Facebook's dream of creating its own global cryptocurrency officially comes to an end

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Facebook has finally revealed the details of its cryptocurrency, Libra, which will let you buy things or send money khổng lồ people with nearly zero fees. You’ll pseudonymously buy or cash out your Libra online or at local exchange points like grocery stores, và spend it using interoperable third-party wallet apps or Facebook’s own Calibra wallet that will be built into WhatsApp, Messenger and its own app. Today Facebook released its white paper explaining Libra & its testnet for working out the kinks of its blockchain system before a public launch in the first half of 2020.

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Facebook won’t fully control Libra, but instead get just a single vote in its governance lượt thích other founding members of the Libra Association, including Visa, Uber và Andreessen Horowitz, which have invested at least $10 million each into the project’s operations. The association will promote the open-sourced Libra Blockchain & developer platform with its own Move programming language, plus sign up businesses to accept Libra for payment and even give customers discounts or rewards.

Facebook is launching a subsidiary company also called Calibra that handles its crypto dealings & protects users’ privacy by never mingling your Libra payments with your Facebook data so it can’t be used for ad targeting. Your real identity won’t be tied khổng lồ your publicly visible transactions. But Facebook/Calibra and other founding members of the Libra Association will earn interest on the money users cash in that is held in reserve to lớn keep the value of Libra stable.

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Facebook’s audacious bid to create a global digital currency that promotes financial inclusion for the unbanked actually has more privacy and decentralization built in than many expected. Instead of trying lớn dominate Libra’s future or squeeze tons of cash out of it immediately, Facebook is instead playing the long-game by pulling payments into its online domain. Facebook’s VP of blockchain, David Marcus, explained the company’s motive and the tie-in with its bộ vi xử lý core revenue source during a briefing at San Francisco’s historic Mint building. “If more commerce happens, then more small businesses will sell more on & off platform, và they’ll want to buy more ads on the platform so it will be good for our ads business.”

The risk and reward of building the new PayPal

In cryptocurrencies, Facebook saw both a threat and an opportunity. They held the promise of disrupting how things are bought and sold by eliminating transaction fees common with credit cards. That comes dangerously close lớn Facebook’s ad business that influences what is bought và sold. If a competitor lượt thích Google or an upstart built a popular coin and could monitor the transactions, they’d learn what people buy and could muscle in on the billions spent on Facebook marketing. Meanwhile, the 1.7 billion people who lack a ngân hàng account might choose whoever offers them a financial services alternative as their online identity provider too. That’s another thing Facebook wants lớn be.

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Yet existing cryptocurrencies lượt thích Bitcoin & Ethereum weren’t properly engineered lớn scale khổng lồ be a medium of exchange. Their unanchored price was susceptible to huge & unpredictable swings, making it tough for merchants to accept as payment. And cryptocurrencies miss out on much of their potential beyond speculation unless there are enough places that will take them instead of dollars, and the experience of buying và spending them is easy enough for a mainstream audience. But with Facebook’s relationship with 7 million advertisers và 90 million small businesses plus its user experience prowess, it was well-poised to lớn tackle this juggernaut of a problem.

Now Facebook wants lớn make Libra the evolution of PayPal. It’s hoping Libra will become simpler to set up, more ubiquitous as a payment method, more efficient with fewer fees, more accessible lớn the unbanked, more flexible thanks to lớn developers and more long-lasting through decentralization.

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“Success will mean that a person working abroad has a fast và simple way to lớn send money khổng lồ family back home, & a college student can pay their rent as easily as they can buy a coffee,” Facebook writes in its Libra documentation. That would be a big improvement on today, when you’re stuck paying rent in insecure checks while exploitative remittance services charge an average of 7% lớn send money abroad, taking $50 billion from users annually. Libra could also nguồn tiny microtransactions worth just a few cents that are infeasible with credit card fees attached, or replace your pre-paid transit pass.

