Who doesn’t know the first ever cryptocurrency? Yeah right! It’s Bitcoin. Invented back in the year 2009, it hasn’t had a competition until now when suddenly facebook, the social media giants decided to unleash themselves into the monetary policy field with “facebook Libra“as they call it. Although they claim it to be a new version of blockchain - “The encrypted technology used by bitcoin & other cryptocurrencies” as explained by The Guardian. It is expected launch is in 2020.
On a broad view we can say that both Libra and Bitcoin belong to the same cryptocurrency family, but they serve quite different purposes -
Bitcoin is decentralized i.e. there is nothing such as a single controlling unit, we are the masters of our own coins. We can make our transactions without restrictions, no fear of getting money frozen etc are some of the benefits. Such is not in the case of it’s counterpart. The Libra association which includes 27 members some of which are Visa, MasterCard, Uber etc is the body which will be controlling all the transactions and other processes in the network. The transaction can be blocked or the funds could be frozen, it’s all in their hands. Also they contain all the information regarding the transaction such as to whom, when, amount etc.
One of the best advantages of Bitcoin is that it is not dependent on the government or any central bank so it is never subject to issues such as inflation rates. It’s value rather depends on availability on currency exchanges, demand & supply etc. On the other hand Libra does depend on the current government, inflation & underlying currencies too & this is because it is tied to national currency.
21 million is the maximum number of bit coins that can ever be produced & that’s it for the fact that it will never be inflational. On the contrary the value of Libra coins fully depends on the Libra association & their decisions.
In this too both stand at sharp contrast to each other, while Libra is expected to start with a permissioned block chain and then continue with permission less, bitcoin’s block chain has always been permission less. For Libra the miners will have to seek for permission before mining, while in bitcoin it’s unrestricted. Libra has a single data Structure along with the history of transactions and other information.
Ok! So now more about Libra.
Some of you may have also heard or even read that Libra is not a cryptocurrency at all. Is it really so? Well, the most important thing about a cryptocurrency is that it’s ability to eradicate "Censorship".
So lack of this decentralized system is what prevents it from being a cryptocurrency because seriously who’ll want some other person to control or interfere in their transactions. It has been only found similar to the cryptocurrency in a way that both of them have blockchains. Also there had been rumors that the association had put forward the idea of making it more decentralized with time which may or may not work out.
Libra is expected to make it’s first launch on the platform such as Messenger, Whatsapp etc.
I think we agree that Libra raises a lot of serious concerns, and those would include around privacy, money laundering, consumer protection, financial stability. Those are going to need to be thoroughly and publically assessed and evaluated before this proceeds
These were the thoughts presented by the Federal Reserve Chairman Jerome Powell in front of Senate Banking Committee where he raised questions about Facebook’s digital currency.
So in the end everything’s just revolving around this one big question which irrespective of be it general public or the lawmakers want answer too "Can we trust facebook with our money & related data ?"