Facebook & Libra, the sensational entry in the financial world

By targeting the approximate 1.7 billion people around the world who do not have access to a traditional bank account, the American firm Facebook aspires to rely on its 2.4 billion users to reach the forgotten and the destitute people of the conventional banking system.

The name Libra comes from Latin and represents a mass unit used by the Romans. The new global virtual currency called Libra will be based on blockchain technology. Although the initiative of the new virtual asset is the result of the American company Facebook, Libra is also supported by a consortium: the Libra Association.

The blockchain technology and the bitcoin

A blockchain is a technology of storage and transmission of information. It is truly innovative and revolutionary because it allows securing the information transparently and in a totally decentralized way. Thus, everything on the blockchain remains on the blockchain, it cannot be altered or modified by anyone and is visible to all.
The bitcoin is the first application of the blockchain. Following the 2008 financial crisis, the creator of Bitcoin wanted to propose an alternative to the banking system: a system without an institution and a central control.

Despite the fact that they are based on the same blockchain technology, Libra and Bitcoin do not share a lot of connections.
For instance, the Bitcoin network is composed of anonymous nodes (servers), requiring expensive and long-term computational power (the mining of data).
The Libra is based on a private blockchain where each member of the Libra Association is in charge of a node (a server) forming the skeleton of the chain and allowing to record the transactions. This is a major difference. The identity of the nodes is known, ensuring secure and faster financial transactions.
The second huge difference is the stability of the Libra. Libra will be indexed on a basket of real currencies (dollar, euro, yen, pound) to ensure certain stability of its price and easy convertibility in fiat currencies.

The price of bitcoin mostly comes from the supply and market demand so depending on the situation, the value can fluctuate a lot and hence is very volatile.

The Libra Association is the organization in charge of the supervision of the currency network. It is an independent, not-for-profit association based in Geneva, Switzerland.
The elected members of the council of the association will ensure the expansion of the network and the good management of foreign exchange reserves for the stability of Libra.
Libra Association virtual money
The consortium behind the project currently includes 28 companies from different fields of activity (tech, payment, telecoms, blockchain, venture capital and NGOs). The goal set by the group is to reach a critical mass of 100 members before the launch of Libra.

Each member contributed a minimum of 10 million dollars to be accepted as a founding member of the association. Since each member oversees security for a node of the blockchain, they all together maintain the network. They will ensure the expansion of the network and the good management of foreign exchange reserves for the stability of Libra.
The governing body of the Libra Association is the Libra Association Council. It's formed by a representative of each contributing member. They will vote on policy and operational decisions.
Facebook assures that it will retire from the leadership role and all members of the association will have an equal vote in the governance of the Libra.

To use Libra, people will be required to use the intermediate Calibra "channel" belonging to Facebook. It is an app compatible with IOS and Android that will play the role of virtual wallet and will be directly integrated with Facebook message platforms: WhatsApp and Messenger.
A valid ID will be necessary for the registration.

The presence of companies as Uber suggests that the users will be able to directly use Libra on third-party services.
A small percentage of transactions made through Calibra will be levied by the Libra Association. These fees will be lower than those practiced in banks.
But several remarks have already been raised on the Libra by different governments. Governments are worried about the security of this virtual currency. Facebook assured that technologies will be implemented to prevent money laundering and fraud by using the same audit and anti-fraud processes that banks and credit cards use: automated systems that will proactively control activities to protect and prevent risky behaviour.
Live help will be available to users and Facebook will reimburse users who have lost their money via fraud.

Facebook wants to diversify its activities and to improve its image after the recent various scandals related to the data protection of users. Thanks to Libra, the company expects the user traffic on its platforms and those of its partners to increase considerably, consequently increasing its advertising revenue (98% of the group's revenue comes from that already). Fees collected during transactions will also be a new source of income for Facebook.

By means of Calibra, Facebook constructs a new brand, a non-profit image, close to people who are abandoned by banking systems. A brand that wants to be independent of the traditional banking system while being at least evenly secure.

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