All you need to know – TechCrunch

Facebook has finally revealed the details of his cryptocurrency, Libra, which will allow you to buy things or send money to people paying no fees. You will buy or reclaim your Libra online or at local exchange centers, such as grocery stores, and spend it on interoperable third-party wallet applications or Facebook's Calibra portfolio integrated with WhatsApp, Messenger, and your own. application. Today, Facebook has published its white paper explaining the Balance and its testnet network for solving the problems of its blockchain system before its public launch in the first half of 2020.

Facebook will not fully control Libra, but will get a single vote in its governance, along with the other founding members of the Libra Association, including Visa, Uber and Andreessen Horowitz, each of whom has invested at least $ 10 million. dollars in project operations. The association will promote the Libra open source blockchain and development platform with its own Move programming language, and allow businesses to accept Libra for payment or even offer customers discounts or rewards.

Facebook is launching a subsidiary, also known as Calibra, which manages its encrypted transactions and protects user privacy by never mixing your Libra payments with your Facebook data, so it can not be used for targeting ads. Your true identity will not be linked to your publicly visible transactions. But Facebook / Calibra and the other founding members of the Libra Association will gain an interest in cash money from users who is kept in reserve in order to maintain the value of the stable Balance.

Facebook's bold attempt to create a global digital currency that fosters the financial inclusion of unbanked people actually has more intimacy and decentralization than many expected. Instead of trying to dominate the future of Libra or immediately withdraw tons of money, Facebook plays the game in the long run by transferring payments to its domain online. Facebook's blockchain vice president, David Marcus, explains the company's motive and its connection to its main source of revenue, saying: "if more business happens, more small businesses will sell more platforms, and want to buy more ads. on the platform, so it will be good for our advertising business. "

The risk and reward of building the new PayPal

In crypto-currencies, Facebook saw both a threat and an opportunity. They had the promise of disrupting the way things are bought and sold by eliminating the ongoing transaction fees with credit cards. This is dangerously close to Facebook's advertising activity that influences what is bought and sold. If a competitor such as Google or a newcomer builds a popular coin and can monitor transactions, he will learn what people are buying and can leverage the billions spent on Facebook marketing. Meanwhile, the 1.7 billion people without a bank account could choose the one that will offer them an alternative to financial services as an online identity provider. It's another thing that Facebook wants to be.

However, existing crypto-currencies such as Bitcoin and Ethereum were not properly designed to become a medium of exchange. Their price without anchorage was subject to huge and unpredictable fluctuations, which made it difficult for merchants to accept payment. And crypto-currencies miss out on their potential beyond speculation, unless there are enough places to take them away instead of dollars, and the experience of buying and spending them is easy enough for a traditional audience. But with Facebook's relationship with 7 million advertisers and 90 million small businesses, as well as his prowess in user experience, he was well placed to tackle this big problem.

Now, Facebook wants to make Libra the evolution of PayPal. We hope that Libra will become easier to implement, more ubiquitous as a means of payment, more efficient with less fees, more accessible to the unbanked, more flexible thanks to developers and more sustainable through decentralization.

"Success will mean that a person working abroad has a quick and easy way to send money to his family and that a student can pay." his rent as easily as he can buy a coffee, "writes Facebook in his documentation on Libra. That would be a big improvement over today when you pay rent in the form of unsecured checks, while abusive money transfer services charge an average of 7% of remittances abroad, which means represents $ 50 billion a year. The Balance could also fuel tiny micro-transactions worth a few cents infeasible with the attached credit card fees, or replace your prepaid ticket.

… Or it could be largely ignored by consumers who see too much concern for too little reward, or too unfamiliar and limited in its use to attract them into the modern financial landscape. Facebook has built a reputation for underutilized and over-designed products. He will need all the help he can to replace what is already in our pockets.

How does Libra work?

Now you know the basics of Libra. Cash in a local currency, get the Libra, spend it like dollars without having to pay big transaction fees or your real name, remove them at any time. Feel free to stop reading and sharing this article if it is close to your heart. But the underlying technology, the association that governs it, the portfolios you'll use, and the way payments work, all have a lot of fascinating detail. Facebook has published more than 100 pages of documentation on Libra and Calibra, and we have identified the most important facts. Let's dive in.

The Libra Association – The new oligarchy of Crypto

Facebook knew that people would not trust him to fully control the cryptocurrency they use, and he also asked for help to promote adoption. So, Facebook has recruited the founding members of Libra Association, which oversees the development of the token, the actual asset pool that confers it value, as well as the governance rules of the blockchain. Each founding member has paid a minimum of $ 10 million to become a member and eventually become a validation node operator (more details on this later), get a voice on the board of the Libra association and be entitled to a share (proportional to their investment) dividends from interest earned on users of the Balance Reserve pay the fiat currency to receive Libra.

