On July 3, local time, Facebook Libra project leader David Marcus published a long article "Libra, 2 weeks in" on his personal Facebook, explaining some of the questions and misunderstandings that Libra had encountered in the past two weeks. The following is the full text:
It has been officially open for two weeks since Libra, a new cryptocurrency based on blockchain technology. We shared a white paper, some in-depth papers on important topics, a test network, and other materials. Since the official launch of the project, we have seen a lot of great discussions from many different perspectives. Encouragingly, so many people accept Libra's ideas and methods. But as expected, there were some doubts and misunderstandings. So, I want to take some time to explain to increase the clarity of the project. We will continue to do so, so that everyone can get an update on Libra.
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Before that, I want to remind everyone that Facebook has only become one of the 28 founding nodes of the Libra Association through its subsidiary Calibra. Some news headlines may make it easy to think that Libra is only related to Facebook, but it is not.
After initial consultations with regulators, central banks and other organizations from around the world, we specifically decided to announce the Libra plan in advance. Our reason is simple: we hope to encourage open discussion through design. Launching high-quality trading media and its supporting infrastructure in the form of cryptocurrencies is impossible in the dark. If we really want to have the opportunity to better serve billions of people and businesses, and these people and businesses deserve modern, open financial services, this is the only way.
Let me now try to answer some of the key questions and statements I have heard over the past two weeks:
1. Is Libra really a blockchain? It is not open and not decentralized.
Although the initial mechanism for organizing nodes and becoming members of the Libra Association is certainly not as open as Bitcoin, that is, anyone can participate in negotiation algorithms, Libra's blockchain is definitely designed for openness. This means that no one needs to be a member of the blockchain to access the blockchain and build services such as wallets or merchant acceptance.
Regarding decentralization – we fully understand this – the replaceability of nodes is a fundamental principle of blockchain, which is why we are committed to a gradual transition to a license-free state in the coming years. At the same time, however, it is also important to start a project with a trusted entity that can operate in a regulated environment with the expertise needed to ensure the integrity of the underlying network. I think that 100 geographically dispersed, industry-diversified organizations are quite central. It may not be enough in a balanced state, but it is true in the startup phase. In contrast, the concentration of power of miners in other blockchains is often overlooked. But there is no doubt that there are more decentralized blockchains, and the Libra Association must work hard to gradually achieve further decentralization.
2. Why is the charter of the Libra Association still undetermined?
Facebook could have unilaterally drafted the charter for the Libra Association and approved it for new members. But this runs counter to the spirit behind our approach to building and operating the Libra Association. We hope that each initial member can participate in the development of governance rules, the selection of managing directors, and other key decisions that should not be made in isolation. We are trying to design a system to limit the power of a single organization, including Facebook, so that the network has the opportunity to become a public product.
I have read a lot of opinions on this topic since the project was announced. One of the points is particularly eye-catching. Someone wrote: "The main reason people don't have a bank account is that they don't have enough money to actually deposit into the bank. Libra won't solve this problem." I think this reflects a misunderstanding of the factors that hinder people's progress. The current system design is such that if your balance falls below a certain threshold, you will be charged a fee that you can't afford. Those who say they don't have the money to open an account in a bank don't actually say they don't use modern financial services. They just said that they can't afford the system, so they are still on the verge and forced to use overcharged services. With Libra, anyone with a $40 smartphone and network connection has the ability to securely protect their assets, access the world economy, trade at a lower cost, and receive a range of financial services over time. We are convinced that if Libra succeeds, it will be a non-linear change for billions of people who need it most.
4. What contact do you intend to engage with regulators and legislators?
We are talking about new things in a highly regulated industry. If you do something wrong, you will definitely bring systemic risks that no one wants to see. That's why we believe and work with regulators, central banks, and lawmakers to ensure that Libra can help solve problems that the existing financial system has been fighting, especially money laundering, terrorist financing, and more. Fundamentally, we believe that the network can help move more cash transactions—a field where there is a lot of illegal activity—to a digital network, which will be an important opportunity to improve the efficiency of financial crime monitoring and enforcement. The network is characterized by appropriate customer-aware (KYC) inspections when funds are in and out, and law enforcement and regulatory agencies can conduct independent analysis of chain activities. The Libra Association will continue to engage actively and openly with all relevant stakeholders on these key issues. Libra should improve monitoring and execution rather than being blocked.
5. Can Facebook be trusted to manage financial services?
Facebook does not control the Libra network, currency or its support reserves. Facebook will be just one of the more than 100 members of the Libra Association. We will not have any privileges. Facebook created a subsidiary, Calibra, which will operate a wallet service on top of the Libra network. Although Facebook owns and controls Calibra, it does not see Calibra's financial data. More importantly, there are many ways people can take advantage of Libra and get into the network. You will be able to use a range of managed and unmanaged wallets that will be fully interoperable, meaning you will be able to pay and receive payments through different company wallets, even using your own software wallet. The bottom line is that you don't have to believe that Facebook can benefit from Libra. Facebook does not assume any special responsibility for the Libra network. But we hope that people will have a crush on the Calibra wallet. We are already aware of our approach to separating financial data, and we will fulfill our commitment to achieve real utility.
6. What are the benefits of Facebook? Why do you want to do this?
First and foremost, because of mission-aligned. Bringing the world closer means giving people the tools to connect and communicate, but now, while people can send texts, videos, photos, etc. to each other, in many cases they can't easily pass on value between each other. Economic empowerment is one of our core values, and 90 million companies on the Facebook platform can prove this. We have done a lot of work to democratize the free and unrestricted exchanges of billions of people. We want to do the same for digital currency and financial services, but there is a key difference – this time we will give up control of the networks and currencies we helped create. If Libra succeeds, Facebook will first get more business opportunities from its app ecosystem. More business means that advertising will be more effective, and advertisers will buy more ads to grow their business. In addition, if we use the Calibra wallet to win people's trust over time, we will also begin to provide more financial services and bring other sources of income to the company.
We look forward to continuing to engage with various communities and stakeholders. We hope to hear from you and promise to take the time to correct it. That's why we open up the plan ahead of time and open the Libra codebase to the world. The time from now to release will be a collaborative, open process. In this spirit, I look forward to hearing in front of the Senate Banking Committee and the House Financial Services Committee in the coming weeks.
As we progress, please stay in touch with us. After all, all of this is for the sake of all mankind, in order to make financial services better serve humanity. Thank you. (The internet)