Libra, Coin? What You Need To Know About Facebook's Answer To Bitcoin
June 18 2019 - 9:55AM
Dow Jones News
By Parmy Olson
Facebook Inc. just disclosed the first details of its
long-anticipated cryptocurrency, called Libra. Here are some early
takeaways:
What is Libra?
Libra is a new cryptocurrency -- a digital currency that uses
cryptography, a method of protecting information, to verify
transactions -- that Facebook will launch next year.
People who use Facebook's Messenger service, WhatsApp, or who
download a stand-alone app will be able to access it through a
digital wallet. It is an alternative to bitcoin that is powered by
blockchain. However, Facebook hopes it will be used by a much wider
base.
In ancient Rome, the libra was a unit of weight.
Wait, what's blockchain again?
Blockchain is a type of digital ledger that is distributed
across a large network of computers, run by powerful mathematical
computations. It is like a giant spreadsheet that is shared widely.
Every time someone updates the spreadsheet, for instance by logging
a financial transaction, every other user can see the change. That
theoretically provides transparency and prevents any single central
source from controlling the flow of information -- or money.
So why is Facebook getting into this?
Facebook says its currency will make it possible to provide
basic financial services to millions of people around the world who
don't have a bank account, or who can't afford to send money
overseas. It could help small businesses that can't get access to
credit, too.
Oh boy, will my data be safe?
Facebook is setting up a regulated subsidiary, called Calibra,
that will provide access to the new currency and will separate
financial data from other "social" data that Facebook uses on its
platforms.
Will the currency gyrate like Bitcoin?
Facebook says that because Libra will be backed by hard assets,
things like real bank accounts and short-term government securities
-- similar to a real currency -- it won't be as volatile.
Does Facebook control the currency?
The cryptocurrency network will be governed by Facebook and more
than two dozen founding partners as part of a consortium the
company hopes to grow further. Facebook will lead Calibra through
2019, but eventually the consortium will take over.
Isn't blockchain meant to have no central authority?
Facebook says the network will "move toward increasing
decentralization over time," but hasn't elaborated on how.
Who are Facebook's partners?
Tech and payment giants like Mastercard Inc., PayPal Holdings
Inc., Uber Technologies Inc. and Spotify Technology S.A. have
already signed up to the consortium that will govern Libra.
Facebook wants it to eventually have 100 members.
When can I buy a cup of coffee with Libra?
Facebook says as early as next year, but that will depend on
where you live. Libra will probably only be available in a few
places to start. And initially, it will only support 1,000 payment
transactions per second. Compare that to Visa, whose network can
handle around 24,000 transactions per second. And Alibaba Group
Holding Ltd.'s Alipay processed more than 250,000 transactions per
second on a busy shopping day in 2017.
Bitcoin can only process up to seven transactions per
second.
(END) Dow Jones Newswires
June 18, 2019 09:40 ET (13:40 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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