Facebook Libra cryptocurrency to potentially empower 1.7 billion unbanked
After much speculations, Facebook has finally revealed what it plans to do with its cryptocurrency, Libra, which will let you buy things and send money to people with nearly zero fees and as easy as – and even more safe and secure than – sending a text message or sharing a photo, no matter where you live, what you do, or how much you earn. Bank account, Facebook account not required.
Facebook aims to launch the blockchain system the first half of 2020.
You can learn more about Libra by reading its white paper which outlines its plans in more details.
When I wrote my previous post there was a lot of uncertainty about what Facebook planned to do with its previously secret Project Libra. While I welcomed the idea, I was a bit nervous and was concerned that this will have serious negative implications as Facebook and “valuing users’ privacy” are not synonymous, but after much clarity, I am more confident about what Libra stands for – it’s a game changer.
What is Libra?
Libra is a stable cryptocurrency that runs on a blockchain system developed by Facebook. It’s not volatile like other popular cryptocurrencies such as Bitcoin or Ethereum, meaning that its value doesn’t fluctuate unpredictably. It is backed by a reserve of several currencies meant to mitigate the impact of price volatility. Facebook hopes to raise as much as $1 billion from existing and future partners to support the effort.
The idea of Libra is to operate more as digital cash than the traditional speculative function most cryptocurrencies serve. It is designed for mass mainstream adoption – more scalable than existing blockchains and cryptocurrencies, faster transaction and quicker validation times, and easy and simple way to transact with.
In developed nations – the likes of Western Europe, USA, parts of Asia and parts of Africa, this is not going to solve major pain points, it is likely that you might dismiss this as another useless fad.
You probably have a bank account, a credit card and/or maybe a PayPal account. You have the means to buy things online (If you’re not broke of course) whether it be digital or physical products, you can even start a business or become a freelancer and get paid via PayPal or Stripe. These are things you take for granted.
Not so for 1.7 billion adults who remain unbanked to this day.
The invention of the internet brought forth efficiency and a new wave of opportunities. New unimaginable business sprung up, the barrier of entry to many industries was lowered, a kid in the garage could start a business that could render a major corporation obsolete, and the financial industry was totally transformed.
For the unbanked, beside an easier way to connect and communicate worldwide, nothing has changed. Without a bank account and with the high fees related to money transactions relative to what they earn, it is impossible for them to participate in the digital economy.
The unbanked population around the world.
With Libra (or something similar), it will create a new opportunity for the unbanked and the underbanked. The impact and benefits will be particularly significant in their lives and that of entrepreneurs everywhere. They will be able to participate in wealth creation.
Just like the advent of the internet, I envision new businesses and services that will sprung up from their communities, for their communities and for the world.
Ayeesha, a 20 year old woman living in a refugee camp in Kilis, Turkey could start blogging about her life in a refugee camp. The proceeds she gets from the ads placed on her blog could be paid directly to her Libra wallet. She could even start a GoFundMe campaign to build wireless networks around her community.
Eric, An underbanked 32 year old man living in Burundi could offer his skills as a digital artist to the world and get paid in Libra after completing a project.
Malaika, a 18 year old asylum seeker residing in Namibia who is unable to open a bank account because of the laws in the country could create an app relevant to 100’s of thousands people in Africa. She could monetise her app, get paid in Libra and transform her life and that of her family.
Noelia, a 39 year old Peruvian nurse residing in Spain could send money to her family in Peruvia quickly and efficiently with nearly zero fees in cases of emergency.
These are just some hypothetical examples of how Libra could be of great value and how it could benefit the unbanked and underbanked around the world. The possibilities of how it could be used and how it could transform lives are endless.
Major Concern
One of the major concerns is should we trust Facebook? The good news is Facebook won’t fully control Libra, it shares control with a number of founding partners. That number will keep on rising.
Facebook CEO Mark Zuckerberg explained some of the philosophy behind Libra. “It’s decentralized – meaning it’s run by many different organizations instead of just one, making the system fairer overall. It’s available to anyone with an internet connection and has low fees and costs. And it’s secured by cryptography which helps keep your money safe. This is an important part of our vision for a privacy-focused social platform — where you can interact in all the ways you’d want privately, from messaging to secure payments.”
Facebook won’t store or share any of your transaction data. You don’t need a Facebook account or any social network affiliated with facebook to use Libra.
“We realize people don’t want their social data and financial data commingled,” says Marcus, who’s now head of Calibra [A Libra wallet developed by Facebook]. “The reality is we’ll have plenty of wallets that will compete with us and many of them will not be in social, and if we want to successfully win people’s trust, we have to make sure the data will be separated.”
The Calibra wallet developed by Facebook.
In conclusion
Libra is probably the best and most useful creation Facebook has under its belt – arguably one of the best creations since the invention of the internet. Many of you who probably live in relatively developed countries wouldn’t understand the hardships that befall the unbanked and the underbanked across the world. Libra, if pulled off successfully, has the potential to completely transform and improve their lives. To put it in perspective, that’s the lives of at least a billion people.
Facebook and its partners have an uphill battle to fight, it will be interesting to see how that plays out but whether it succeeds or not it’s inevitable that an idea like Libra or better will eventually succeed – that’s the future of money.
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