Facebook reveals plans for new cryptocurrency Libra and digital wallet Calibra
Social media giant Facebook Inc has revealed plans to establish a cryptocurrency called Libra on Tuesday. It will be run by an association comprised of other corporate investors and non-profit members, with an expected launch in the first half of 2020.
THE COIN
Libra will be a digital currency backed by a reserve of real-world assets, including bank deposits and short-term government securities, and held by a network of custodians.
The structure is intended to foster trust and stabilize the price.
Although Libra prices may not always align with the underlying assets, holders should have a “high degree of assurance” that they can convert coins into traditional currency based on an exchange rate, according to the project’s information.
Libra will trade on a network of exchanges, which Facebook did not identify.
TECHNOLOGY
Libra transactions will be powered and recorded by a blockchain, which is a shared ledger of transactions maintained by a network of computers.
The Libra blockchain will be permissioned, meaning that only entities authorized by the governing association will be able to run the computers. Its governance differs from bitcoin, which does not have an entity in charge.
The software will be “open source,” meaning companies outside the association can build applications on top of it.
The association plans to move toward a permissionless blockchain within five years of Libra’s launch.
THE ASSOCIATION
The Libra Association is a 28-member independent non-profit based in Geneva, Switzerland. It will oversee major decisions about the digital coin. Members include Mastercard Inc, Visa Inc, Spotify Technology SA, PayPal Holdings Inc, eBay Inc, Uber Technologies Inc and Vodafone Group Plc, as well as venture capital firms Andreessen Horowitz and Thrive Capital.
There is a minimum $10 million investment to join, except for non-profit members like financial inclusion group Kiva. The association aims to have 100 members by launch.
Each will have one vote on important issues. Facebook will be a member via Calibra, a newly created subsidiary that will offer a digital wallet for Libra.
THE WALLET
Individuals and merchants will be able to use Calibra to store, send and receive Libras. It will be available as a standalone app on smartphones, as well as a button within Facebook’s Messenger and WhatsApp products.
Facebook eventually wants to make Calibra available for transactions across its family of apps, such as digital checkouts for purchases on Instagram. Executives envision users purchasing Libra through the app either by linking a bank account or, for people without banks, at physical locations like cash transfer businesses and convenience stores.
Calibra engineers are involved in building the blockchain, though Facebook says it intends to keep the currency and the wallet in separate entities. Calibra has about 100 employees, mostly based at Facebook’s headquarters in Menlo Park, California, as well as in Tel Aviv. Calibra executive Kevin Weil told Reuters he did not foresee a dramatic expansion beyond that headcount.
