

The full Libra statement is here.

 

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