Libra, Bitcoin and the Future of Cryptocurrency

Libra, Bitcoin and the Future of Cryptocurrency

Bitcoin came into existence a decade ago, when a mysterious figure – who could be either a person or a group – called Satoshi Nakamoto released the software as open-source. For years, it was ignored by most and dismissed by the rest (with the exception of a few true enthusiasts) as a utopian dream that will never become a reality. Moreover, its common uses mostly relegated it into the underground. For a while, it was the preferred means of payment for shady businesses on the dark web, and it was used for playing online casino games with cryptocurrency at specialized – and mostly unregulated – venues. A major breakthrough came in 2017 when, toward the end of the year, the exchange rate of Bitcoin started growing like crazy, pushing it into the center of attention and triggering a media craze. What some call a “Bitcoin bubble” peaked around a year ago, then it seemingly burst – from almost $20,000, the exchange rate of Bitcoin receded to the lower half of the four-digit realm.

For most, Bitcoin was done with but it did its part: it determined many investors to embrace the blockchain, the “distributed ledger” behind the coin itself, and build new financial services based on it. And when the waters almost came to a standstill, Facebook announced its own cryptocurrency (complete with a whole set of financial services) called “Libra”. There’s no way to tell whether the blue giant’s announcement had a positive effect on Bitcoin’s exchange rate or it is just a coincidence but Bitcoin has once again soared above $10,000 these days.

What is “Libra” anyway?

In short, “Libra” is a blockchain-powered currency backed by companies like Visa, Stripe, PayPal and Mercado Pago. Used with the digital waller “Calibra”, it is planned to make sending money around the world as easy as sending a photo through Facebook Messenger. Besides, with the impressive list of partners backing it, the currency is expected to be accepted by merchants all over the world (and online, of course). The currency itself will not be run by Facebook – the blue giant only plans to profit from the use of the Calibra waller that will remain its own. Many online services have opted to back Libra – and join its governing association. Each of them will act as a node (a validator) of the Libra Blockchain – entities responsible for verifying transactions on the blockchain. The association has 27 founding members, including companies like eBay, PayPal, Stripe, Visa, and Mastercard, Uber, and Lyft, Spotify, Coinbase, Union Square Ventures, and Facebook itself.

The impact of Libra on cryptocurrency as a whole

Facebook has huge financial power, and so do many of the companies backing its initiative. These big names – that were not associated with Bitcoin at its time – may provide the stability to Libra that other currencies lack. At the same time, keeping all the control over the currency in a single entity’s hands is opening the door to more control (even government control) over the currency. At this point, there is no way to assess the true impact of Libra on the world of cryptocurrency – it is way too early in its development. Specialists say that it could either be extremely good or extremely bad – a lot depends on the way regulators respond to it.

Libra is a promising initiative, on one hand, with a truly big name backing it that can rally many supporters for itself and change the way most people look at cryptocurrency as a whole. At the same time, it will abandon a good part of the anonymity and decentralization that made Bitcoin attractive in the first place. By putting the control over the entire currency into the hands of a single legal entity – and these can be legally coerced by governments to take certain actions. And this is a reason to worry.