Is Facebook’s Libra a fiat in crypto’s disguise?


Facebook’s entry into the cryptospace has finally given the community a much-needed push into mainstream adoption. As a result, institutions and individuals are being forced to understand the inner mechanics of blockchain, in an effort to best leverage the inevitable change. Changpeng Zhao’s Binance Research took a deep dive into Facebook’s Libra to present more clarity to the community.

The report began by explaining,

“Libra is a cryptocurrency minted on the Libra Network, a blockchain developed by a Swiss foundation and a consortium led by Facebook.”

Quoting the original whitepaper, the report stated that the crypto is backed by a not-for-profit organization called the Libra Association. Currently backed by the Libra Reserve, the basket of low-volatility assets includes four fiat currencies namely, USD, GBP, EUR and JPY. The selection of assets will be purely based on predetermined criteria related to quotability, free-floating and the ease of decision-making process.

Going into the specifics, Libra will run on Libra Blockchain, which is currently supported by a Proof of Stake (PoS) algorithm. While node development will be reliant on the new Byzantine-Fault-Tolerant (BFT) consensus algorithm, it reveals the company’s plan for interoperability with other chains in the future.

Source: Binance Research

The chart above shows a one-on-one comparison between Facebook’s and JP Morgan’s crypto-initiatives, which also signals Facebook’s position as the bridge between traditional financial institutions and the general public.

Further, Libra’s smart contracting will be written in ‘Move,’ Facebook’s in-house programming language built for implementing custom transactions and smart contracts. While the current blockchain will be running only pre-approved contracts, the decision has been made to avoid transaction-related errors.

Although speculators believe pre-approval of contracts does not conform with the laws of crypto, Facebook has clarified that the number of use cases, needs, and desires to be pre-built can be fairly comprehensive as the necessary smart contracts and tools needed from enterprise players can be sourced and polled directly from its consortium of 100 parties.

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