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Is Facebook’s Libra A Cryptocurrency Or A Whole New Fiscal System

For such a transformational project to succeed, Libra needs to be regulated in many countries © Libra Association
For such a transformational project to succeed, Libra needs to be regulated in many countries © Libra Association

“Libra will have several aspects. The first is the political one,” says Svetlin Nakov, the co-founder of SoftUni. Ever since its whitepaper release on June 18, Facebook-backed Libra cryptocurrency is one of the hottest projects in the blockchain space. The project that would also have its own blockchain network comes from Facebook and its subsidiary, Calibra.

+++ Libra: the basics you need to know ++++

Like all the new projects that are aiming to turn upside down and transform entire industries, there are polar opinions about this one too. The local crypto community and its leaders and experts gathered to discuss whether Facebook could really be the one to bring blockchain technology to mass adoption.

The third type of money & politics

“There are three types of money by their source. Governmental money, which is a full monopoly. Тhen you have the peoples money – the Bitcoin, and you have the corporate money. Corporations want to have their fair share in this fundamental transformation of the finance industry, which is huge. This time the money won’t come from the Federal Reserve or Central Bank. They will come from corporates,” explained Petko Karamotchev, Director of INDUSTRIA. What he means is the fact that alongside with Facebook, there are already close to 30 companies and brands like Mastercard, Paypal, or Spotify, who’ve joined the Libra Association, and will gain profits, but will also make decisions on the direction in which Libra should develop.

According to Svetlin Nakov, co-founder of SoftUni, Libra also has political aspects. “It is a question whether certain countries and regulations will accept or reject it. The second [aspect] is the technical impact – because it would be one of the most used blockchains in the world,” explains Nakov.  In other words, blockchain, as we know it today, is not a highly scalable infrastructure, and too many transactions at once could break it.

Could Libra be the fuel leading mass adoption

One thing that Bitcoin still lacks in mass adoption. Currently, about 0.38% of the people in the world own the cryptocurrency, shared Karamotchev from INDUSTRIA. “If you are Uber and you receiving payments with thousands of different cards on your network in thousands of different banks accounts you will prefer to use one – Libra, this way it will reduce the operational costs.”

“We should be sure that Facebook will unconditionally onboard all of its users to use its cryptocurrency. It would be in your Facebook account. How exactly would this happen? I`m not sure yet, but this is something that will transform the entire industry. I think this is a big step ahead for the entire blockchain industry. Everyone will benefit. Of course, big players will benefit more, because they will try to take around the banking system, or at least it will be a big transformation,” stated Novakov from SoftUni.

“We need to be in the shoes of Facebook for a couple of minutes and see what their plan is. Their plan, to my own taste, is where bitcoin fails, which is to be a real medium of exchange. Apart from being a fantastic mathematical example and a fantastic decentralized system, only a few traders use it,” adds Karamotchev.

A new monopoly?

Svetlin Nakov asked one of the biggest questions of the discussion after pointing out that people are already paying a lot of money to Facebook for marketing ($16.6b in 2018 according to their own reports – ed.note) But what if Facebook might say “Ok, I will take only Libra” he pointed out.

Karamotchev explained that “it aims to disrupt the banking at its core, which is the payments and kind of little transaction on a daily basis.” This explains, for instance, why Visa, PayPal, even Uber, and Lyft are in. “These are companies that are considered to be fast movers and you can’t pay with bitcoin to this. So a very strong medium of exchange,” he added.

Regulations, technology, and trust issue

For such a transformational project to succeed, Libra needs to be regulated in many countries, meaning that the local authorities would have to decide if it is a treat to governmental money. When buying Libra the consortium takes the dollars, but when you spend it, the Libra is burned. So in a way that is governmental money, it is just a transaction somewhere on the internet. It would become a treat when the consortium, which is full of financial companies like Visa, Mastercard, PayPal, and PayU and services like Uber, Lyft and Spotify, decides to adopt that currency.  If all the companies start to accept Libra, and the companies start to pay salaries in Libra, that is no longer governmental money – it becomes corporate money. It would be a whole fiscal system on the top of the internet.

“One of the questions is how the consortium is going to make all the laws and be regulated in all countries. But the companies inside are the most capable of doing it, because they have changed laws before. Libra is questioning the money of the country,” shares his view Ivo Georgiev, CEO of AdEx Network.

Speaking about the tech behind Libra, Nakov explained, “I have enough trust for this project from the technical side. I believe it will be fair. From a technical perspective, the protocols are based on proven techs.” Then again, when asked about the regulation aspect, he added, “I am not sure about the political side. Some countries might forbid with law to use the libra currency, and you cannot stop that.”

But do we need blockchain for that at all?

One question that was bothering the crowd on the event was “Does Libra really need a blockchain technology through”? The Director of INDUSTRIA, Petko Karamotchev pointed out, “Libra is using a blockchain because they run a consortium. And within a consortium, you might be the biggest player, but you need to tell the rest of the crowd that you will play fair. It is a trust thing. It is not a trust to the holder of the currency, but trust within the consortium.”

Bitcoin won’t die

Ever since cryptocurrencies exist, the topics of adoption and would any of the current ones would be alive in a few years, have been bothering the blockchain community. “For a bitcoin to fail, is what Libra is trying to achieve and to become the retail currency of the world. It is trying to replace the banking sector and the retail banks in their own ground,” explained Karamochev.

Speaking about how Libra would impact the blockchain ecosystem as a whole, the CEO of weiDex, Tito Titov, shares that he doesn’t believe that if Libra fails the whole blockchain ecosystem will fail. “We have Bitcoin, Ethereum and other cryptocurrencies before Facebook`s and probably will have them regardless of whether Libra pays out or not,” he adds. It’s still unclear if other big companies like Google, Amazon, and IBM that also support blockchain, but are not part of this association, would form a separate association or few.

Ivo Georgiev from AdEx Network thinks,  “If Libra succeeds and bitcoin never achieve mass adoption, in this scenario bitcoin still has a very solid use case for and I don’t want to say this but for staff which is like operating in the grey area, they are many cases that we need permissionless money.” To support the same views Karamochev added, “bitcoin will remain whatever happens with the Libra. It has proven its resilience for the ten years it exists, utility or not.”

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