Several days ago, the world woke up to the headline “Facebook launches its digital currency Libra.” This news caused a very big uproar, and its resonance is still spreading to all parts of the globe.
Facebook, the giant that dominates the field of social media (it owns Instagram, WhatsApp, and Messenger) will enter the world of money and currencies, launching its digital currency, Libra, in early 2020.
So, what is the Libra currency? And what is its mechanism of action? How will it be traded? What is the reason behind its release so quickly? What is its impact on the global market?
And that’s not all. Facebook has recently faced a lot of criticism, lawsuits and fines for violating users’ privacy. How does Facebook expect people to accept this new currency?
Everyone knows that Facebook owns all the information about any user of its services, interests, activities, acquaintances and places where he is, and everything is done on his computer or phone even after closing or even removing the Facebook application.
Now that Facebook has launched Libra, Facebook will also get users’ financial data, the types of services they subscribe to and the products they prefer.
This information may be sold by Facebook to interested parties, or may be used by its advertising platform, in order to help marketers to target users with advertisements very accurately based on their spending and financial habits.
Do you see how Facebook responded to these questions? And how were the reactions from various organizations and economic and political parties in the world? You will learn all this and more in this article.
What is the Libra currency? And what is its mechanism of action?
Libra is a digital currency based on blockchain technology, used to make money transfers and purchase products easily, but in a different way from traditional digital currencies.
For this reason, if you do not fully know what digital currencies are, and what is blockchain technology, I advise you to read the following articles before completing this article:
The Libra currency is based on real currencies. In order for anyone to get this currency, they must buy it for money, and this is unlike the regular digital currencies that anyone can obtain through the mining process.
When you want to top up your Libra currency, you can use your credit cards, or you can buy it from service providers in the market – just like you charge your mobile phone or pay internet bills.
In the same way, you can convert the Libra currency that you have to the normal currencies of your country so that you can use it as you wish.
Note that the process of transferring and trading this currency will be with a very small fee (amount much less than 0.1 dollars), unlike money transfer services such as PayPal and Western Union.
And because Facebook is the one who launched the Libra currency, it will enable you to transfer and receive this currency through the WhatsApp and Messenger application, and also through a separate financial application called Calibra.
Facebook creates Calibra
In order to facilitate the process of trading these currencies, and for Facebook to promote this service – we will talk about this in more detail later – he founded a separate company called Calibra.
This company will be responsible for the process of trading the Libra currency, and for the Facebook application for trading this currency, and this company will also have special servers away from Facebook in order to maintain customer financial data?
New programming language Move Programming Language
As I mentioned, the Libra currency is different from traditional digital currencies such as Bitcoin or Ethereum . That’s because you only get it by buying it, and Facebook says one Libra was worth about $1 when it was launched.
So, the Libra currency will be an alternative only to regular paper currencies, and it relies on blockchain technology to store customer data and record financial transactions, because the blockchain is a fast and safer system.
It’s similar to what happens in games, you pay money to buy game currency (such as FIFA or Fortnite), and then use that currency to buy anything within the game itself.
For this, Facebook acquired some companies in this field in order to develop a new programming language that works on the blockchain system, and it was called Move.
Facebook claims that this language will make the process of trading Libra currency much faster than other digital currencies, as the new system can accommodate 1,000 transfers per second.
This is in contrast to other currency trading operations that do not exceed 7 operations per second.
It is worth noting that this language, and the system on which this currency will depend will be open source , which means that any programmer can participate and exploit this currency and build various applications.
The Libra Association
In order for Facebook to try to convince the global and financial community to launch a new digital currency, Facebook tried to involve the largest international companies with it in this project in order to gain their satisfaction, and to help it promote this currency.
Among these companies (currently the number has reached 28 companies), Uber, Visa and MasterCard, PayPal, Vodafone, and other famous companies in the world.
You can get acquainted with some of these companies through this photo.
Facebook aspires to reach 100 companies by the end of this year. These companies must meet several conditions, and they will have several responsibilities, which I summarize in the following points:
- Any participating institution must invest at least $10 million in this project.
