Libra, can you surpass Utopia?

The various "virtual currencies" represented by bitcoin have proved to be a harmful utopian movement, and it has become a joke to claim that the rhetoric of replacing the traditional government currency. Bitcoin and its children and grandchildren can make waves, because it captures the pain points of society. The government’s traditional currency issuance is inexhaustible, resulting in unstable currency. But the reason why “coinage” is in full swing is that many people want to pass through nothing. Making a fortune, which determines the value of those "coins" is more unstable than the traditional currency, and can not effectively enter the circulation field.

Bitcoin and its descendants were born in the Ponzi scam. Mining activities also waste energy and pollute the environment. But this is not to say that this novelty has not produced any incidental positive effects. Facebook is preparing a new currency, Libra. Experiments, more or less should be inspired by Bitcoin.


Libra seized two major pain points in the financial sector. First, the traditional currency is unstable (this is the same as Bitcoin); second, the traditional financial services are costly, especially the international exchange costs are high, and the inclusive financial supply is seriously insufficient.

For the first pain point, Libra did not control the circulation to achieve a stable currency value like Bitcoin, because that argument is inherently logically unfounded. Libra solves the problem of currency stability through a traditional currency combination pricing method, which is completely feasible and easy to understand, because exchange rate fluctuation is a change in the relative price between various currencies, and a combination of various traditional currencies is built into a certain ratio. The fluctuations cancel each other out, and the combination can remain basically stable. This is consistent with the idea of ​​creating an SDR by the International Monetary Fund. If the portfolio adds gold, credible government bonds and other assets, then it can not only eliminate the fluctuation of the country currency. Risk, the exchange rate between it and commodities may also be more stable, that is, the price of goods and services priced by Libra will be more stable, and it is less prone to inflation or deflation.

For the second pain point, the solution is that technology, network and blockchain can greatly reduce transaction costs, and cut off the high service fees that traditional financial institutions demand. This is well understood and there is not much controversy.

More importantly, Libra is not only based on a portfolio of assets, but also uses this portfolio as its reserve, which is the essential difference between it and Bitcoin. Bitcoin is fabricated out of thin air, without any reserve support, it corresponds to the imaginary code, which is exactly the same as the land on the moon and Mars. Libra is backed by 100% real asset reserves. What does it mean? We can understand through two examples. First, the bank vouchers issued by early commercial banks are the predecessors of modern currency. When you deposit one or two silver into the bank, it will give you a voucher of one or two silver. Under this complete reserve system, there is no need for a central government. Banks, commercial banks can issue their own currency (bank notes) and have 100% credit. Second, Hong Kong's joint system, the note-issuing bank must submit the equivalent of US dollars to the monetary authorities for each Hong Kong dollar issued. The banknotes in Hong Kong are not issued by the central bank, but issued by three commercial banks. Of course, There is no central bank under the UN system.

It is not difficult to see the following four points: First, Libra has reserve support; second, its reserves are combinations, not silver, dollars, etc.; third, if it is fully prepared, then it can not rely on the central bank. Closed-loop operation; Fourth, Libra ultimately aims to obtain service revenue and interest income, unlike Bitcoin, which targets the use of drums and flowers.

It is because Libra is essentially different from Bitcoin, so it is a step closer to reality. Man-made currencies such as bitcoin, a performance art invented by geeks and utopians, were eventually infamous by greedy sickles, but Libra is more like an ambitious group of people in the mainstream society who want to really come to a currency and finance. The revolution in service. Their differences can be seen from the reactions of all parties in society. Bitcoin and other man-made coins have been raging for many years, but they have never caused a blow in its birthplace. The Libra white paper has caused a strong global response as soon as it was released. The main concern is that the US president has rarely published it. Libra's distrust evaluation, the US Congress quickly discussed this matter, many people do not want to let Libra be born, the reason is that Libra does have some realistic feasibility, and the social impact it brings is huge and unknown. Facebook also announced under various pressures to temporarily cancel the Libra plan without obtaining regulatory support and support.

From the law of human currency development, what problems will Libra's plan encounter if it is implemented, and what problems will it cause?

First of all, in the field of international payments, its ability to reduce costs is unquestionable, and the conflict with the existing regulatory system is also fundamental. The current international remittance procedures through traditional banks are cumbersome and costly, partly for technical reasons and partly for organizational systems (for example, the lack of a settlement system such as Chinese personal transfers), and network and blockchain technologies can instantly destroy this barrier. At the same time, whether it is a country with capital controls or a country with no capital control, the cross-border flow of funds has always been the focus of national monitoring. Under the Libra plan, transfers with anyone in the world can be done anonymously in an instant, but The government will never give up the corresponding monitoring. This contradiction is fundamental.

Source: Securities Times

Author: Huang Xiaopeng