Among the 28 founding members of the association and their industries, previously reported by Frank Chaparro of The Block, are:

• Payments: Mastercard, PayPal, PayU (Naspers fintech arm), Stripe, Visa
• Technology and Markets: Booking Funds, eBay, Facebook / Calibra, Farfetch, Lyft, Pago Mercado, Spotify AB, Uber Technologies, Inc.
• Telecommunications: Iliad, Vodafone Group
• Blockchain: Anchorage, Bison Trails, Coinbase, Inc., Xapo Holdings Limited
• Venture Capital: Andreessen Horowitz, Innovative Initiatives, Ribbit Capital, Thrive Capital, Union Square Ventures
• Non-Profit and Multilateral Organizations, and Academic Institutions: Creative Destruction Lab, Kiva, Mercy Corps, Women's World Banking

Facebook hopes to reach 100 founding members before the official launch of Libra and is open to anyone who meets the requirements, including direct competitors like Google or Twitter.

To join, members must have a half-rack of server space, a dedicated Internet connection of 100 Mbps or more, a full-time site reliability engineer and from a corporate level security. Companies must achieve two of three thresholds with a market value of $ 1 billion or $ 500 million of customer balances, reach 20 million people annually and / or be recognized as one of the 100 plus leading industry leaders by a group like Interbrand Global or the S & P group.

Cryptography-focused investors must have over $ 1 billion in assets, while Blockchain companies must have been in operation for a year, have enterprise-level security and confidentiality, and have more than $ 100 million in assets. dollars of assets. And only one-third of founding members can participate in cryptography exceptions or invite exceptions. Facebook also accepts research organizations such as universities and non-profit organizations that fulfill three criteria: working on financial inclusion for more than five years, reaching out to multiple countries, bringing together many users, being among the top 100 best of Charity Navigator or something similar, and / or $ 50 million in budget.

The Libra Association will be responsible for recruiting more founding members to act as validation nodes for the blockchain, raise funds to revive the ecosystem, design incentive programs to reward early users and distribute social impact grants. A board composed of one representative from each member will help select the association's executive director who will appoint a management team and elect a board composed of 5 to 19 high-level representatives.

Each member, including Facebook / Calibra, will only get one vote or 1% of the total vote (whichever is greater) on the board of the Libra Association. This provides a level of decentralization that protects against Facebook or any other player diverting Libra to his own advantage.

The currency of Libra – A Stablecoin

A Libra is a unit of the cryptocurrency Libra that is represented by a unicode character with three wavy horizontal lines ≋ as if the dollar were represented by $. The value of Libra is expected to remain largely stable. So it's a good medium of exchange because the merchants can be certain not to receive a Libra today which is worth less then tomorrow. The value of the Balance is linked to a basket of bank deposits and short-term government securities for a series of historically stable international currencies, including the US dollar, the British pound, the euro, the Swiss franc and the yen. The Libra Association maintains this basket of assets and can change the balance of its membership as needed to offset significant price fluctuations of any foreign currency, so that the value of a Balance remains consistent.

The Libra Association always looks for the exact starting value for Libra, but it is supposed to be closer to a dollar, a euro, or a pound so that it is easy to conceptualize. In this way, a gallon of milk in the United States could cost 3 to 4 Libra, the same price, but not exactly the same price as with a dollar.

The idea is that you will earn money while keeping a balance balance that you can spend to accept merchants and online services. You'll be able to trade your local balance in your local currency, and vice versa, through certain wallet applications, including Facebook's Calibra, third-party wallet applications, and local resellers like convenience stores or grocery stores where users already complete their data plan. mobile. .

The Balance Balance – One for one

Whenever someone pays a dollar or its local currency, that money is paid into the Libra Reserve and an equivalent Libra value is minted and distributed to that person. If a person pays money to the Libra Association, the Libra that she renders is destroyed / burned and receives the equivalent value in her local currency. This means that there is still 100% of the value of the Balance in circulation, guaranteed by real assets in the Balance Reserve. It never runs fractional. And unrelated "indexed" stable coins that are tied to a single currency like the US dollar, Libra retains its own value – although that should cash in at about the same amount of a given currency over time.

When members of the Libra Association join and pay their minimum of $ 10 million, they receive Libra investment tokens. Their share in total tokens translates into the proportion of the dividend that they earn on the interests of the assets in the reserve. These dividends are paid only after the Libra Association used the interest to pay for operating expenses, investments in the ecosystem, engineering research and grants for non-profit organizations and others. . This interest is part of what attracted members of the Libra Association. If Libra becomes popular and many people carry a large balance in foreign exchange, the reserve will increase enormously and will attract considerable interest.

The Balance Blockchain – Built for Speed

Each Libra payment is permanently written in the Libra blockchain – a cryptographically authenticated database that acts as an online public ledger designed to handle 1,000 transactions per second. The blockchain is exploited and constantly checked by the founding members of the Libra Association, each of whom has invested $ 10 million or more to have a say in cryptocurrency governance and the ability to operate a validation node. .

When a transaction is submitted, each node performs a calculation based on the existing general ledger of all transactions. Thanks to a Byzantine Fault Tolerance system, only two-thirds of the nodes must reach a consensus that the transaction is legitimate to be executed and written in the blockchain. A Merkle tree structure in the code makes it easy to recognize changes made to the Libra blockchain.

