0 Shares

After Facebook announced its new cryptocurrency project, new debates about it came to the surface. The company and its partners believe, that Libra could fundamentally change global financial and payment systems. So what is this hype about?

Libra itself is a digital currency. It is powered by blockchain and is supposed to launch next year. Facebook also is not doing it alone: there are up to 100 companies and nonprofits who will help to govern the currency.

In order for Libra to be used, Facebook and other companies will build applications. For example, Facebook’s digital wallet app could be plugged into Whatsapp and Messenger and allow users to send the digital currency through their message. Simple as that.

This whole thing is being created in order for people to be able to use a stable, digital currency on their everyday transactions. For example, buying online, transfering money (cheaper and faster than traditional wire transfers) or even taking out bank loans.

Now let’s overlook the three key things everyone needs to know about Libra:

How Big It Might Become

Facebook will be trying to gain more mainstream audience for Libra than any other cryptocurrencies.

Around 35 million people worldwide now have blockchain “wallets” to hold cryptocurrency. Although a single person can hold multiple wallets, that more or less shows how many people are currently in the market.

To understand the whole picture better, Facebook’s global user base consists 2.4 billion users. Massive enough, for sure. The partners in this Facebook’s project are companies like Spotify. And they are also design experts. It basically means that the user interfaces they create to work with Libra will probably be a lot more user-friendly than other digital currency projects have been.

How Facebook Will Make Money With Libra

An independent subsidiary called Calibra was created by Facebook in order to manage all Libra developments and transactions for the company.

Facebook’s way of making money from this project will be exactly the Calibra and the products it creates for users to interact with Libra. The Calibra wallet app will allow users to send each other money. A lot of times it will be free, but sometimes there should be a small fee.

It is not specified by Facebook when it will charge for transfers. Still, that fee is going to be much less than a wire transfer across the world is. Also, the transfer will be instant.

Facebook Messenger’s own peer-to-peer transfer feature and Venmo already lets people transfer and spend money digitally. Problem is, that it requires to have a bank account and move money back and forth from the apps to the bank.

Libra should take off in developing countries where many people do not have access to a bank account. At least, that is Facebook’s expectation. Libra is offering a stable alternative to their local currencies. It will be easier to spend and store.

Users Privacy Protection In Libra

In blockchain technology, each computer (or “node”) that is plugged into the network, records every transaction made with the digital currency. It is recorded under a pseudonym so the user’s personal information is not directly connected to the transaction.

Any user will be able to access that anonymized record of any transaction on the Libra network. Companies and governments have been able to connect a specific user with their transactions by searching of their use of the currency on the other cryptocurrency networks.

Calibra is not supposed to share users financial data with Facebook, although Facebook itself said, there might be exceptions in “limited cases”. Also, Calibra will not be used for targeted advertising and will have the same kind of verification and anti-fraud processes that credit cards and banks use.

Conclusion

There is still quite some time before the launch and we surely can expect news, but these are the main three things everyone should know about Facebook’s new project for now.