…Or it could be globally ignored by consumers who see it as too much hassle for too little reward, or too unfamiliar và limited in use khổng lồ pull them into the modern financial landscape. Facebook has built a reputation for over-engineered, underused products. It will need all the help it can get if wants to lớn replace what’s already in our pockets.

Here’s our zero-buzzword breakdown of Libra:

How does Libra work?

By now you know the basics of Libra. Cash in a local currency, get Libra, spend them like dollars without big transaction fees or your real name attached, cash them out whenever you want. Feel không tính phí to stop reading và share this article if that’s all you care about. But the underlying technology, the association that governs it, the wallets you’ll use và the way payments work all have a huge amount of fascinating detail to lớn them. Facebook has released more than 100 pages of documentation on Libra & Calibra, và we’ve pulled out the most important facts. Let’s dive in.

The Libra Association — crypto’s new oligarchy

Facebook knew people wouldn’t trust it to lớn wholly steer the cryptocurrency they use, và it also wanted help lớn spur adoption. So the social network recruited the founding members of the Libra Association, a not-for-profit which oversees the development of the token, the reserve of real-world assets that gives it value and the governance rules of the blockchain. “If we were controlling it, very few people would want khổng lồ jump on và make it theirs,” says Marcus.

Each founding thành viên paid a minimum of $10 million lớn join & optionally become a validator node operator (more on that later), gain one vote in the Libra Association council and be entitled lớn a nội dung (proportionate to lớn their investment) of the dividends from interest earned on the Libra reserve into which users pay fiat currency khổng lồ receive Libra.

The 28 soon-to-be founding members of the association và their industries, previously reported by The Block’s Frank Chaparro, include:

Payments: Mastercard, PayPal, PayU (Naspers’ fintech arm), Stripe, VisaTechnology và marketplaces: Booking Holdings, eBay, Facebook/Calibra, Farfetch, Lyft, Mercado Pago, Spotify AB, Uber Technologies, Inc.Telecommunications: Iliad, Vodafone GroupBlockchain: Anchorage, Bison Trails, Coinbase, Inc., Xapo Holdings LimitedVenture Capital: Andreessen Horowitz, Breakthrough Initiatives, Ribbit Capital, Thrive Capital, Union Square VenturesNonprofit và multilateral organizations, and academic institutions: Creative Destruction Lab, Kiva, Mercy Corps, Women’s World Banking

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Facebook says it hopes khổng lồ reach 100 founding members before the official Libra launch & it’s xuất hiện to anyone that meets the requirements, including direct competitors like Google or Twitter. The Libra Association is based in Geneva, Switzerland và will meet biannually. The country was chosen for its neutral status & strong tư vấn for financial innovation including blockchain technology.

Libra governance — who gets a vote

To join the association, members must have a half rack of vps space, a 100Mbps or above dedicated mạng internet connection, a full-time site reliability engineer và enterprise-grade security. Businesses must hit two of three thresholds of a $1 billion USD market value or $500 million in customer balances, reach 20 million people a year and/or be recognized as a đứng đầu 100 industry leader by a group like Interbrand Global or the S&P.

Crypto-focused investors must have more than $1 billion in assets under management, while Blockchain businesses must have been in business for a year, have enterprise-grade security và privacy & custody or staking greater than $100 million in assets. And only up to one-third of founding members can by crypto-related businesses or individually invited exceptions. Facebook also accepts research organizations lượt thích universities, and nonprofits fulfilling three of four qualities, including working on financial inclusion for more than five years, multi-national reach to lots of users, a vị trí cao nhất 100 designation by Charity Navigator or something like it and/or $50 million in budget.

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The Libra Association will be responsible for recruiting more founding members lớn act as validator nodes for the blockchain, fundraising to jump-start the ecosystem, designing incentive programs to reward early adopters và doling out social impact grants. A council with a representative from each member will help choose the association’s managing director, who will appoint an executive team và elect a board of five lớn 19 đứng top representatives.

