Social media giant Facebook has announced its upcoming virtual currency, Libra. The white paper announced a new crypto initiative governed by the not-for-profit Libra association. This has the potential to turn Facebook into a financial services giant as well as the world’s largest social media and advertising platform.

While Libra won’t officially launch until early 2020, the testnet is already active and a new programming language dubbed Move will allow developers to create decentralized applications for the Libra blockchain. This has generated equal parts of excitement and anxiety in the crypto space. Keeping up to date on the most important developments in virtual currencies is important to UTRUST so we wanted to give you a rundown of the pros and cons of Libra.

The Pros:

Understanding crypto. Cryptocurrencies are a difficult concept for many people to grasp. This is one of the things that has kept them out of the mainstream. As Facebook launches its native cryptocurrency, its huge user base will begin to gain a deeper understanding of virtual assets. Ultimately, UTRUST feels that more information about crypto will lead to greater adoption and utilization across the board. Using crypto. One of the key obstacles for the global crypto ecosystem has been its limited number of users. For digital assets to be valuable they have to be widely used and accepted — by both merchants and customers. Until recently, crypto has been stuck in a cycle where merchants won’t accept virtual assets because customers aren’t using them. Meanwhile, customers don’t use them because merchants don’t accept them. Facebook’s cryptocurrency has the potential to break this cycle by capitalizing on its global brand, which both customers and merchants can rally behind. In crypto we trust. The news cycle generally leads with stories of things going wrong. A quick glance at the crypto news makes the market seem pretty bleak. From North Korean hackers and exit schemes to crypto heists and Twitter fraud, the space hasn’t had the best reputation in the last couple of years. On top of that, many people turned on to crypto at the height of the last bull run only to get out as the price of Bitcoin plummeted. Lack of trust in the crypto space has led to a volatile market which sends most investors running. Facebook is a globally recognized brand which encompasses a trusted network of potential customers and merchants. Establishing greater trust in the crypto space gives the whole market a bump. Crossing borders. One of the most important use cases in virtual assets is remittances. While banks and services like Western Union charge high rates to send money overseas, crypto can be sent easily at a fraction of the price. Given that Facebook is used globally, the launch of its new asset could mean that people around the world will begin using their crypto to send money across borders to friends and family. All of this has the potential to spark the mass adoption and utilization that the whole space has been waiting for. Interoperability. This is a fancy, but important word in the world of digital money. What it means is that value can be transferred from one blockchain or asset type to another. We will have to wait and see how interoperable the Facebook cryptocurrency is, but it is likely that it will be able to be traded for other virtual assets like Bitcoin and Ether. This might serve as an important “onramp” into the crypto-ecosystem as a whole. Onramps are spaces where new investors can begin using cryptocurrencies in their day to day lives. This usually meant going to an exchange like Coinbase or even a Bitcoin ATM to purchase crypto. However, Facebook has the potential to become the world’s biggest onramp to investing in virtual assets.

The Cons:

Greater centralization. Cryptocurrencies were originally developed in order to be decentralized. This allowed power to be moved away from central governments and banks by developing a person-to-person financial system on the blockchain. Facebook is a centralized social media and advertising giant. This means that Libra does not fit with the ethos of cryptocurrencies which creates a level of distrust in it’s proposed ecosystem. Privacy concerns. Facebook doesn’t have the best track record when it comes to privacy. The company has sold customer data, while also falling victim to further data breaches and leaks. This is a big problem when it comes to handling customer funds as users may fear that information on how and where funds are being used could potentially be revealed. Cryptocurrencies are financial tools that were designed to put people in control of their own money while keeping big corporations and prying eyes out. If Facebook wants to win over investors in the crypto space it will have to solve some of its brand reputation problems around privacy. Permissioned blockchain. Libra is not a permissionless blockchain like Bitcoin or Ethereum. This means that it is not truly decentralized. It will also allow Facebook to eliminate any decentralized apps which are built on its platform if it finds them questionable. This is another knock to the foundational principles of cryptocurrencies. Pay to Play. The 27 founding members of the Libra Association paid $10 million each in order to host a node on the Libra Network. While Facebook states that this will allow the company to increase transaction speed, it also means that individual actors cannot host the blockchain. $10 million is a huge price tag which only major corporations can afford. This has led to some important questions around nepotism. Currently, it is unknown what are the advantages of hosting a node imparts to the companies willing to shell out the money. Corporate vetting. Libra could allow for the financing of individuals around the world through their cell phones, but they will have to be approved first. There is an inherent danger to allowing one company to determine whether a huge population can use its services for financing. This means that the company itself can stop a person or population from accessing their funds.

UTRUST is glad to see that Facebook is bringing renewed interest to the crypto space. We think that this will lead to greater awareness and adoption of cryptocurrencies across the board. With more people getting used to paying in virtual assets it’s possible that this will set the stage for a platform like UTRUST to grow and expand to even bigger markets. We’re looking forward to seeing what Libra brings to the world of virtual currencies.

Drop us a line to let us know how you feel about Libra.