Facebook launched its cryptocurrency known as “Libra,” in association with MasterCard, Visa, Uber, and others. It was formally launched on 18 June 2019, and Facebook-led digital currency is preparing to launch in early 2021.
You will be able to purchase Facebook Cryptocurrency “Libra” from Libra wallet apps on your phone. You cash with your local currency like dollars and get the same number of Libra coins.
What do you need to know about Facebook’s ‘Libra Cryptocurrency’? Facebook’s evolved cryptocurrency aims to enable a simple global currency and financial infrastructure that empowers millions of people.
1. Know about Cryptocurrency:
Cryptocurrency is a system of money that commonly takes into account the exchange for goods and services. Therefore it holds value in trades and transactions. Cryptocurrencies are digital currencies and secured using cryptography.
Cryptography is defined as the practice of securing information or any communication system by encrypting it into an unreadable format by using codes so that it remains secured between the sender and the receiver.
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2. History of Facebook’s cryptocurrency:
Back in 2017, when Morgan Beller started working on cryptocurrency and blockchain at Facebook. He was the only person working on Facebook’s blockchain initiative. In 2018, Facebook vice president David A. Marcus joined this initiative. By May 2019, Facebook’s cryptocurrency was termed as “GlobalCoin” or “Facebook Coin.”On June 18, 2019, it was formally announced as “Libra.”
3. What is Libra?
- Libra is a new currency that Facebook is initiating. It is a cryptocurrency because cryptography helps to protect the value of the currency from criminal falsification. For instance, double spending and to protect the payment process.
- Libra has its association termed as “Libra Association,” consisting of large international corporations such as Facebook, Uber, and Vodafone. Mastercard and visa also have their association with ‘Libra,’ but no banks have an association with ‘Libra.’
4. What makes Libra different from other cryptocurrencies like Bitcoin?
- The other cryptocurrencies besides Libra are Bitcoin and Ethereum. But the difference primarily lies in the method of operation and management.
- Bitcoin and Ethereum have no single authority to control or verify transactions between parties. So anyone could potentially do it.
- Bitcoin follows a process called mining. To get authorized for a bitcoin transaction, you must prove that you have done the work, known as a “proof of work.”In simple terms, mining is the solving of computational problems that allow chaining together blocks of transactions.
- The mining process reduces fraud. As anyone can mine Bitcoins, colluding is much more challenging. You wouldn’t comprehend who will be the next individual to mine a coin, and review the authorized individual is easy because anybody can verify that the puzzle to fix them properly.
- Libra is different from Bitcoin as it will verify transactions based on “proof of stake.”Under this system, transactions would be authorized by a group of people who have a stake or ownership in the currency, for instance, the Libra association. This method makes it easier to know who the next person is or a group. And who is going to get the authorization? Since there is an extensive database of users known to a relatively small number of the authorized groups. And this group that makes Libra association.
- However, to become a member of the Libra association, the group should influence many people along with its contribution of a minimum of US $10 million as an entrance fee.
5. People’s expectations from ‘Libra’:
The cooperation of software giants means it’s likely that the user interface for Libra coins would be smooth and straightforward to use. Low transaction costs would benefit users, and the Libra Association promises to control the currency’s value so that it does not fluctuate as much as other cryptocurrencies. It’s unclear how they plan to do this. But value stability would be a great advantage in times of uncertainty.
6. Banks and regulators worry about “Libra”:
- Cryptocurrencies affect government and tax services since they have little or no transaction costs when transferred across countries. So while the low transaction costs would be good for everyday users, the emergence of a new cryptocurrency with many user bases has governments and banks very concerned.
- Libra is also an open-source transaction, which means the source code is available for all to view, use, and modify. However, the members of the association will be continuously monitoring the currency.
- Libra could shift from traditional government taxes and banking fees to a new international monetary system controlled by corporate entities like Facebook and Uber. It is the main concern for regulatory bodies.
7. Few risks you should know:
- The everyday consumer probably wouldn’t know the difference between the “proof of work” and the “proof of stake” mechanisms. But since Facebook has a large database of users that are using Libra. It may be able to link Libra transactions to individuals. It could be a privacy concern. We cannot know about Bitcoin transactions. Because account numbers used in Bitcoin transactions link to an individual’s identity.
- Recent cybersecurity breaches have contributed to a growing awareness of the vulnerabilities of IT systems. As with all software, the Libra implementation and management could be vulnerable to attack, which in turn could mean users could lose their money. Whatever the case may be, users are always at risk in all cryptocurrency transactions. But that is a risk that all cryptocurrency users face, whether they are aware of it or not.
8. How can consumers protect themselves?
- No matter what cryptocurrency you choose to use, your funds are still accessible through the same interface, either a web page or a mobile app. You can control access to your funds by setting up a password.
- Make sure to keep your password safe by making it complicated and hard to guess. Look for applications that allow you to use two-step authentication and make sure it is turned on.
Finally, Libra has been launched recently, but it is yet to prove its claims of making financial transactions safe and convenient. Only time will tell if its action will become widespread in the future.