Facebook this month unveiled plans to launch its foray in to the world of cryptocurrencies, after being developed in secret for the past year.
With the launch of Libra – named after the Roman unit of measurement used in minting coins – David Marcus, head of Facebook’s blockchain technology research, hopes to shake up the established financial institutions with this new blockchain based system, describing it as having the potential to bring “change for the entire world.”
The concept of a blockchain-based financial system is based on a de-centralised, shared database on which transactions are built, removing power and control from Wall Street and central banks – an appealing prospect for a growing number of people who are wary and distrustful of the traditional banking elite, seen to manipulate markets for profit, causing economic woes for those at the lower end of the economy, with few repercussions.
This de-centralised approach has the added benefit of allowing a far greater level of transparency, as each transaction must be validated by the blockchain’s consensus mechanisms – a set of protocols which ensure that all nodes on the chain are synchronised and agree on which transactions are legitimate and viable to be added to the blockchain. This allows oversight by all parties on the blockchain rather than just a select few.
Facebook’s move into the world of crypto, however, has not come without criticism. Sceptics of the social media giant have pointed to their past inability to ensure the security of users’ private information – a fundamental duty of any institution which handles financial transactions.
There are also those who have become concerned about Facebook’s size and power within the technological sphere and therefore, increasingly, all of our lives. In order to allay these fears, Facebook has taken steps to reassure us that they will not use Libra-based financial data to target tailored advertising to users, despite the use of user data for advertising currently being their main revenue stream on the platform.
They have also made moves to distance the Libra project from the main corporation, passing direct management to a non-profit based in Switzerland – the Libra Association.
Despite this initial criticism, Libra has already attracted the backing of 27 companies confirmed as partners this week, including Visa, Spotify, eBay and PayPal, who see the potential in the future of blockchain as a mainstream prospect.
This outcome would allow users to hold and move these blockchain based digital currencies almost instantly and with very low transaction fees. This would bring greater economic freedom to many, especially those in the developing world who do not currently have ready access to cheap digital bank accounts and credit cards, limiting their ability to trade and operate on the international field, keeping them from accessing markets and goods that could benefit themselves and their communities.
Overall, the world of cryptocurrencies is still in its infancy and as such it is difficult to predict the future of this potential globe-spanning economic system.
However, it is fair to say that the entry of a large, well known corporation like Facebook will have a huge impact on the landscape and its possibility to become the new norm in the financial sector which has remained largely unchanged, and unthreatened, for decades.