Let’s Give You an Overview of Libra!
Libra is the latest among the cryptocurrencies built on the blockchain with its own proof of stake protocol. It is backed by its reserve containing a basket of low volatile assets.
So, What does Low Volatility Do?
Though not designed as a Stablecoin in crypto-terms i.e. pegging against single fiat currency, Libra is pegged to four relatively steady currencies such as US Dollar(USD), Pounds(GBP), Euro(EUR) and Yen (JPY).
Assets on Libra
There are three key elements Libra is looking into for inclusion of assets into their basket :
- Fiat with free float and not tied/soft-pegged to any other currency
- Assets must be recognized by public institutions(Fiat Currency) or freely accessible(commodities)
- Universal recognition of the assets with a programmatically quotable value
- Consensus Algorithm
Libra runs on their native blockchain with Proof of Stake protocol where the nodes are run by the participants in the consortium. Nodes rely on the Byzantine Fault Tolerance(LibraBFT) which is a modification of the Hotstuff framework.
- Smart Contract
Smart Contracts are written on the Move programming language on the Libra blockchain. As the Whitepaper of Libra says Move is an “executable bytecode language used to implement custom transactions and smart contracts”.
With more than 100 participants in the consortium, the use cases built-in in the smart contracts is exhaustive. The tools needed for enterprise applications are sourced from Libra for development.
The Two Token System allows participation through the governance token called Libra Investment Token(LIT). Organizations are able to participate in the governance without having the minimum holding of $10 million of LIT.
The low barrier to entry ensures incentives for wider adoption of Libra and the blockchain technology. When compared to J.P. Morgan’s Quorum’s Permissioned network, Libra is designed for the wider acceptance for the permissionless blockchain network.
What is the Impact of Libra?
Libra will have both local and global impact in the short, medium and long term.
In the short term, Libra like coins will disrupt or have the incentive to disrupt traditional financial institutions, especially in the payments industry. This is due to the faster, more secure and scalable way to execute transactions.
With Ripple & J.P. Morgan’s Quorum already being tested by the banking industry, Libra & Calibra wallet interface will find its way to Facebook, Instagram, and Whatsapp.
In the medium term, Facebook has invested its resources into providing infrastructure requirements such as Website Authentication, Mobile App Development, and onboarding users into cryptocurrency.
In addition, mass adoption will be encouraged through arbitrage opportunities, increased competition among stablecoins and attract larger institutional players to endorse blockchain.
In doing so, the learning curve for the layman is reduced for acceptance of blockchain and cryptocurrency.
In the long term, competing with Google, Libra wants to reshape the way we look at the Payments industry. In addition, by lowering capital requirements worldwide it could contribute to developing a monetary policy.
The real challenge Libra faces in the long term is that monetary policy and economic decisions will move from public representatives to private corporations. This will hinder consumer rights, thereby, leading to a monopolistic ecosystem for export/import of goods.
It would be interesting how Libra can overcome the regulatory hurdles while competing with/convincing a banking institution in accepting this framework.
While we can only predict the industries like Retail, BFSI and Payments will be disrupted, it difficult to predict if they would develop their own ICO, to reach the general public.
Facebook has laid a foundation for wider adoption of blockchain and crypto-ecosystem by businesses of all scales and retail users alike.