Facebook have just announced their foray into cryptocurrency this week, the ‘Libra’ digital coin.
What is it?
Cryptocurrency is a digital currency, created with encryption to ensure transactions are secure, regulated and independent from a centralised bank. A little different from the payment services offered by the likes of Google, Apple or PayPal, which rely on bank accounts or other services.
Libra is Facebook’s cryptocurrency, expected to launch in 2020.
What are the advantages of cryptocurrency?
Cryptography makes transactions secure and tough to counterfeit.
A significant advantage of crypto is the removal of a middleman from the process. A major disadvantage of our current banking system is the time taken to clear funds, especially internationally. As blockchain is decentralised, it means funds can be transferred cheaply, more securely and perhaps most impressive, instantly.
As there is no bank involved, digital currency can provide a safe method of storing money, especially for countries where much of the population have no bank account – which is the crux of Facebook’s mission in Libra.
Another considerable advantage is the ability to produce programmable contracts, where funds are released upon particular criteria and variables being met, such as a commercial contract based on specific stock prices. It is another layer of security to avoid money going missing by using a third party.
Why is Facebook launching a new currency?
Facebook claims they are launching this new currency to reach the 1.7 billion people, particularly in developing countries across the world, who do not possess a bank account.
Users will be able to pay using Libra on Facebook’s apps, such as WhatsApp, and Facebook says paying will be “as easy as sending a text”.
However, there have already been security concerns about the endeavour, with a big question mark over what the appropriate parties will do with the data attached.
Who are involved?
Facebook state that various parties will manage Libra, which they have dubbed the ‘Libra Association’. Businesses such as eBay, Spotify, Uber, PayPal and more will be involved, along with charities.
Can we trust it?
Facebook state its payment system will be heavily protected to ensure users money and personal data is kept safe and secure.
However, the big question on everybody’s mind is: How can we trust the company with our finances, especially after the Cambridge Analytica scandal only a year before?
The data coming into the network is also suspect. While the data will be anonymised, the parties involved in the currency will undoubtedly gain valuable insights from an entirely untapped market – the 1.7 billion people without bank accounts.
Libra is a hugely ambitious endeavour by the social media giants. Will Zuckerburg’s group change the world again, or is this going to be an incredibly expensive failure?