Each member, including Facebook/Calibra, will only get up to one vote or 1% of the total vote (whichever is larger) in the Libra Association council. This provides a level of decentralization that protects against Facebook or any other player hijacking Libra for its own gain. By avoiding sole ownership và dominion over Libra, Facebook could avoid extra scrutiny from regulators who are already investigating it for a sea of privacy abuses as well as potentially anti-competitive behavior. In an attempt to preempt criticism from lawmakers, the Libra Association writes, “We welcome public inquiry và accountability. We are committed to lớn a dialogue with regulators and policymakers. We cốt truyện policymakers’ interest in the ongoing stability of national currencies.”

The Libra currency — a stablecoin

A Libra is a unit of the Libra cryptocurrency that’s represented by a three wavy horizontal line unicode character ≋ lượt thích the dollar is represented by $. The value of a Libra is meant khổng lồ stay largely stable, so it’s a good medium of exchange, as merchants can be confident they won’t be paid a Libra today that’s then worth less tomorrow. The Libra’s value is tied lớn a basket of ngân hàng deposits & short-term government securities for a slew of historically stable international currencies, including the dollar, pound, euro, Swiss franc and yen. The Libra Association maintains this basket of assets & can change the balance of its composition if necessary khổng lồ offset major price fluctuations in any one foreign currency so that the value of a Libra stays consistent.

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The name Libra comes from the word for a Roman unit of weight measure. It’s trying lớn invoke a sense of financial freedom by playing on the French stem “Lib,” meaning free.

The Libra Association is still hammering out the exact start value for the Libra, but it’s meant to be somewhere close khổng lồ the value of a dollar, triệu euro or pound so it’s easy khổng lồ conceptualize. That way, a gallon of milk in the U.S. Might cost 3 to 4 Libra, similar but not exactly the same as with dollars.

The idea is that you’ll cash in some money and keep a balance of Libra that you can spend at accepting merchants and online services. You’ll be able to lớn trade in your local currency for Libra và vice versa through certain wallet apps, including Facebook’s Calibra, third-party wallet apps và local resellers like convenience or grocery stores where people already go to top-up their điện thoại data plan.

The Libra Reserve — one for one

Each time someone cashes in a dollar or their respective local currency, that money goes into the Libra Reserve and an equivalent value of Libra is minted and doled out to that person. If someone cashes out from the Libra Association, the Libra they give back are destroyed/burned và they receive the equivalent value in their local currency back. That means there’s always 100% of the value of the Libra in circulation, collateralized with real-world assets in the Libra Reserve. It never runs fractional. And unliked “pegged” stable coins that are tied lớn a single currency lượt thích the USD, Libra maintains its own value — though that should cash out khổng lồ roughly the same amount of a given currency over time.

When Libra Association members join và pay their $10 million minimum, they receive Libra Investment Tokens. Their share of the total tokens translates into the proportion of the dividend they earn off of interest on assets in the reserve. Those dividends are only paid out after Libra Association uses interest to lớn pay for operating expenses, investments in the ecosystem, engineering research và grants to lớn nonprofits và other organizations. This interest is part of what attracted the Libra Association’s members. If Libra becomes popular & many people carry a large balance of the currency, the reserve will grow huge and earn significant interest.

The Libra Blockchain — built for speed

Every Libra payment is permanently written into the Libra Blockchain — a cryptographically authenticated database that acts as a public online ledger designed to handle 1,000 transactions per second. That would be much faster than Bitcoin’s 7 transactions per second or Ethereum’s 15. The blockchain is operated & constantly verified by founding members of the Libra Association, which each invested $10 million or more for a say in the cryptocurrency’s governance and the ability to operate a validator node.

