On June 18, local time, Facebook officially released a white paper on encrypted digital currency.
The official name of the currency is Global Coin (International Hard Currency), alias Libra (Libra), which means a fair trading currency. Libra is used for "peer-to-peer payment" in applications for users to trade and consume through software such as Facebook Messenger and WhatsApp.
- Read the relationship between the IMF and the digital currencies of central banks
- Opinion | Zhongjing Jinchuang Zheng Runxiang: RMB internationalization should establish a mechanism for applying RMB digital currency in the field of commodity trading
- National Currency Magic Curse: A Digital Currency Discovery Tour in Latin America
- Japan's Finance Minister: China's central bank's digital currency may pose great risks
- Fed report: digital currency, stable currency and growing payment patterns
- Interpretation of the US Economic Research Institute "Who should issue CBDC" report: ignoring the consequences of wholesale digital legal currency
It is reported that in order to develop the currency, Facebook specially hired the former CEO of PayPal, David Marcus, to host the project. According to LinkedIn data, more than 100 people have participated in the project before Facebook released Libra, and Facebook is still expanding the team. In addition, Facebook plans to use a machine similar to the "ATM machine" for users to purchase Libra, and let employees can also get paid in the form of Libra.
Xiao Lei, an encrypted digital currency analyst, said in an interview with the International Finance News that "due to the developed countries such as the United States, micropayments must also pass through banks and credit card systems, so the cost is very high. This problem has already been paid by mobile in China. The way to solve it. It can be said that China's mobile payment only needs to send a red envelope to solve the problem, the United States has to mobilize the bank settlement system to transfer money. Because of this pain point, and mobile payment is suppressed by traditional financial institutions, it can be said that direct stimulation The birth of Bitcoin and Libra."
A higher dimension than mobile payments?
So, what is the difference between the digital currency issued by Facebook compared to virtual currency and other digital currencies? First, we need to distinguish between the concepts of “virtual currency”, “digital currency” and “cryptocurrency”.
It means any currency that is not printed on paper or metal. It exists only in the virtual world. It can only be circulated in one direction, cannot be exchanged for cash, and cannot be transferred. Tencent’s Q coins and the “fish balls” of the live broadcast platform are virtual currencies.
Generalized digital currency
Including encrypted (digital) currency and central bank digital currency, the currency is presented in digital form, but assumes a function similar to the physical currency, supporting real-time transactions and transfer of ownership without geographical restrictions.
Encrypted (digital) currency
It is a digital currency created based on a certain encryption algorithm and is not issued by any centralized organization. Therefore, it is theoretically not affected by interference and control by government departments. At present, Bitcoin, Ethereum, EOS, etc., which are in circulation, are all cryptocurrencies.
The digital currency issued by the central bank is actually “digital legal currency”, which is essentially the same as cash and has national credit. Compared with the decentralization and concealment of cryptocurrencies such as Bitcoin, the central bank's digital currency, although combined with blockchain technology, is dominated by the state. At present, some domestic authorities believe that only the digital currency issued by the central bank with legal status is the real digital currency.
So, what is the difference between Libra and the well-known mobile payment?
Xiao Lei told the International Finance News reporter that in addition to all the advantages of mobile payment, Libra has many special features.
First, Libra's transfer transactions do not need to go through a bank, without a third-party settlement system, and because Libra is anonymous, users can quickly establish one or more addresses that are not related to their true identity;
Second, international financial institutions that provide services to Libra, including MasterCard, PayPal, PayU, Visa;
Third, users can exchange between Libra and French currency at the exchange rate;
Fourth, transferring money between users using Libra is as easy as sending a photo and information to the other party;
Finally, Libra's non-profit operations are located in Neutral Switzerland (Geneva).
In addition, Xiao Lei also pointed out that Libra may be one dimension higher than mobile payment. “Because people's demand for commodity trading is limited, and the demand for financial currency is unlimited, especially the institutions that can accommodate and carry commodity transactions.”
Not linked to a single currency
According to a white paper published by Facebook, Libra's mission is to create a simple, borderless currency and a financial infrastructure that serves billions of people and consists of three main components:
1. The foundation is a safe, scalable and reliable blockchain;
2. Backing is an asset reserve that gives intrinsic value;
3. Governed by an independent Libra association to promote the development of this financial ecosystem.
In addition, Libra has several features:
1. Libra is fully supported by real asset reserves. It is not “linked” to a single currency, but rather a basket of bank deposits and short-term government bonds of corresponding value to ensure the stability of Libra's currency. At this point, Libra is different from most cryptocurrencies.
