Libra, Facebook’s cryptocurrency, has put the global financial sector in check because it could revolutionize the economy as we understand it today. We talked to some experts to understand what can happen to Libra.
Facebook has paralyzed its currency: pound. The cryptocurrency, which was intended to launch in 2020 and is still an idea, could change the world’s trade and finances. The company Mark Zuckerberg created the Libra Association with more than 28 companies to develop currency, but this week the Federal Reserve of the United States has expressed concern for this payment method. We spoke to experts to draw the map for cryptocurrencies, blockchain, and the future of the pound.
What is a cryptocurrency?
It is the digital representation of a value. The best known is Bitcoin, which began circulating in 2013 and reached its maximum value in 2017 when a Bitcoin value exceeded 18,000 euros.
It is not issued by any bank, company or state and can be transmitted between people. Basically it is a currency that works only on the internet through the blockchain.
And what is blockchain?
As its name indicates in english, it is a blockchain. each block would be, in this case, a page of an accounting book and each page has a number that is chained with the next one. So when talking about blockchain, it is a record book. In that accounting book the transactions that are made on the Bitcoin network are noted and this accounting book is hosted on as many computers as there are on the network.
And here come what are called miners. A Bitcoin miner is the computer capable of generating a new page for this ledger. “In the bitcoin network, a page is generated every 10 minutes where all the transactions that are being carried out in the world continue to be registered”, explains Pablo F. Burgueno, expert in blockchain and cybersecurity.
Bitcoin is different from Libra
Two different assets must be understood as cryptocurrencies. Cryptocurrency is commonly referred to as Bitcoin. And yes, bitcoin is one of them, but not the only one.
Bitcoin fluctuates in the market, that is, its value changes with speculation and is freely regulated in the market. Instead, behind Libra there will be a consortium of companies. The Libra Association has 28 founding members – among them Paypal, Visa or Uber- will supervise Facebook’s currency in this case, which will regulate its value.
What can you buy with Libra?
Technically you can buy practically whatever you want using cryptocurrencies like Bitcoin. You can change Libra only for what the company has allowed you. In the case of Facebook, there is a precedent called Facebook credit, which is used to make purchases in applications that can be accessed from the social network, for example, in games. In order to make a purchase within this application, Facebook had two options: option A is to pay with the euro, option B is to use Facebook credit and use them only within the applications.
Why has it been paralyzed?
States are afraid of losing monetary control of the world. With the entry of a currency controlled by a company, suddenly, the world borders and the economy as understood until now are broken.
“What if the european Central Bank lost control over its currencies and Facebook and its friends in the consortium could use the pound in all countries of the world? What is being debated is whether it is worth giving the power of monetary control to a company, subtracting that control from the states of the entire world, ”says Burgueno.
“Facebook is not only Facebook, it is also WhatsApp, for example. If this currency is created, there is the possibility of creating a new financial system and a person who goes to work in another country to send money from one place to another without having to go through a bank, for example, “explains Luis Garvía, professor Finance Department. “Furthermore, the competition is weChat and weChat already allows users to pay through their social network. In this sense, Facebook is behind in relation to its Chinese competition ”.
Is it safer than having money in a bank?
It really is different. The bank has tight control, audits and insurance over its accounting books, while in the case of the blockchain everything is stored in a book hosted on the computer network. “The difference is that the bank, being the only one with its own accounting book, can modify it. However, once you write something on the blockchain, it can no longer be erased or modified in the past ”, explains Burgueno.
Where are we headed?
“The enemy is not so much the creation of the pound, but the Internet itself. It is a way of doing things. Bitcoin is a first step and blockchain the second that allows us to decentralize things, “explains Garvía. “I am not able to predict what will happen in the future but the tendency is for Google, Facebook and Amazon to provide more and more services,” he says.