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Zuck’s bucks have no luck, for now
The Facebook-founded Libra Association has revised its planned digital currency after regulatory concerns and public backlash made the project’s initial vision untenable.
Libra was introduced last June as a global digital currency, that would be linked to the value of real-world currencies and used by Facebook and others. It was to be based on a permissioned blockchain – only authorized parties could record transactions – with permissionless governance – no single party could change the rules of the network.
Initially, the idea took the form of a chaperoned version of Bitcoin. Rather than relying on permissionless consensus to exchange value, Libra’s transactional bookkeeping was to be overseen by Facebook and an association of data-harvesting friends.
But its stated ambition [PDF] was to move toward the Bitcoin model, “where anyone that follows the rules of the protocol and contributes the right types of resources (e.g., computing power in the case of a proof-of-work system) can do so.”
That’s now been abandoned, replaced by more modest goals outlined in an explanatory paper [PDF].
Derisively referred to as Facebank or Facebucks, Libra alarmed regulators, advocacy groups, and competitors. The idea of allowing Facebook to set up a minimally accountable global financial data chokepoint after its many privacy and misinformation controversies raised more than a few eyebrows.
From Libra to leave-ya: eBay, Visa, Stripe, PayPal, others flee Facebook’s crypto-coin
So Libra now intends to play by the rules of global finance. On Thursday, the Libra Association asked the Swiss Financial Markets Supervisory Authority (FINMA) for permission to obtain a payment system license. The currency’s future form thus looks more like PayPal than an Ayn Rand-inspired run around regulation.
According to David Marcus, co-creator and a board member of Libra and head of Facebook digital wallet subsidiary Calibra, this means implementing measures to combat money laundering, to avoid financing terrorism, and to enforce national financial sanctions.
Libra will now offer “stablecoins” – digital currency pegged to, and exchangeable for, specific national currencies – in addition to the multicurrency Libra Coin.
And instead of moving toward a permissionless model, Libra aspires to move toward “a market-driven open and competitive network,” said Marcus via Twitter.
He also noted that the Libra Association is now member-funded, with less than 10 per cent of funding coming from Facebook. Distancing Libra from Facebook may make it more palatable to those put off by the ubiquitous social network.
The Libra Association anticipates that Designated Dealers (of Libra currency), Virtual Asset Service Providers (businesses selling digital stuff), and Unhosted Wallet Users (people with Libra Blockchain addresses) will be the major users of the currency.
Not everything is changing however: Libra will continue to rely on blockchain technology. The Register asked the Libra Association why a blockchain, as opposed to a traditional database, is necessary.
A spokesperson for the organization offered a not-particularly enlightening reply: “Blockchain technology leverages decades of experience with distributed and open systems. We are using blockchain technology to bring these innovations in security and operability to a new payment system.”
The organization’s white paper provides a bit more insight into the ostensible benefits of a blockchain.
“One outcome of the above design decisions is that the Libra Blockchain will provide public verifiability, meaning that anyone (validators, Libra Networks, Virtual Asset Service Providers (VASPs), law enforcement, or any third party) can audit the accuracy of all operations,” the paper says.
“Another outcome of the above design decisions is that the Libra Blockchain will support a privacy approach that will take into account the variety of participants on the network.”
Yet the paper provides no detail about how everything will be both auditable and private, or how the Libra Association defines privacy, which in general means being unobserved.
“We will collectively continue to work as hard as we can to enable people and businesses to send and receive money globally as easily as it is to send a text message and at a much lower cost,” said Marcus via Twitter. ®