- The company must have a known history, and have giant capabilities that help in the development of the project.
- Each company will be responsible for a portion of the Libra trading process.
- Together, these companies will be responsible for making decisions in order to organize and develop various trading operations, and to cooperate with government institutions.
The headquarters of this institution will be in Switzerland, and the funds that will be obtained in exchange for the Libra currency will be controlled by this institution.
In the following points, the picture will become clearer to you to learn why Facebook is launching a new digital currency.
How will Facebook and the joint stock companies profit from the Libra currency?
This is a very logical question, especially since we previously mentioned that the fees for converting this currency from one user to another will be very simple, and even if millions of people used the Libra currency, this would not cover a large part of the operating costs.
Despite this, the answer to this question is very simple, in order to get the Libra currency you have to buy it for money, where do you think this money will go?
This money will be collected in one bank account (Reserve), and will be at the disposal and protection of the Libra Foundation that we mentioned earlier, and the interests of this money will be used in the operation process.
The surplus will be distributed as profits to the joint stock companies, each according to his participation in the project. Therefore, it is expected that if this project is launched, it will achieve huge profits in a short period of time.
That’s not all, this account will have a very important feature, follow the article to find out what it is!
Facebook’s plan to promote Libra currency
Some believe that Facebook’s plan to promote the Libra currency is a smart plan, especially after Facebook launched the official Libra website to explain the outlines of this giant project.
Others also believe that it is a cunning (or despicable according to some analysts) plan, especially since the main image found on Libra’s website is of a black woman of African descent.
To understand why this behavior is so upset, to discover the elements of the entire marketing campaign, and how Facebook is trying to convince the world about this project.
Carefully read the following points in which you have collected all the pillars of Facebook’s promotional plan.
1- Promoting the poor
According to the famous Forbes magazine statistic in late 2018, there are at least 1.7 billion people in the world who do not have a bank account.
Most of these numbers are found in Africa and the poorer countries of Asia – unlike China, which has very complex rules, where the government controls the population according to a strict social system.
Facebook claims that the existence of this currency will help these poor people especially in insecure societies, because thieves and criminals cannot steal cryptocurrencies.
That is why many analysts were upset with the design of the Libra website, and they felt that Facebook was taking advantage of the poverty and hunger in many black-skinned countries to promote the Libra currency.
2- Resist the exploitation of money transfer companies
In order to transfer money from one country to another, you need some services such as paypal, Western Union or Payoneer . I know that these companies charge very high rates, up to 7% of the value of the amounts transferred.
This makes these companies earn billions of dollars annually with almost negligible effort.
That’s not all, have you not heard of closing accounts in these companies? A company such as PayPal or Stripe can close any account you want at any time, and do not pay money to the owners of these accounts.
This is happening continuously all over the world, and there are a lot of people who have suffered from this and lost thousands of dollars, and who can face a giant company like PayPal in the expensive courtyards?!
These are the points on which Facebook plays to promote this currency, the transfer fees are almost negligible, and the company promises not to freeze any account without an order from the competent authorities.
Please remember that last sentence because we’ll be using it later… Read on to discover the wonder!
3- Decentralization
In an effort to combat allegations of privacy violations, Facebook says it is not in control of the coin, as there is an independent organization called the Libra Association that controls everything.
Each company in this organization has only one vote, which makes Facebook control 1% – that’s assuming there are 100 companies involved.
This is not accepted by many economic analysts, however, Facebook relies heavily on this point in promoting the Libra currency.
4- Libra is based on an open source programming language
As I mentioned, the Move language will be open source, and this enables anyone to rely on it and develop applications based on the Libra currency.
This means that there will be many applications competing with Facebook’s Calibra application, and therefore Facebook will not have as much financial data for users as some claim.
5- The Libra currency will be stable
The reason why digital currencies such as Bitcoin and others are not widely spread, and not widely accepted is because of their instability in the market.
The prices of digital currencies are constantly changing, this change is catastrophic in many cases, as happened to the bitcoin, which fell from the value of 21,000 dollars to 3000 dollars in a few days.