Balance transactions can not be reversed. If an attack affects more than one-third of the validator's nodes, which causes a fork in the blockchain, the Libra Association indicates that it will temporarily stop the transactions, determine the extent of the damage, and recommend software updates to solve the fork.

Transactions are not completely free. They pay a tiny fraction of a cent to pay for the "gas" that covers the cash transfer processing cost similar to that with Ethereum. These fees will be negligible for most consumers, but once added, gasoline costs will deter bad actors from creating millions of transactions to launch spam attacks and denial of service attacks.

Move coding language – for moving the scale

The Libra blockchain is open source with an Apache 2.0 license and any developer can create applications that work with the Move encoding language. The prototype of the blockchain launches its testnet today, so it is in beta mode for developers until its official launch in the first half of 2020. The Libra Association is working with HackerOne to launch a bug bonus system later this year, which will allow security researchers to safely identify. defects and defects. In the meantime, the Libra Association implements Libra Core using the Rust programming language, designed to avoid security flaws, and the Move language is not ready yet.

Move was created to facilitate blockchain code writing that follows the author's intent without introducing any bugs. It's called Move because its primary function is to move parts of the Balance from one account to another and never to let those assets duplicate inadvertently. The primary transaction code is similar to the procedure "LibraAccount.pay_from_sender (address_address, amount)". Ultimately, Move will be able to create smart contracts for program interactions with the Libra blockchain. Until Move is ready, developers can create modules and transaction scripts for Libra with the help of Move IR, which is high enough to be human-readable, but sufficient down to be translated into true bytecode Move which is written in the blockchain.

The Libra ecosystem and the Move language will be completely open to use and construction, which presents a considerable risk. Dishonest developers could attack crypto novices, claiming that their application works in the same way as legitimate apps, and that it is safe because it uses Libra. But if the scammers scam the consumers, the anger will surely burst to Facebook. Even though she has tried to distance herself sufficiently through her subsidiary Libra and the association, many people will probably think that Libra is Facebook's cryptocurrency and blame her for their misfortunes.

Using the Scale in the Wild – Calibra

So, how do you actually own and spend Libra? Through Balance portfolios like Facebook's own Calibra and others that will be created by third parties, possibly including members of the Libra Association such as PayPal. The idea is to have money sent to a friend or to pay for something as simple as sending a message to Facebook. However, you will not be able to make or receive any real payments until the official launch of next year.

None of the members of the Libra Association has agreed to provide details on what it will build on the blockchain, but we can take Facebook's Calibra portfolio as an example of the basic experience. Calibra will be launched alongside Balance currency on iOS and Android in Facebook Messenger, WhatsApp and a standalone application. When users sign up for the first time, they are subject to a Know Your Customer anti-fraud procedure, in which they must provide a government-issued photo ID and other information of their own. verification. They will have to exercise due diligence on clients and report any suspicious activity to the authorities.

From there, you can cash in Libra, choose a friend or merchant, set an amount to send it and add a description, then send them from Libra. You can also ask for Libra. It is also likely that Calibra will offer a quick way to pay merchants, giving them the urge to scan their QR code or QR code.

Privacy – at least Facebook

Facebook CEO Mark Zuckerberg explained the philosophy behind Libra and Calibra in a message published today. "It's decentralized – that is, it's run by many different organizations instead of one, which makes the system more equitable overall. It is available to anyone who has an internet connection and has low fees and costs. And this is secured by cryptography that allows you to keep your money safe. This is an important part of our vision of a social platform focused on privacy, in which you can interact in any way you want in private, from messaging to secure payments. "

By default, Facebook will not import your contacts or profile information, but may ask you if you wish. In addition, it will not communicate any of your transaction data to Facebook, so it will not be used to target you with ads, rank your newsfeed or earn money directly to Facebook. The data will only be shared in specific cases in an aggregated, anonymized manner or following a request from the law enforcement authorities.

In the event that you are hacked, scammed, or lose access to your account, Calibra will reimburse you for lost coins where possible through chat support 24 hours a day, 7 days a week. will probably become the default wallet for many Balance users, this extra protection is essential.

For the moment, Calibra will not earn money. But Kevin Weil, product manager of Facebook's blockchain team, told me that if it reached the scale, Facebook could launch other financial services via Calibra that it could monetize.

A world currency

If Facebook succeeds and legions of people take money for Libra, she and the other founding members of the Libra association could reap big dividends. And if, all of a sudden, it becomes very fast to buy things via Facebook with the help of Libra, companies will increase their ad spending there. But if Libra is hacked or unreliable, it could cost money for many people around the world while offering them cryptocurrency. And by offering an open Libra platform, shady developers could create applications that not only capture the personal information of people like Cambridge Analytica, but also their hard-earned digital money.

Facebook has just tried to reinvent the money. Next year we will see if the Libra Association will succeed.