Libra wants to cool? Congress stops! After the fever, the rational look can reach the core of value.

Computational power

Facebook's Libra will open the door to the real world of the blockchain world, but even by the expected release of 2020, the number of people who can come in may be less than expected. However, its historical significance is comparable to Facebook's "founding a nation", or it will use the blockchain technology to reduce the traditional Internet and restructure the old world financial system.

In the two weeks after Facebook released the Libra project white paper for the blockchain, public opinion has interpreted it from the dimensions of technology, currency, and story, and the conclusions are mixed. After extensive interviews, the power think tank felt that the views of the industry on the topic gradually became more rational and in-depth. Many of the previously ignored priorities were emerging one after another.

1
Blockchain new world is coming

When it comes to blockchain, it generally discusses its financial and technical attributes at the same time. Libra actually has both attributes.

“Libra's mission is to build a simple, borderless currency and financial infrastructure that serves billions of people.”

This sentence appeared three times in total in the white paper, the importance is self-evident, and the media's interpretation around it has emerged endlessly.

However, it is worth noting that Libra is expected to be released after the first half of 2020. The most direct impact is reflected in the currency price of the encrypted digital currency and the blockchain technology itself.

 

2
The benefits of Libra are exhausted
First reflected in the bitcoin volume and price

On June 18th, Facebook released a white paper on the blockchain Libra project around 2 am US time. The bitcoin price was about $9,300. In the next 10 days, as the market heats up, the price of the currency approaches 14,000. The US dollar, and then with the stagnation of the price, the price has dropped.

The gray line is the price of Libra when it was released (source: coinmarketcap)

"We believe that the growth of bitcoin's currency price is mainly driven by the amount of money. As long as more people buy it, it will raise prices. Facebook's launch of Libra will make people inevitably understand Bitcoin and even purchase. Bitcoin. Now there are only about 20 million people holding cryptocurrencies around the world. Facebook has 2.7 billion users. Even if this funnel is 1% down, it will bring at least double the user increment of the blockchain. It is definitely good for Bitcoin.” This view comes from Zhang Mingjing, former vice president of Huaxing Capital and now a partner of Xingxing Capital. He has both traditional capital and blockchain investment experience.

But other encrypted digital currencies are not so lucky. In the 10 days of bitcoin skyrocketing, there was no centralized outbreak in their prices.

That is to say, the price impact of the incremental user brings the concentration to the bitcoin.

 

3
The “open source” blockchain infrastructure system is the core of value.

In addition to the impact on the currency price, Libra's influence on blockchain technology and its application is rarely mentioned by mainstream financial media, and industry insiders believe that this may just lead to a qualitative leap in the blockchain.

This is very similar to that of Nakamoto's invention of Bitcoin in 2008, but the blockchain technology behind Bitcoin was only noticed in 2013 and 2014, and the name "blockchain" was obtained.

“We have invested in many blockchain projects. We feel that the current blockchain products are not industrialized enough. There are many Demo-level products, and Facebook is a very mature Internet and software company. They can certainly promote the use of software engineering methods. To carry out large-scale commercial technology development, we believe that this will have a very large role in promoting the blockchain." Zhang Mingjing told the think tank.

It is mentioned in the white paper that the Libra currency is “based on a secure, scalable and reliable blockchain”, “Designing and using the Move programming language” and “open source”.

If you understand Libra from the blockchain technology dimension, then the situation will become very interesting: first, it sends a coin called "Libra"; second, it will develop a digital wallet Calibra with Libra; third The world's top developers will apply a new language, develop applications in the open source ecosystem, and what applications will be born is likely to surpass the imagination of ordinary people.

Can be borrowed from the 2007 Android system open source. Google is intended to compete with Apple to seize the share of the smartphone operating system, but it does not necessarily accurately predict that Android will occupy more than 80% of the market share, and the impact on the mobile Internet application market is so great.

4
Reconstructing the traditional old world financial system

Libra's initial basket of currencies or dollar-dominated will strengthen the dollar's hegemonic position; but in the long run there are uncontrolled risks, and if the ratio is too low, it may challenge the dollar.

The starting point for launching the project is stated in the Libra white paper:

  • There are still 1.7 billion adults in the world who are not exposed to the financial system and cannot enjoy the financial services provided by traditional banks. Among them, 1 billion people have mobile phones and nearly 500 million people have access to the Internet.
  • Throughout the world, the poor pay more for financial services. Their hard-earned income is used to cover a variety of complex expenses, such as remittance fees, wire transfer fees, overdraft fees, and ATM fees. The annualized interest rate for payday loans may be 400% or higher, and financial services can only be borrowed for $100.

As a result, Facebook intends to provide this group of people with more convenient and competitive financial services: creating incremental users who use financial services, and influencing the stock of traditional banks. But no matter which part of the user is targeted, the challenges behind Facebook come from the pressure of traditional old worlds such as banks, clearing houses and even governments around the world.

The game between Facebook and vested interests may be extremely difficult. The feedback from the computing power think tanks in the extensive interviews is still positive. The financial circle industry generally believes that Libra will be in the midst of difficulties, and the difficulty of the regulatory level will far exceed the difficulty of technical and commercial level.

"I personally feel that the difficulty of landing in the third world countries is less than that in developed countries." Zhang Mingjing added, "Those bordered, partial beauty countries may be easier to land, we pay close attention."

When interviewing Chris Kameir, managing director of Sustana Capital, USA, he said that more than a dozen countries around the world directly use US dollar bills as their local currency. This situation is caused by the fact that since the collapse of the Bretton Woods system, local currency prices have fluctuated drastically. In order to resist inflation, citizens exchange their national currency for the value of the US dollar. Over time, the US dollar becomes a substitute for local legal currency. Monetary policy is fully aligned with the dollar.

History has striking similarities. In Venezuela, for example, its inflation rate is expected to exceed 10000000% (100,000 times) in 2019. In order to fight inflation, local residents risked being arrested to dig bitcoins, and bitcoin fluctuated considerably. If Libra has already launched, the choice of the people of small countries suffering from inflation is probably Libra stable currency.

"The strategy is very clear, and the persimmons are softly pinched. First, the monetary system of the weak countries in the 200 countries of the world is gradually replaced. When encountering a very few powerful countries, of course, it is necessary to bow down and the conspiracy will be conspiracy." Hing said in the meal no comments Libra said.

When many domestic financial circles believe that Libra's target basket of currencies is dominated by the US dollar, it is likely to become an extension of the US dollar hegemony in the digital economy. On Tuesday afternoon, US House of Representatives Financial Services Committee suddenly turned to Zucker. Facebook and other Facebook executives sent a letter asking them to immediately stop all Libra and Calibra work, and believe that if they do not immediately stop the implementation of the project, they will face a new system that will trigger a financial tsunami if it fails.

From the US House of Representatives Financial Services Committee official website

“Libra anchors a basket of currencies consisting of multinational currencies, and its function is similar to that of the IMF. If the dollar dominates in this basket of currencies, it will strengthen the dollar’s ​​dominance; if a basket of currencies has a lower proportion of dollars, Facebook, with 2.7 billion users worldwide, has the power to challenge the dollar hegemony and become an independent central bank in the global digital economy, which may weaken the Fed’s ability to regulate the macro economy. In short, the Libra project has many uncertainties. Wang Jie, chief researcher of Li Zhiku Research Institute, pointed out.

Author: Chen Akwa

Source: Computing Intelligence