Libra : The Star Sign Into The Future, MJ Almazan (ECO001)

Social media giant, Facebook and its influential CEO Mark Zuckerberg have amassed 2.5 billion users worldwide while growing to achieve a net worth of $138.3 billion after 16 years of operation. The company possesses exceptional influence and power demonstrated by its inclusion in the exclusive FAANG acronym ( Facebook, Apple, Amazon, Netflix and Google) comprising of the highest performing technology companies. Midway through 2019, Facebook decided to take an even bigger stride within the technological community as it announced a digital currency called Libra which targeted a launch in 2020 allowing the billions of Facebook users around the world to make financial transactions online. Though sounding revolutionary at first, Facebook has received severe backlash for its intended project with key partners such as eBay, Visa, Mastercard and PayPal backing out of the non-profit Libra Association spearheaded by Facebook. The innovative technology threatens to alter the landscape of banking which has awoken the criticism legislators and economists alike expressing their unease in regards to Facebook’s “cavalier attitude toward everything from data breaches to misleading political ads.”

What Is Libra?

According to Facebook, “Libra is a simple global currency and financial infrastructure that empowers billions of people.” which in other words means that it is a digital asset developed by Facebook and powered by encrypted technology similarly used by Bitcoin as well as other cryptocurrencies. Libra contains five essential components or features which include :

being built on a secure, scalable (capable of handling thousands of transactions per second) and reliable blockchain
It is a stablecoin that is backed by a reserve of assets
It is governed by the Libra Association
Uses the LibraBFT consensus mechanism
Smart contact coding is done through “Move” programming language

To corroborate with the cryptocurrency, Facebook has developed a digital wallet named “Calibra” where users will be able to send Libra as currency through their smartphones via “Calibra”. Customers will be able to convert hard currencies such as the US dollar into Libra to place into their “Calibra” digital wallet through online or local currency exchanges. It is an extremely confusing fiasco.

The Benefits and Disadvantages of Libra

The Benefits

Easier and Cheaper Transaction – Although the precise transfer fees are unknown yet, the Libra Association and Facebook claim that the new digital asset will make money transactions easier for everyone with money transferred anywhere in the world in only a couple of seconds. Furthermore, the introduction of a mainstream endorsed cryptocurrency could foresee the gradual abolishing of hard money which means that the natural resource of trees can be preserved, thereby protecting our environment and wildlife while also maximising utility.
Appeasing the Lack Of Banking Around The World – One of the most significant issues around the world in terms of finance is the 2 billion people who do not have an active bank account. This problem is what presents Facebook’s new cryptocurrency as a potential powerhouse since it has the ability to provide simple and accessible online banking. An example of the impact that Libra could produce is the target country of India, who have 190 million unbanked citizens but also possess the largest population of Facebook users with 270 million. This is a discrepancy that the new currency will attempt to resolve by allowing Facebook users to utilise social media into an alternative banking platform, providing people in India and around the world with the ability to access, spend and transfer money worldwide. Furthermore, with such as vast number of users, Facebook could utilise the natural herd behaviour of humans by releasing Libra with mainstream and powerful advertising in order to accumulate a sense of ‘hype’ around the concept. By encouraging large binges of people to rapidly participate as well as organising famous influences to endorse the product, it will inevitable generate a flocking or “herd” behaviour as people flock to the ongoing trend. This will be especially effective in high density countries such as India, where Bollywood is a persuading influence and word travels through the streets almost instantly, a phenomenon such as that of the social media app TikTok.

3. Allowing Businesses and Brands to Expand Their Influence – By introducing Libra or “Calibra”, Facebook is transforming itself from a one-dimensional social media platform revolving around the exchange of information from one life to another into a multi-dimensional programme capable of exchanging money. This enhancement has the potential to attract more investors aiming to advertise their products or services around the world as users spend more time on the app through online shopping and browsing through the lifes of others. In retrospect, the increased exposure of businesses will lead to an increase in sales boosting the economy through GDP of whichever country the company produces its product in.

The Disadvantages

The Idea has Politicians and Economists Worried – Politicians view the Libra cryptocurrency as a danger to the world’s global financial system in fear of an economic dystopia. Furthermore, legislators have also utilised Facebook’s ambitious plans to lay into the company’s cavalier attitude with California Rep. Maxine Waters telling Mark Zuckerberg “I have come to the conclusion that it would be beneficial for all if Facebook concentrates on addressing its many deficiencies and failures before proceeding any further on the Libra project.” It did not stop there though, as Zuckerberg endured another six hours of lecturing where he continually insinuated his points of helping the world’s unbanked to enter the banking system and allowing America to suppose superiority in cryptocurrency over rivals such as Russia and China.
Exploitation of Personal Data – Facebook has been involved in various data scandals over the years with the personal data of its users exposed to political parties and businesses alike. By having visibility into Libra users’ finances, Facebook and the Libra Association will have even more information of its users at hand. On the contrary, the users will be on the complete opposite end of the spectrum, with the concept of cryptocurrency still vague and incomprehensible leaving the consumers with a lack of bounded rationality.

Conclusion

Libra’s main benefits revolve around bringing the unbanked citizens of the world into the financial world while also making the purchasing or goods and services much cheaper and easier. A patriotic profit from endorsing Libra as presented by Zuckerberg, is the crytocurrency superiority of America over its rivals. Despite these advantages, the idea also presents potential risks such as upsetting the financial balance of the world and exploiting and selling the information of its users to businesses and political parties. However, Libra Association head David Marcus has stated honestly that the members of the association will “not use the transaction data for commercial purposes”, though the promise of money may be difficult for the members to resist. Ultimately, the concept of Libra is one that will benefit many people around the world but only if the Facebook can be trusted to keep the information of its users confidential away from the prying eyes of ambitious businesses and manipulative politicians.