When a transaction is submitted, each of the nodes runs a calculation based on the existing ledger of all transactions. Thanks khổng lồ a Byzantine Fault Tolerance system, just two-thirds of the nodes must come to lớn consensus that the transaction is legitimate for it lớn be executed and written lớn the blockchain. A structure of Merkle Trees in the code makes it simple to lớn recognize changes made to the Libra Blockchain. With 5KB transactions, 1,000 verifications per second on commodity CPUs and up khổng lồ 4 billion accounts, the Libra Blockchain should be able lớn operate at 1,000 transactions per second if nodes use at least 40Mbps connections và 16TB SSD hard drives.

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Transactions on Libra cannot be reversed. If an attack compromises over one-third of the validator nodes causing a fork in the blockchain, the Libra Association says it will temporarily halt transactions, figure out the extent of the damage and recommend software updates khổng lồ resolve the fork.

Transactions aren’t entirely free. They incur a tiny fraction of a cent fee to pay for “gas” that covers the cost of processing the transfer of funds similar khổng lồ with Ethereum. This fee will be negligible to lớn most consumers, but when they địa chỉ cửa hàng up, the gas charges will deter bad actors from creating millions of transactions khổng lồ power spam and denial-of-service attacks. “We’ve purposely tried not lớn innovate massively on the blockchain itself because we want it to lớn be scalable và secure,” says Marcus of piggybacking on the best elements of existing cryptocurrencies.

Currently, the Libra Blockchain is what’s known as “permissioned,” where only entities that fulfill certain requirements are admitted to lớn a special in-group that defines consensus và controls governance of the blockchain. The problem is this structure is more vulnerable to lớn attacks & censorship because it’s not truly decentralized. But during Facebook’s research, it couldn’t find a reliable permissionless structure that could securely scale khổng lồ the number of transactions Libra will need to lớn handle. Adding more nodes slows things down, và no one has proven a way to avoid that without compromising security.

That’s why the Libra Association’s goal is to lớn move khổng lồ a permissionless system based on proof-of-stake that will protect against attacks by distributing control, encourage competition và lower the barrier to lớn entry. It wants to lớn have at least 20% of votes in the Libra Association council coming from node operators based on their total Libra holdings instead of their status as a founding member. That plan should help appease blockchain purists who won’t be satisfied until Libra is completely decentralized.

Move coding language — for moving Libra

The Libra Blockchain is mở cửa source with an Apache 2.0 license, & any developer can build apps that work with it using the Move coding language. The blockchain’s prototype launches its testnet today, so it’s effectively in developer beta mode until it officially launches in the first half of 2020. The Libra Association is working with HackerOne to lớn launch a bug bounty system later this year that will pay security researchers for safely identifying flaws và glitches. In the meantime, the Libra Association is implementing the Libra vi xử lý core using the Rust programming language because it’s designed khổng lồ prevent security vulnerabilities, và the Move language isn’t fully ready yet.

Move was created lớn make it easier to write blockchain code that follows an author’s intent without introducing bugs. It’s called Move because its primary function is lớn move Libra coins from one trương mục to another, and never let those assets be accidentally duplicated. The core transaction code looks like: LibraAccount.pay_from_sender(recipient_address, amount) procedure.

Eventually, Move developers will be able lớn create smart contracts for programmatic interactions with the Libra Blockchain. Until Move is ready, developers can create modules và transaction scripts for Libra using Move IR, which is high-level enough khổng lồ be human-readable but low-level enough khổng lồ be translatable into real Move bytecode that’s written to lớn the blockchain.

The Libra ecosystem & the Move language will be completely xuất hiện to use & build, which presents a sizable risk. Crooked developers could prey on crypto novices, claiming their app works just the same as legitimate ones, & that it’s safe because it uses Libra. But if consumers get ripped off by these scammers, the anger will surely bubble up to Facebook. Yet still, Calibra’s head of sản phẩm tells me, “There are no plans for the Libra Association lớn take a role in actively vetting ,” Calibra’s head of hàng hóa Kevin Weil tells me.

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Even though it’s tried to distance itself sufficiently via its subsidiary Libra và the association, many people will probably always think of Libra as Facebook’s cryptocurrency & blame it for their woes.