Libra; the cryptocurrency from Facebook for you.
So finally the purpose of the Facebook biggest acquisition is in front of us after these many years? Remember, we wondered how a wolf-like Facebook is going to make money out of WhatsApp which vowed never to run a single ad on the app? It was supposed to be a complete loss for Facebook and it is still making Facebook bleed!! This week, Facebook after so many speculation and guesses declared they are launching Libra, a cryptocurrency which will be run through its app mainly from WhatsApp.
Facebook’s Futuristic plan to be a Facebook bank?
Facebook has given the name of the cryptocurrency as ‘Libra’ and the digital wallet as ‘Calibra’. Like any other cryptocurrency, Libra will work on blockchain technology. Calibra is a subsidiary firm of Facebook along with 27 more such participants to develop the project further. The wallet will responsible for making Libra available to Facebook users. The ultimate objective for the Calibra and Libra is to develop the system into a full-fledged financial service from where we can not rule out a possible Facebook bank of cryptocurrency.
When can you transfer the money in Libra?
If all goes well you can transfer the currency in mid of year 2020. But again how seamless it will be; is difficult to tell at the moment. Not so many lawmakers are happy with facebook decision. Blockchain technology is already a disruptive technology challenging the existing system. But when a company like Facebook is interested in cryptocurrency in such magnitude, anything is expected. That is why people from the financial world in the US and around the world have already started to raise the red flags against it.
The Inspiration behind Facebook Cryptocurrency
Kevin Weil, vice president of product for Calibra tells an interesting fact. The inspiration behind the introduction of the Facebook currency and wallet is mainly WhatsApp where users send photos of money transfer receipts to one another across borders. That is a cumbersome, time-consuming process and costs money. So why not to integrate a payment system with WhatsApp itself? So the goal is to make sending money as easy as sending a text message.
Strong userbase will be the strength of Libra
WhatsApp and Facebook along with Instagram have a huge user base. Specifically WhatsApp, which has a very strong presence in so many developing countries as a text messaging app. In these countries, people don’t have access to banks and credit or debit cards but they have a smartphone and a slow internet connection. That is all Libra is looking for. The transactions will be very easy with its standalone app or a button on Whatsapp and Facebook’s messenger.
In the long run, when the user base of Libra will be big enough, the cryptocurrency can be used for the purchase of the items from Instagrams and other apps. The plan is for more adaptability of the Libra so that Libra as a vibrant financial service, is up for the payment the companies like Uber and pay less due to inherent cost-effectiveness. That is a big reason that 27 collaborators are supporting this project along with Facebook.
Your wallet, cryptocurrency vis-à-vis the Facebook currency
At first glance, Calibra seems a fairly standard digital payments method with no differences from the rest of the digital paying companies around. But there are a few differences.
For example, no company in the world has such a massive user base where digital commerce can create a perfect foundation for a new currency to take off in such a fashion. So far, every payment platform has a limited number of users. Your digital payment method is different from the individual you want to transfer the money. But this is unlikely in the case of Facebook and a common mode of payment like Libra here can be a game changer.
Secondly, in developing countries, the process of money transfer still remains a complicated exercise. Facebook has the plan to introduce the cryptocurrency transaction as simple as sending the message in WhatsApp itself.
Unlike the cryptocurrency in general, there won’t be much volatility of the value of the Libra. Also the transactions, despite being based on blockchain will be much faster and cheaper. And there will be a strong financial and psychological support from those 27 and more well-known brands.
The challenges for Libra!
The only challenge Facebook will face is the credibility issue. Facebook’s digital wallet will provide fraud protection and a commitment to never share your financial details or transaction history with the social network’s advertising divisions. But the company is marred with the allegation of data sharing and not maintaining user privacy. Moreover, the company is to deal with the countries where either cryptocurrencies transaction is banned or Facebook or WhatsApp is blocked.
Updates 21Jun 19
As said previously, people are not yet open to cryptocurrencies. In this sequence, the Reserve Bank of Australia doesn’t believe cryptocurrencies will catch on for actual payments any time soon – if ever. They believe that Facebook Libra or any cryptocurrencies for that matter, would never be able to catch up with the conventional payment system.