We have analysed Libras technical papers to see if what has been stated in its White paper about privacy, cryptocurrency, decentralisation could become real features of this coin or not. We will also examine the attributes needed to be a Founding member and Node Validator, and other aspects of the Libra currency.
Libra’s Blockchain and privacy
Libra’s technical paper calls the blockchain a “cryptographically authenticated distributed database”, maintained by a network of distributed validators. But in reality is not a distributed database, but a single-versioned database with consensus copies distributed in all validator’s nodes.
Since all transactions will be public by the nodes, and also these nodes could have other databases linking the pseudonymous accounts to mobile devices or credit card transactions, customers shouldn’t bear any expectations of privacy.
According to the technical paper, the Libra Database can be thought of as a state machine with all its states recorded. So, the complete transaction history of all its customers will be permanently stored. That could, also, raise concerns about consumer rights and privacy. Since the possibility to link transactions with users exists, it is quite possible to create consumer profiles.
People do not seem concerned about their privacy loss when using Facebook, WhatsApp, Instagram and other Social Networks, so it might not have a significative impact on Libra’s spread.
Is it really a cryptocurrency?
“The Libra Blockchain doesn’t have an explicit notion of a block — it only uses blocks for batching and executing transactions.” Source – Libra Technical Paper
Although Libra makes use of cryptographic keys to handle and validate transactions, the concept of the block is internal and used only with the purpose to process transactions within the database. but blocks are not mined. It is unknown how the blocks are shared by all the nodes, or how to decide about which will be the next one. That puts Libra in the edge of the cryptocurrency concept as currently is thought.
Becoming a Founding Member
To be a validator and also a founding member, the Libra Association will ask for specific technical requirements and fulfil particular criteria.
According to The Block the requirements for private organisations are:
- More than USD 1 billion market Cap or more than USD 500 million sales balance.
- Reach more than 20 million customers or users worldwide
- Be an established top-100 industry leader.
They will accept non-profit organisations, but the Libra Association will decide their eligibility, which includes an operating budget of $50 million and being global. Also, they should cover node costs that may go as high as $350,000 yearly.
Academic Institutions will be required to be a top-100 ranking by QS World University Rankings and also top-100 ranked in Computer Science.
The White Paper and also the technical papers claim Libra is decentralised. But in view of the above, seems it won’t be truly open and distributed. Also, as of now, Libra can only be exchanged using the official Calibra wallet and the user has no mean to store his cryptographic in no way aside from the provided by the application.
Libra is expected to be traded in major crypto-exchanges though, therefore it makes sense that other Libra wallets may appear in the market. That will be good news for users in terms of privacy and security.
The Libra Reserve backing the cryptocurrency will consist mainly of monetary assets backed by major banking institutions and distributed around the world. Interest rates will be used to pay the network’s expenses and also distributed as dividends to the Founding members.
Since no part of it will be returned to the Libra Reserve, this currency will suffer a higher depreciation level than fiat currencies do.
Will Libra be a monopoly?
“Libra is an attempt to build a global (central) bank that piggy-backs on existing central banks’ monetary policy, with the goal of taking over and eventually deprecating them.” – John deVadoss interviewed by Cryptoslate.
A project whose “mission is to enable a simple global currency and financial infrastructure that empowers billions of people” can be thought of as a project attempting to create a global crypto-bank that could in a future date make obsolete the current financial structure.
But the fact is that Libra will face competition with already established transfer and payment methods – Currencyfair, Xe, Worldremit Bizum, Skrill- including current cryptocurrencies such as Bitpay, Coingate and others. That includes the very recent project by Litecoin Foundation, Bibox and Ternio to create a debit card solution to pay in online and physical stores around the globe.
The reaction of the banking establishment will oppose Libra, also. Big banks around the globe will weigh their options and opportunities to create payment and money exchanging structures for the XXI century, something they were not too keen to start with.
It will also depend on how stakeholders align. Any attempt to a global currency will be fought politically by the existing big economies. The interests in Europe, the USA, China, Japan and Russia are not aligned with this project, nor those of the seven countries holding 50% of unbanked people on earth.
Political and financial interests surely will push for different, local, solutions that may be controlled by the “local” power establishment, therefore it seems Libra may have to fight its way toward a “global status”.
The end of physical Money?
Will the appearance of Libra be the end of the physical money? It seems that physical money will have a limited time span if the spread of digital payments and money transfers gets generalised. But that fate cannot be credited to Libra. Electronic payment systems predate Libra. Libra’s merit is to aim at creating a payment and money exchanging system not requiring a bank account.
Exciting times for the financial sector and users of the financial services!