20 Jun Facebook’s Libra Coin: Everything You Actually Need To Know

Did Facebook just go and create a world-changing “stablecoin” or is this whole Libra thing just going to be another flop? Well, only time will tell but I think it has a chance to make a difference, specifically overseas where governments are unstable but the internet works.

There is so much to unpack about what the Libra coin is, how it works, and should you use it. Most of this cryptocurrency, stablecoin, blockchain madness is super confusing to everyone so I’m going to attempt to keep this simple and for the average consumer who doesn’t care about the tech and just wants to know the basics. So, let’s get to the money!

What is Libra and what is a stablecoin?

Some of you may have heard of cryptocurrencies like Bitcoin, Ethereum or Ripple. The point of these is to be decentralized and not to have any government interference. The price is set by factors such as supply and demand but has nothing to do with banks or government.

This can cause the value to fluctuate drastically in a short period which makes it hard to use as an every day currency. However, stablecoins are backed by fiat currency (aka the dollar or euro). I don’t know the actual exchange rate yet, but assume $1 US dollar = 10 Libra. This creates a separate online currency that can be transferred globally without having to pay traditional exchange rates overseas.

Why make a digital currency when we can transfer money online anyway?

Nothing makes money like money. Why do you think banks and financial institutions usually do well for themselves? By charging fees and skimming a tiny percentage off of each transaction, Facebook will have the opportunity for a massive amount of revenue generation if people use Libra often.

Also, I personally see this as a desperation move by Facebook. They realize they have to evolve beyond picture and video posting because people are beginning to see the effects of the Facebook platform on their personal lives. And the results aren’t pretty.

Depression. Anxiety. Lack of sleep. Poor focus. Less productive. The science behind overuse on social media in general is pretty bad, but Facebook has been proven to specifically do things other platforms don’t like make you more likely to be politically divisive.

Millennials and Gen Z are deleting the Facebook app and moving to happier, less political social media apps like Instagram, Snap and Tik Tok. Facebook knows all of this and has to find a way to utilize their massive network while people still use it regurlarly. Their marketplace has become pretty popular so to be able to expand it and give you a way to pay right there with Libra is a big gamble that could pay off for them.

Should you use Libra?

It really depends. The coin will be released in 2020. Apparently, it will be super easy to transfer money (like Venmo or the Cash app). However, this does have one advantage over all those things. Instant global reach.

Libra can be used by anyone with Facebook and that’s 1/6 of the damn planet! If you have a global operation or are trying to, there are some real benefits here. Also, if Facebook were to offer incentives to shop on their marketplace, that too could make it more worth it.

An example would be if I sold a shirt for $20 US dollars on Facebook, but you could buy it for 18 Libra (assuming in this example that its a 1:1 exchange rate), then that is basically a sale and I’d be more likely to use Libra than USD. It would also incentive me to shop on their marketplace instead of other online stores like Amazon, Etsy and others.

Now I don’t know if they’ll do that but they have to give some type of incentive to really get this going and make it a differentiator. Otherwise, people will continue to leave Facebook and Libra will slowly fade into irrelevance.

But I don’t think it will. Why? Because countries who have unstable governments or currency that is dealing with hyper-inflation may be attracted to use this. It’s a currency with global recognition and the only drawback is you have to use Facebook to transfer it. Not the worst thing in the world if your country’s government is falling apart.

Due to that, I think it will gain some traction. They have a lot of competition in the US and UK which is why I say they will need to incentivize people somehow if they want to truly become the dominant global currency someday.

Is this another way for Facebook to get my personal data?

Suprisingly, it doesn’t seem to be a data grab. That has definitely been Facebook’s money-maker. Collecting your data and selling it to businesses. They know more about you than any other web service out there with the exception of maybe Google.

The immediate concern was that with banking information, personal spending preferences and other aspects of your financial life, Facebook could invade your privacy even more than having their app listen when your phone is off to display ads for things you talked about but never searched online for.

However, I have to hand it to them. They seem more than happy to just make money by processing the money and actually have gone a long way to PROTECT your data…I know, I was shocked too.

Facebook is not solely responsible for the Libra coin. Below is a list of the organizations that have votes in the governance. Facebook only gets one vote just like everyone else. This was a smart move on their part especially given the recent trust issues everyone seems to have with them.

libra

On top of all this, they have created a subsidiary called Calibra that will be focused on protecting your privacy settings and making sure your Libra data does not comingle with your Facebook data. Overall, I was impressed with the actions taken to protect our data. But it was also necessary because NO ONE is going to use it if they don’t feel they are 100% protected.

Will this kill cryptocurrencies like bitcoin?

Not at all. Stablecoins like this will become even more popular if this works. I promise Amazon is considering one and monitoring this very closely along with others. But stablecoins don’t really compete with cryptocurrency. They compete more with regular money like the yuan, dollar or euro since the value of stablecoins is backed by them.

If anything, it legitimizes cryptocurrency that much more (as we saw yesterday as bitcoin spiked to a yearly high after the announcement of Libra). People will get more used to the idea of money just being an electronic signal sitting in an electronic wallet.

Money = code. Get used to it. We’re already doing that. What do you think you do when you transfer money from Paypal or Amazon’s One-Click buy button? You aren’t transferring actual paper money or the same value in gold. It’s just computer code.

That’s what crypto is without the interference of governments and banks. And crypto is more secure than any of those options (if you read of crypto getting hacked, it doesn’t, the exchanges did). Crypto can’t be hacked which is why the technology behind blockchain has so much promise. We can secure and transfer more than just digital dollars. But that’s another post for another time.

I hope this has been a helpful introduction into Libra and stablecoins. I’ll have more on this as details continue to come out.