2. Managed by the Libra Association, a non-profit organization, and gradually reduce its reliance on founders. Currently, Facebook has partnered with other association members to play a key role in the birth of the Libra Association and the Libra blockchain, but Facebook said it will retain this “leadership role” until the end of 2019. An important goal of the Libra Association is to gradually increase the degree of decentralization. Similarly, as a Libra reserve manager, the association will strive to minimize its dependence on itself.
3. Ensure that social data is separated from financial data. Facebook created a regulated subsidiary, Calibra, to build and operate on the Libra network. After the official release of Libra, Facebook and its affiliates will also have the same rights and assume the same obligations and financial responsibilities as other founding members.
4. The interest on Libra's reserve assets will not be distributed to users, but will be used to pay for the cost of the system, dividends to the initial investors, etc., to support further growth and popularization. However, the distribution of interest will be set in advance and will be supervised by the Libra Association.
5. Only the Libra Association can manufacture and destroy Libra. The Libra Association is the entity responsible for managing Libra's reserves and therefore controls the stability and growth of the Libra economy. Libra coins will only be manufactured when an authorized dealer buys Libra coins from the association. Libra coins will only be destroyed when they sell Libra coins and exchange them for mortgage assets.
Penetration capacity or several times the dollar
Facebook's launch of the encrypted digital currency Libra is undoubtedly of epoch-making significance. Spencer Bogart, general partner at Blockchain Capital, said: "Facebook's efforts in this area are likely to be one of the most important external catalysts in the history of bitcoin and technology."
A number of analysts said that this may legitimize the field, and it will be easier for users to purchase other cryptographic assets such as Bitcoin, and encourage large financial institutions to get rid of the "wait and see" model.
But at the same time, Libra has also been questioned by some outsiders.
On the one hand, the digital currency issued by companies is likely to have an impact on central banks in some countries. Some experts predict that by the first quarter of 2020, Facebook and its partners will launch specific digital currency payment systems in 12 countries and regions. Xinhua News Agency said that there are reasons to believe that by then hundreds of multinational organizations and enterprises will use the Facebook digital currency as a platform to carry out a series of "innovation attempts." Once this "innovative investigation" is completed, more multinational giants will flock to the top, and enterprise applications will even dominate the development of digital currency.
In an interview with the International Finance News, the blockchain company everiToken co-founder and CEO Luo Wei said, "The cryptocurrency issued by Facebook is hard to have an impact on big countries, but the impact on small central banks will be very huge. There is no doubt that because the credibility of hundreds of multinational corporations is added together, I am afraid that the credibility of the government of a small country is even stronger."
Xiao Lei also told the International Finance News reporter, "Although Libra will not have a huge impact in the short term, don't underestimate the long-term impact, because we have witnessed this power from mobile payments."
On the other hand, user data and privacy issues are also a concern for Facebook. Nguyen, CEO of blockchain company nChain, believes that although digital currency transactions can be anonymous, they can still be tracked by distributed parties on distributed taxonomy accounts. Therefore, those who have access to Libra can also access valuable data.
"Because this creates a system with a lot of data, it's very complicated. If I'm a regulator, I would question them as the way to handle the privacy of these data. Just because it's Facebook, it's subject to more regulatory scrutiny." Nguyen Say.
Luo Wei told the International Finance News reporter that "Facebook does not have anonymity at this point, and absolutely can access all the data information. The so-called 'privacy' is only for the front-end users, at the back end, there is no privacy."
In addition, since the entire white paper does not mention anything about the US dollar, the US regulatory system, and what kind of architecture is established in the United States, Libra's founding members are all-American Anglo-American companies. In Xiao Lei's view, Libra may be a behavior that is completely controlled by Wall Street in the United States and is aimed at upgrading the international status of the US dollar in the international market.
Finally, Xiao Lei pointed out that although Libra is a basket of currencies, the dollar is likely to still dominate. "This will inevitably stimulate the exchange of global users. If the development is relatively rapid, the currencies of some small and weak countries may accelerate their depreciation or disappear. Even some governments may accept Libra to pay taxes and expenses. This penetration capability. It may be several times the dollar."
Source: International Finance News