Tuesday morning, Facebook revealed plans for its new cryptocurrency, Libra, that is actively backed by tech giants like Visa, MasterCard, PayPal, eBay, Lyft and Uber.
Wall Street analysts exalted that Libra, also the name of Ancient Rome’s pioneering currency, brings financial services to 1.7 billion bankless individuals, while it democratizes the institution of money.
Well, Facebook, as we well know, has always been a “closed book”, so what’s the company plotting now? How does Libra differ from the 1,600 other altcoins out there? And can Facebook, with its tremendous resources, really bring cryptocurrency to the masses, where others have failed?
To the extreme, top Blockchain influencer, Andreas M. Antonopoulos, insisted that Facebook’s Libra flies in the face of all that is cryptocurrency and, in fact, is the very antithesis of an open, censorship-free platform:
“Libra breaks all five pillars that define Blockchain: They’re not censorship resistant, they’re not borderless, they’re not neutral and they can’t be public either.”
Antonopoulos elaborated on each of these conditions and concluded:
So, I’ll hold what I have because to me this is not about … access to a two billion user base. This is about being able to be free … to not have anyone freeze my money, censor it, tell me who I can transact with or when I can transact or how I can transact… That freedom is at the core of cryptocurrency and that freedom is the one thing that you can’t do with Libra.
So what’s the truth? Is Libra really a watershed moment for cryptocurrency, or is it just one more way for Facebook to expand its control?
To find out, Karma analyzed Project Libra’s technical documents.
Libra is not a decentralized Blockchain
A decentralized system, like Ethereum or Bitcoin, appeals precisely because it is independent and transparent, as well as open to the public for censorship-resistant contributions.
Libra’s white paper tells us its platform will be governed by its 28 Founding Members that include Facebook and Calibra (Facebook’s new subsidiary). This “collection of validators [will] work together to process transactions and maintain the state of the Blockchain.” Users can access the Libra testnet, but they won’t get a node and can run their transactions only through already validated nodes.
Facebook calls its project “open source”, but open-source software is published transparently, and developed by and for the community rather than by and for a particular number of entities.
Indeed, Libra’s Overview confirms that Project Libra is a permissioned ledger where “only a defined set of entities can shape consensus and governance”. This executive paper adds that:
As of today we do not believe that there is a proven solution that can deliver the scale, stability, and security needed to support billions of people and transactions across the globe through a permissionless network.
While Facebook does say it aims to transition to the public within five years, its white paper shows no such milestones beyond consultation with the community.
If Facebook would ever commit to such a step – that would mean the end of Facebook.
Facebook can’t become a decentralized platform
If Facebook’s so-called Blockchain Libra were to become open source or permissionless, Facebook would lose its clients and be sued again and again. This is because the company would break various laws that apply to secrecy of financial information. By making its platform transparent to the global public — which is open-source — Facebook divulges its users’ finance information, handing access to all private transactions that cross its platform to Libra’s billions of internal and external members worldwide.
Imagine the holler!
Facebook can’t create public APIs, nor can they release any aspects of their clients’ data without their permission, among other aspects. There’s no way Facebook can allow this data to leak to viewers outside its platform. So, Facebook and Calibra and Libra’s 26 other “validators” have to sit in the middle and control each transaction. In this way, Project Libra becomes nothing more than a megalithic global bank. Just like J.P.Morgan’s “digital” JPM Coin, which is also just an internal payment system rather than a cryptocurrency.
So Libra can never succeed as a truly open public Blockchain. Nor can Facebook help the world’s unbanked population.
Rather, the words of David Marcus seem closer to the truth.
“If more commerce [through Project Libra] happens,” Facebook’s vice president told Techcrunch, “then more small businesses will sell more on and off platform, and they’ll want to buy more ads on the platform so it will be good for our ads business.”
In other words, by monopolizing the global economy, Facebook attracts more consumers, all ready bait for advertisers, which, in turn, means more moola for Facebook.
So we’re back to more of Facebook’s shenanigans under the guise of social justice. This time with a digital coin that shares its name with the astrological sign of the scales — justice itself.