If you think that the age of cryptocurrency is ending, then we have some news for you. Libra, a new digital asset made and launched by Facebook, is already on the run. As any other cryptocurrency, Libra is aimed at decentralization. Indeed, no bank regulates operations inside of the network. What is more, Libra transactions will cost you less than those you make with the help of a large financial service (like Western Union).
This coin uses all technologies of cryptocurrency. You can join the mining activity and get access to a public blockchain. However, there are some interesting features and restrictions of Libra that make it different from the rest assets.
Is it really a cryptocurrency?
Some experts claim that even though Libra works similarly to other coins, one cannot say that it is a cryptocurrency as we know it. For example, comparing it to the giant of cryptocurrency world – Bitcoin, Libra doesn’t share one of the main principles of digital money. As you know, one can receive BTC after completing calculations called mining. This system is based on the consensus only – you solve the task, you get the money. This process is not based on trust or permissions. Everyone can join and have access to the public ledger.
However, Libra allows only a few trusted users to see the ledger. There are no cryptographic operations of high complexity here. Still, Libra uses anonymous wallets, and transactions require public key usage. The permission-based access means that the mining process is more straightforward, and the coins are more accessible.
Why is Libra called “stable”?
Most of you have heard that Libra is a “stable currency.” Yes, maybe, we can agree with that. At the same time, how stable a cryptocurrency can be? People say that Libra is stable because it is tied to “real-life” assets. Some other coins are tied to dollars and euros, but Libra is connected with bank deposits and governments securities. This means that Libra is pegged to a whole range of different currencies. On the contrary, BTC is not tied to any fiat money. Its price is extremely changeable just because it depends on how much people believe in it.
This means that no matter where you live and which currency you use, there is just one Libra. Some experts claim that Libra has more chances to replace fiat money than any other digital coin. Everything is pretty simple: when buying things online, you use Libra. When you need to buy something in real life, you need to convert your crypto into dollars. Dollars are not stable – they move up and down, while Libra always stays the same. If most companies and stores accept this coin, Libra’s power will grow.
What about Libra’s reserve?
Cryptocurrency is limited – there is a particular number of BTC that can be mined. One day, the coins will end. With Libra, a situation is quite different. It uses investors’ money to create a reserve. The first investors surely are Facebook owners, but when other users buy Libra coins, the cash will be stored in reserve.
There is one suspicious moment here. The creators of Libra claim that the first investments will be used to cover the expenses for researching, improvement, and engineering of the system. When the costs are covered, the initial contributors will get dividends. So all investments will be spent on Libra, and the profits will go to the initial investors – namely, Facebook owners. That’s pretty nice!
Does Libra use the blockchain?
If you read Libra’s white paper, you will notice that the Blockchain takes capital letter there. What is more, the authors distinguish Libra’s Blockchain “from all other blockchains.” Namely, this currency doesn’t use blocks for transactions but looks like a structure that saves the records about transactions and stores them. However, here a small question arises – if Libra doesn’t use blocks, is it a blockchain at all?
Considering this fact, one can assume that Libra is not the most decentralized currency on the market. The founders fully control the first version of the coin. People can join it only if they have permission and meet the requirements. If you take a closer look at the way Libra functions, you might conclude that it is not very different from any fiat currency.