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Why I am not looking forward to Facebook’s Libra Coin

Libra Coin reeks of Trumpism

Word in the crypto world is that Facebook is on the verge of creating a digital currency that is poised to provide affordable and secure ways of making payments, regardless of whether a user has a bank account or not.

The social networking site, which owns WhatsApp and Instagram, is hoping to disrupt existing networks by breaking down financial barriers, competing with banks and reducing consumer costs.

The currency, which is being referred to internally as “GlobalCoin,” (later officially unveiled as Libra Coin) is going to be available in around a dozen countries at launch according to this BBC report.

It is widely reported that Facebook is already in talks with a number of online merchants to accept the currency as payment in return for lower transaction fees. Most crypto enthusiasts have already started to envision a future where blockchain companies, banks, and brokers are going to join forces with social networks in enabling people to transfer value seamlessly, cheaper and anonymously as never before.

Blockchain is the Backbone of Cryptocurrencies
Crypto-currencies such as Bitcoin, Ether or/and the Libra, if it succeeds, run on blockchain technology. A blockchain is a ledger of blocks of information, such as transactions or agreements, that are stored across a network of computers.

This information is stored chronologically, can be viewed by a community of users, and is not usually managed by a central authority such as a bank or a government. The concept was designed to ensure security and anonymity for users, by preventing tampering or hijacking of the network.

These digital coins/tokens are held in online wallets and can be sent anonymously between users thereby acting as currencies that can be used to pay for things in the real world, such as a pizza, fuel or even a house.

The debate around Libra coin
The news about the impending release of the Libra by Facebook has kindled a spirited, fiery debate around the idea whether the coin will do more good than harm to the world of cryptocurrency. Cryptocurrencies have been taking hits since 2018 from the organisations such as the FCC in the US as well as new legislation enactments in different countries where trade and movement in the digital currencies has been taking place.

#DeleteBitcoin

There is a school of thoughts that is arguing that Mark Zuckerberg is aiming to #DeleteBitcoin and other alt-coins through displacement by bringing in a coin backed by his name as a tech guru and a billionaire as well as the muscle of the organizations that he fronts — Facebook, Instagram, and WhatsApp — which already have harnessed billions of users’ data and not to mention it twice — money.

If one is to ask any person who has been involved in blockchain project, the above named 2 ingredients are part of the life and blood of any successful cryptocurrency project.

a development that is going to raise the price of Bitcoin

On the other side, others think that the ‘adoption’ of crypto by mainstream firms as well as Facebook and JP Morgan Chase really means the rise of a new token economy that they always envisioned with blockchain has already started manifesting. Most cryptocurrency holders and traders see this as a development that is going to raise the price of Bitcoin.

Possible benefits of the Libra to cryptocurrency

massive adoption

This development may be what is going take the cryptocurrency market forward, as we all know, Facebook is one of the platforms with the largest audience, around 2 billion people which means that Mark Zuckerberg is sitting on a minefield of data which can be used to make massive adoption of cryptocurrency easier and in turn this will exponentially increase the overall volume of the market.

Speaking to CNBC’s “Squawk Box”, Galaxy Digital’s Mike Novogratz accentuated the importance of Facebook’s massive step into this space. The former Wall Street hotshot, now a well-known cryptocurrency investor, said that “Facebook is wildly important for the ecosystem”, adding that this tacit endorsement of the technology behind Bitcoin is resounding. He even states that contrary to popular belief, Libra will add value to the non-centralized cryptocurrency ecosystem, not subtract.

shot in the arm for Cryptocurrencies

The collapse in prices and market capitalization of cryptocurrencies in late 2018 as well as the emergence of scam ICOs that took investors’ money and ran exposed problems within the sector, problems mainly to do with compliance and regulation. Without control, the crypto space has proved to be prone to scams and pump and dump evil schemes.

This, in turn, has acted as a barrier to widespread adoption of cryptocurrency and blockchain as a legitimate piece of financial tech that can rival traditional monetary channels. The Libra is going to be that shot in the arm for Cryptocurrencies as more people are more likely to trust their money with Facebook rather than some fly-bye little startup they have never heard of.

But there are red flags….

Trust issues

Facebook has a history of mishandling their users’ private data- remember the explosive Cambridge Analytica episode. Trust is what you need with financial applications. Can Facebook be trusted with handling people’s funds and yes private information?

The backbone of cryptocurrency is the decentralized nature of it and the fact that a user can send funds anonymously to other users which is why we often call bitcoin a pseudo-anonymous coin. Can Facebook be trusted to keep that data private and not share it with other organizations as before?

And it’s not like they stopped and plugged the holes in their data storage systems and processes as recently some users noted that even when they implemented end-to-end encryption in WhatsApp they still kept saving backups of users’ conversations on centralized cloud servers.

Market manipulation

Facebook is huge, it’s monstrous and it’s addictive. While their size can be a good thing to crypto in terms of scaling and massive adoption — it also means that they can easily manipulate the market!

There are already fears of price manipulation in crypto where a small number of whales control the largest percentage of coins like bitcoin and they are said to determine where the price goes.

Now imagine a 100-billion-dollar whale!

Why GlobalCoin

In analyzing this coin we should have started with its reported name — Libra — it is everything that is wrong with this coin.

it is not even a “global” coin as it has been touted to be because they are excluding a bunch of countries from their list and the fact that the coin is not going to be accessible to some parts of the world clearly show the next biggest problem with this coin which is centralization!

Libra reeks of Trumpism

The Libra reeks of Trumpism — building walls around things to keep others out and trade standoffs — its nothing but a centralized coin where Facebook will have full control!

This is what Satoshi was trying to put into the past when he envisioned decentralization. Facebook might as well be working on a virtual currency more like Mpesa in Kenya or Ecocash in Zimbabwe but not a cryptocurrency

Limited usability

From the information that is out there the Facebook coin is likely to have limited usability. Apart from being the payment medium for services and commerce around Facebook, Instagram and WhatsApp, what more can the Libra offer ?

In conclusion
Notwithstanding the above-named limitations, Facebook’s coin is going to make a big impact in the virtual currency market because of the parent company backing it and for this chief reason, the coin is likely going to experience massive adoption and exponential market capitalization.

Getting other big players such as e-commerce giants Amazon and eBay to accept the coin will be key to its easy and fast scaling. But If this is successful, China could probably follow suit and create its own national stable coin around WeChat or Weibo and have all Chinese e-commerce platforms such as Alibaba adopt it — more fuel to the trade war!

I personally don’t see any reason to cheer for a centralized coin, it goes against everything that blockchain was meant to do. The jury is still out and it will take a lot to convince me that this is a good thing for blockchain.

Whenever something new is served to your plate, always look at the bigger picture and decide accordingly!

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Tendai Tomu

Tendai Tomu

Blockchain Consultant || Fintech || Author: The Rise of Blockchain for Agriculture (https://www.amazon.com/dp/B08KHC3WCF) Email: tendaitomumedium[at]gmail.com