wallet, or spend them to pay
for goods and services online.
Eventually, you’ll be able to
tap and pay with your phone
for your coffee, Uber ride, or
whatever you want. You can
also cash in your coins, getting
hard currency in return. It’s
not clear yet whether this will
involve a fee, although it looks
likely. Libra is not meant to be
a vehicle you put money into;
it has been designed to be
used as money itself. There
are plans to make it possible
to buy Libra at ATMs, too.
Any fees will be low, certainly
considerably lower than using
traditional financial services,
although we don’t know
exactly how low. The Libra
website talks of “low or no”
fees, and of potential rewards
and bonuses for choosing
to pay with Libra. As the
Libra website says, “Libra’s
mission is to enable a simple
global currency and financial
infrastructure that empowers
billions of people.” That’s big
talk, but then Facebook does
like to frame its projects in
grandiose language.WHEN YOU BUY a Libra
coin, what you buy into is theLibra reserve fund, currently
backed by assets worth
around $1 billion. The reserve
fund is held in major world
currencies and US Treasury
bonds, which are traditionally
pretty stable. By spreading
the risk, the value of a Libra
coin should remain fairly flat.
And because you are likely to
buy and then spend your Libra
coins quickly, any long-term
drift is relatively unimportant.Initially, a Libra coin will be
worth about one dollar.
Libra will be much more
than hipsters tapping phones
to pay for skinny whites. All you
need is a smartphone, and you
have access to banking-like
services. That’s something
that nearly two billion people
don’t have. Libra can power
the kind of micro-transactions
that make all the differenceTHE BLOCKCHAIN
What is the blockchain? It is tempting to say it’s a mass of
complicated math you don’t need to understand. Essentially, it’s
an electronic ledger that tracks the movements of digital tokens
between wallets—apps that store the tokens. The tokens can
represent anything: ownership of a share or proof of identity,
for example. Each transaction is verified and added to the list,
or chain. The wallets have two cryptographic keys, one private
and one public. A transaction is encrypted
using your private key and the recipient’s
public key. At the other end, the process is
reversed, so it can only be unscrambled by the
intended recipient, and they know it’s from
you. The scrambling involves that complicated
math we mentioned. Each transaction becomes
part of the whole, because it’s mathematically
linked to previous transactions, so it’s virtually tamper-proof.
It’s a neat system, which can run on a distributed network
(traditional cryptocurrencies) or private systems.
While Libra uses much of the same underlying technology
as bitcoin, it works differently. Coins are created as required,
and “burned” (destroyed) when they leave the system. This is
quite unlike bitcoin, which has a limited number of coins that, in
theory, never get burned, although an estimated quarter of allbitcoins have been irretrievably lost. Although it is called the
Libra Blockchain, it doesn’t use blocks of data, but rather treats
the data as a whole. This simplifies things, and speeds it up. It
is also the reason why any transition to a distributed model will
be very difficult, despite the idea that Libra will be opened out
in the future. Facebook has termed Libra as a “decentralized
programmable database,” although this hardly helps make
things clearer. It has been widely reported as
having an initial transaction speed of 1,000
per second. If true, it looks a little inadequate,
unless there is some batch-processing
involved. Visa runs an average of 150 million
transactions per day, which equates to around
1,700 a second. Given Libra’s expected use for
multiple micro-transactions, and the hoped-for
size of the user base, it’ll need to expand capacity at some point.
The banking world has been employing blockchain
technology for years, but hidden away behind the scenes,
managing business-to-business transfers, clearing, and
settlement transactions between banks, for example. While the
adventures of bitcoin, with its crazy valuations, has captured
the headlines, back-room blockchain systems have been
working their way into the servers of big business.in developing countries. The
potential market is massive:
There are 100 million people in
Pakistan alone with no access
to a bank account. The market
for international remittance
is a target, too (see “Sending
Money Home” box). Libra has
potential to do a bit of good,
as well as earn Facebook and
friends a lot of money.
Libra may be revolutionary
for the financial market, butthe technology really isn’t. The
widespread use of Internet-
enabled devices and the
development of the blockchain
ledger made it inevitable that
Libra, or something similar,
would appear eventually.
Using money on the Internet
used to be an awkward
process—if you remember a
time before PayPal and debit
cards, you’ll know. Libra isthe logical next step, where
money is converted into
tracked, transferable data,
with the blockchain keeping a
record of who has how much.
Your dollars are free to flash
across the world, along with
the endless text messages
and selfies.
Cryptocurrencies were
always a threat to Facebook,
as well as a huge opportunity.
Facebook’s billions are made
selling ads to influence what
people buy. Any company
that developed a successful
stable cryptocurrency would
threaten that market by
building a valuable set of data
that tracks spending habits—
just what advertisers want. If
that company had the reach
and power of, say, Google,
it could take a sizable bite
out of Facebook’s business.
Libra means Facebook can
keep transactions within a
controllable suite of Facebook
apps, giving even more
reason for a business to buy
advertisements there.
Most tech enterprises
attract little attention from
the world at large. Facebook
carried on quietly fueling the
social media boom for years©^FA
CEBOOKGet used to these wavy lines; Libra introduces a new global currency.Facebook’s new money
46 MAXIMUMPC OCT 2019 maximumpc.com