Chang Yong: Facebook's Libra is an important innovation but the future is unknown

Guide: Facebook issued a new cryptocurrency Libra caused a strong global concern, based on the understanding of the cryptocurrency and recent discussions, make the following comments:

1. Libra is the result of the evolution of cryptocurrency

From bitcoin to competitive coins, to Token, to USDT, to Libra, it is a profit-driven, spontaneous process that provides a variety of cryptocurrencies that meet different market needs. Overall, it is the evolution of generalized cryptocurrency.

2. Libra has important innovations than stable coins

Innovation lies mainly in:

1) Anchor a basket of currencies instead of US dollars;

2) Mortgage low-risk asset portfolios rather than US dollars;

3) Invite senior financial entities to form alliances.

Therefore, Libra is not an extension of the dollar supply, but a new form of credit currency that is different from a single currency. Its implementation and impact will be very complicated, not sure if Facebook can control.

3. Libra is essentially different from decentralized cryptocurrency

As long as the electronic currency of the account and trading system is constructed using asymmetric cryptography, it can be called cryptocurrency. But Libra's essence is "private credit currency". Mortgages and alliances are all about increasing the "credit" strength. They are built using cryptography instead of a decentralized consensus currency like Bitcoin that does not rely on any personal or organizational credit. It is customary for "password currency" to refer to the latter.

4. The biggest difficulty Libra faces in the short term is supervision

The reason why private credit currencies have not existed for a long time in history is not the lack of technology, but the public power of the system does not allow the private operation of the currency. Although the technical conditions and institutional environment have evolved, Facebook has a strong influence, and Libra's alliance structure has also been innovative, but it is uncertain whether Libra can survive the control of public power.

5. The biggest difficulty Libra has faced in the long run is the game of internal interests.

The credit currency that is separated from the metal standard has extremely strong liquidity and derivative ability, and the interests involved are so great that it eventually forms a monopoly of central bank based on national sovereignty. Once Libra survives, its game of interest distribution will be very complicated and fierce. Without a strong power base, it will be difficult to survive for a long time.

6. Libra is still an extension of the legal currency system

Libra is essentially a credit currency. It anchors legal currency and mortgaged currency-denominated assets. It is the use of legal currency credit to support private credit. The problems and challenges faced by the legal currency system will also affect Libra's stability. Facebook gives Libra the direction of decentralization in the future, but a complicated and large alliance credit currency system is very difficult to turn to decentralized currency.

7. Libra cannot replace decentralized password currency

In the short term, Libra will become a hot spot in the field of cryptocurrency by leveraging the user base and credit of Facebook and the alliance, the stability of anchoring the legal currency, and the heat of model innovation. However, in the long run, the problem of the legal currency itself, the game of monetary sovereignty, and the alliance Both the game and the risks of Facebook's own operations pose risks to Libra's monetary base, which is the meaning of the birth and existence of decentralized cryptocurrencies and cannot be replaced.

8. The risk of decentralizing the cryptocurrency comes from itself

The decentralized cryptocurrency was born to replace the French currency, and its existence has shown its strong vitality. The current problems are mainly the dilemma of decentralized ecology, such as how to solve the problems of development centralization, centralization of computing power, anti-social attacks, and low efficiency of public decision-making.

9. Libra will promote the popularity of password currency

As a form of generalized cryptocurrency, Libra is connected to other cryptocurrencies in terms of concepts, logic, technology, infrastructure, etc. Libra introduces hundreds of millions of users of Facebook into the cryptocurrency field, which is a huge boost to the entire cryptocurrency market. .

10. The legal currency system must face the impact of the cryptocurrency

From bitcoin, competitive currency, ERC20 tokens to USDT, Libra, cryptocurrencies have impacted the legal currency system in various ways. Simple suppression and prohibition of transactions cannot prevent the rise of cryptocurrencies. The legal currency system should adopt an open, pragmatic and rational attitude to seriously study and respond to the rise of the cryptocurrency and cryptographic economy.

Libra is a major innovation in the development of cryptocurrency and will promote the development of the crypto economy, but it is a major challenge to the traditional financial system. Libra itself faces regulatory pressures in the short term, and there are long-term internal game problems. Whether it is successful or not, it faces great challenges and risks. But in any case, Facebook is willing to adapt to the trend of the times, explore the password economy, and deserve respect and encouragement.