Libra, the cryptocurrency being developed by Facebook and the newest contender for the much coveted title of ‘money of the internet’ continues to divide opinions. No matter the consistent criticism and skepticism surrounding Libra, one thing is undeniable. Libra is making significant progress. And this should count for something.
Within a few weeks of Facebook’s announcement of their intention to launch Libra, much has happened as chronicled in this coindesk achive. Though all have not been positive, the signs are there that Libra is here to stay and in doing so will leave a lasting impact.
This detailed review assesses whether Libra possesses the hallmarks of a black swan may end in a drastic shift in the global financial system and potentially usher in mainstream crypto adoption.
This article attempts to break down some of the major obstacles that have stood in the way of mainstream cryptocurrency adoption. Also it reveals how, unexpectedly, Libra may overcome them and open a path for a new global financial system.
Firstly, Libra has garnered much attention in few weeks that has been lacking in the cryptocurrency for years. Its dance with regulators has provided blockchain technology, Bitcoin and cryptocurrencies with tons of free PR. Bitcoin has been around for 10 years now and is yet to get the kind of attention that Libra is getting from the relevant quarters. This is not to belittle the milestones attained by Bitcoin and other cryptocurrencies but to highlight the potential that Libra has especially in drawing the attention of mainstream media, regulators, consumers, and corporations. To put this into perspective, the crypto market has witnessed a bull run since the Libra announcement providing vindication for the effect its publicity has had on the market.
Additionally, Libra continues to be discussed across media houses, government institutions, business circles, and in homes. This increasing interest surely has its spill-over publicity to Bitcoin and other blockchain initiatives. Though not all these discussions may be positive, largely due to Facebook’s past indiscretions, the exposure will definitely be beneficial for cryptocurrencies. As they say, there is no such thing as negative publicity.
Ease of use
Based on Libra’s white paper, the coin will be pretty much easy to use with people able to send, receive, and make payments with the touch of a button on their phones. The technicality of cryptocurrencies and blockchain in general has been a significant deterrent for mainstream adoption and use. Lack of blockchain knowledge has become a hindrance for cryptocurrency usage by the ordinary Joes. Subsequently, crypto assets have become a preserve for those with blockchain know how. However, Libra promises a cryptocurrency that is easy to use which will increase people’s propensity to adopt it as a currency. Furthermore, Facebook intends to provide its social media users direct access to the Libra blockchain directly from their apps, Facebook, Instagram, and Whatsapp. In this sense, Libra will become the precursor for mainstream adoption by providing the gateway for Bitcoin and other crypto assets. Aaron Brown, an investor and a writer for Bloomberg Opinion sums up this pointing out that “It could be the America Online to the internet. America Online introduced 40 or 50 million people to the internet in a simple, safe, inexpensive way.”
Onboarding and mass adoption
When it comes to onboarding new users, Libra has a wide net to cast in the form of its founding father, Facebook, large user base. Libra will leverage already existing users on Facebook, Instagram, and Whatsapp. Moreover, Libra will potentially have access to users from other companies in the Libra Association. This includes some global heavyweights such as Visa, Uber, Lyft, Coinbase, Mastercard, and PayPal. These companies have large network of users that Libra can use as a launching pad in the foray into digital payments space.
To date, cryptocurrencies have failed to gain mainstream adoption partly due to their niche nature approach. Blockchains such as Ripple and Stellar that have been built purposely to support peer to peer transactions, remittances, and ecommerce have fell below early expectations. This is partly due to them being new to the market, and inadequate of resources. Libra can expect a smoother ride with the backing of Facebook and Libra Association financial muscle together with large network of users.
The volatility of cryptocurrencies has been a major obstacle hindering their adoption as a means of exchange. Businesses shy away from accepting Bitcoin as a means of payment due to the unpredictable price fluctuations. Similarly individuals have shied away from using cryptocurrencies as a means of exchange and store of value due to their volatility. As a result, cryptocurrency use has been largely reduced to speculation.
Libra will be an asset backed cryptocurrency pegged on a basket of fiat currencies according to their white paper. This will serve to stabilize the price thus making it a more acceptable means of exchange. Libra is preceded by a series of stable coin launches that have been positively embraced in the cryptocurrency community. In this regard, Libra’s launch couldn’t have been timed any better. If the adoption of Libra as the money of the internet succeeds then it could pave way for Bitcoin to become the new Gold standard for cryptocurrencies.
Over the years, the blockchain community has been rather apprehensive in regards to regulation. Or is it the other way round? Whichever it is, the situation is about to change.
Facebook intends to Launch Libra in 2020 and the company has indicated that it intends to gain relevant accreditation before launching. In line with this promise the company has been moving in earnest to have the relevant laws put in place. The company officials have already appeared before the Congress to address any concerns that may stand in the way. Moreover, the company has stated that it will continue to push until they win over the regulators however long it takes.
This aggressiveness has injected a sense of urgency and pressure on the multiple governments to act and put in place laws to govern the blockchain sector. This may come as a huge relief to players in the industry that have continually operated in a gray area with so much uncertainty. Regulation of cryptocurrency assets will also be very much welcome in the community that has suffered from negative publicity from scams, hacks, and stalled projects.
However, it is not all smooth sailing with Rep. Maxine Waters tabling a bill seeking to prevent large companies venturing into the financial sector. Moreover, the G7 have issued strong statements stating the intent to block Libra citing possible undermining of their sovereignty and user privacy among other issues. Some other governments and central banks have also started exploring the possibilities of creating national digital currencies in response to Libra. This was affirmed by the Bank for International Settlements (BIS) chief revealing that Central banks may have to issue digital currencies sooner than expected. Evidently, since the Libra announcement, the tide has been turning fast and concerted efforts are being put in place to block it or at least delay it as they seek alternatives.
Given the past apathy shown by governments towards Bitcoin and crypto assets it is certain that Libra has ruffled more than a few feathers. In its own, twisted way, this is good news for the entire blockchain industry. This is because cryptocurrency regulation has proven to be very tough for the crypto community with regulators showing great reluctance to conduct the process. But Facebook has shown that it is ready to do the heavy lifting on behalf of the crypto industry by pushing the regulators to act. With pressure mounting, governments cannot afford to kick this can down the road any more. And this could finally usher a new era of digital currencies, propel mass adoption of cryptocurrencies, and eventually establishment of the internet of value.
Blockchain anarchists/purists will be quick to point out that Libra is not decentralized enough, or that it runs on a permissioned blockchain, or users lack control over their coins for it to be considered a proper cryptocurrency. Also, critics are concerned that Libra will be created and managed by corporations thus defeating the purpose for which Bitcoin was created in the first place; to take power and control away from the banks and giving it back to the people. However, where Libra, fails to fit the ‘text book definition’ of a cryptocurrency it makes up for in plenty by ticking other boxes that existing cryptos have failed. Take nothing from Bitcoin, but Libra is a reach above in terms of applicability, scalability, and usability.
It may be a hard pill to swallow for Bitcoin maximalists, crypto enthusiasts, and crypto anarchists but the yet to be launched Libra is on the brink of achieving what Bitcoin has been trying to for the past 10 years. A move away from government controlled currency and financial system. Libra may not be the perfect remedy for the global financial system but it brings with it some goodies that the crypto space has been yearning for, for ages. With its ease of use, publicity, stability, large user base, and ability to push for legislation, Libra may be become the unexpected black swan that opened the door for mainstream cryptocurrency adoption.
Images Courtesy: Pixabay, Libra and Coinmarketcap