Earlier this week, Facebook has released its white paper on its long-awaited cryptocurrency –Libra, a transformative digital currency designed to bring affordable financial services to billions of people on the planet.
So, what exactly is Libra?
It is a digital currency built on the blockchain technology to create more access to better, cheaper and open financial services. It is simply a currency that can be used by businesses or people around the world to make online transactions at lower cost than what we have today.
Libra’s Goal: Stable currency built on a
secure and stable open-source blockchain, backed by a reserve of real assets,
and governed by an independent association.
So … how Libra is different from Bitcoin?
Similar to Bitcoin, Libra is built on the
foundation of a secure, scalable, and reliable blockchain network.
However, Libra is relatively more stable in its value. This is because Libra is backed by a reserve of underlying assets which comprise of bank deposits and short-term government securities in currencies from stable and reputable central banks.
Many cryptocurrencies today such as Bitcoin and Ether have no underlying assets to back the cryptocurrency, causing high degree of fluctuation on its value, hence creating more risks to their investors and users.
Libra on the other hand, is designed to be a currency where the users will know that its value in the near future will be close to its current value. This can be achieved via its reserve mechanism, that comprises a basket of stable and liquid assets, which protects Libra against the speculative swings and bring more confidence to the users.
How can I use Libra?
The users will need to purchase the Libra currency by transferring money from a bank account or financial account like PayPal. Libra will then be stored on a digital wallet created by Facebook called Calibra – expected to launch in 2020.
Calibra is a new digital wallet designed for users to save, send and spend Libra. With Libra in your Calibra wallet, you can pay bills with the push of a button, buy a cup of coffee with a scan of a code or travel in local transit without carrying any cash.
Besides, Libra can be stored in any digital
wallet provided by other companies, which further enhance its liquidity.
How safe is Libra?
An independent, not-for-profit association called Libra Association is set-up to coordinate and provide a framework for governance of the network and reserve. The Libra Association participates in the key decisions on the development of the Libra Blockchain, management of the Libra Reserve, and the approach to social impact grant-making.
The initial group of organizations will
work together to finalize the Libra Association’s charter and will become the
association’s Founding Members upon its completion. Below is the list of
soon-to-be Founding Members:
Payments:
Mastercard, PayPal, PayU (Naspers’ fintech arm), Stripe, Visa
Nonprofit & Multilateral Organizations,
and Academic Institutions: Creative Destruction
Lab, Kiva, Mercy Corps, Women’s World Banking
Libra is also set-up as a separate entity from Facebook, promising to not share its user’s information to other platforms such as Facebook and Instagram. This means that Calibra customers’ information and financial data will not be used to improve ad targeting on the Facebook family of products. This effectively enhanced the data privacy of Libra’s users.
How will this impact business owners?
Libra provides an alternate option for the
businesses to make overseas transactions.
Transactions that used to involve two or more currencies with high transaction fee will now be able to be conducted via Libra. This could effectively reduce transaction costs, reduces cost of good sold & facilitates overseas trades, especially for e-commerce.
Fourth industrial revolution (4IR) is happening and it’s happening fast. It’s going to bring unprecedented change to the way people work, spend and do things via various emerging 4IR technologies such as AI, Machine Learning and Blockchain, cutting down the time and cost to complete a task while increasing the productivity.
Both private and public sector should embrace the 4IR and devise a clear roadmap for 4IR adoption to reap the benefits of 4IR technologies.
Speak to us to find out how we can help your organization to capitalize on the digital technologies such as blockchain, AI, machine learning: ivan@27advisory.com.my