This matter, according to the analysis of experts in this field, is largely due to the reliance of these digital currencies on the dollar only to maintain their value.
This is what Facebook promises not to happen with its currency, I remember the feature I told you about for the Reserve bank account I mentioned earlier, this feature that this account will be in more than one currency.
It is similar to a basket of foreign currencies, where the existing funds will be converted into certain percentages of well-known currencies such as the euro, dollar, franc and others, in order to ensure the stability of the price in the market.
This point is supposed to encourage business owners and companies to rely heavily on the Libra currency.
6- The different uses of this coin
Facebook says that because different developers and companies are allowed to contribute to the development of this currency, and because of the programming language it depends on, there will be many applications and services.
These applications will allow users of this currency to buy anything with the click of a button, or by scanning a specific code, as happens in the famous Chinese application Wechat .
Specialists fear that Facebook will launch its digital currency, Libra
Now you have a clear picture of the Libra currency, how it works, and how Facebook is trying to promote it, and in order for this image to become clearer, you need to know several things.
These matters are related to the concerns of analysts and specialists in the field of blockchain, economics, financial freedom and human rights, which I summarized for you in the following points:
1- Facebook or any company that owns the Libra currency trading application can close the accounts. Facebook’s promise is not enough, and governments can put pressure on these companies in one way or another.
2- Facebook claims that this currency helps the poor, and what many do not know is that Facebook has been trying for a long time to control poor markets by providing internet services for free, and after providing financial services, Facebook will control everything. Which makes Facebook controlling the people of poor countries, for example, it will control the news that is shown to them, and it controls their money, and thus Facebook can help authoritarian governments in these countries to control their people in exchange for greater facilities for Facebook to get more profits.
3- The Libra currency aims to resist the greed of money transfer companies, despite this, the largest number of contributors to this project are these same companies such as Visa, MasterCard, PayPal and Stripe. As if Facebook is trying to deceive people, and what you will take from these companies with the right hand, you will give it and more with the left hand.
4- What distinguishes any digital currency is that it is controlled and operated by millions of computers all over the world to ensure safety factors, but in the case of the Libra currency, all those who control this currency are only 100 companies. Which makes the fate of this currency in the hands of a certain group of people, and this is against the purpose of blockchain technology in general.
5- There is another point related to the previous point, what will happen if one of these companies is sold to another joint stock company, for example, what if Facebook buys the Visa company, would this not make a certain company more control over this currency?!
6- This currency, if it succeeds, will make these joint-stock companies more and more large and giant companies than they actually are, which will make competition non-existent, and these companies will control the market more, given that most of these companies work in the banking sector.
7- This currency, despite Facebook’s claim to secure the privacy of its users, most analysts do not believe this at all, especially because of the existence of a new programming language with specific goals.
8- This currency, if many giant companies subscribe to it, and large institutions and stores agree to use it – this helps Facebook to escape any accusations related to data theft.
As Facebook becomes involved with the world’s most powerful companies – who will have many interests in this data, and who use their influence and connections to dispel any charges or obstacles in Facebook’s way.
9- In order to obtain a Libra currency trading account, you must provide a copy of your personal identity, meaning that your data will be legally registered. This is unlike regular digital currencies, which without providing any information anyone can open a wallet and trade currencies, and this means that governments control all financial transactions of citizens.
Some experts see the Libra currency as an attempt to legalize and control blockchain technology, and to monitor the movement of wealth around the world.
For this, many US government institutions agreed to launch this currency, despite the request of some members of Congress for a hearing soon to explain some things about the Libra currency.
No one can predict the future, but when the world heard that Facebook was launching its digital currency, Libra – in order to help humans evolve, many people laughed.
Facebook and other large companies do not care about people, or provide anything to them, they are only interested in profits, and also want to collect as much as possible of the most expensive currency in the world.
This currency is data. One piece of information equals a treasure for the one who knows how to use it, and this maximizes profits more and more.
For this, you have to follow the winners constantly, so as not to miss the treasures that we share with our followers constantly, perhaps one piece of information will be a precious gem for you, and help you change your life for the better