Facebook has entered the cryptocurrency game, and it’s shooting for the stars with its own cryptocurrency, called Libra. Revealed in June 2019, Libra promises to be “a simple global currency and financial infrastructure that empowers billions of people.”
Considering Facebook’s history with privacy and Mark Zuckerberg’s low opinion of its users, it’s not exactly a huge surprise that the cryptocurrency community reacted to Facebook’s announcement with skepticism and distrust. However, some experts believe that Facebook’s Libra could actually benefit Bitcoin and the cryptocurrency ecosystem in general. Let’s take a closer look at their arguments to understand whether there is some merit behind them.
Facebook’s Libra Explained
“Libra is a global, digitally native, reserve-backed cryptocurrency built on the foundation of blockchain technology. People will be able to send, receive, spend, and secure their money, enabling a more inclusive global financial system,” explains Facebook.
Contrary to popular belief, Facebook won’t have full control over Libra. Instead, the social media giant will have one vote in its governance, along with other members of the Libra Association, an independent, not-for-profit membership organization, headquartered in Geneva, Switzerland. The founding members of the Libra Association include Mastercard, Mercado Pago, PayPal, PayU, Stripe, Visa, eBay, Lyft, Spotify, Vodafone, Uber, Coinbase, Xapo, Andreessen Horowitz, and many others and they are united by their common interest to connect the 1.7 billion adults globally who remain outside of the financial system with no access to a traditional bank.
As philanthropic as their objective may seem, the ultimate motivation is to gain access to new markets, new customers, and, ultimately, new sources of advertising revenue. What makes Libra different from all other cryptocurrencies before it is not the Libra blockchain or Libra Reserve, a group of accounts held by financial custodians around the world intended to preserve the stable value of Libra. What really makes Libra different is Facebook.
Why? Because in many countries in Africa and Asia, Facebook is the internet. One survey revealed that millions of Facebook users in Indonesia have no idea they’re using the internet. “It seemed that in their minds, the internet did not exist; only Facebook,” concluded Helani Galpaya, a researcher with LIRNEasia, a think tank. “It seemed that in their minds, the internet did not exist; only Facebook.”
These are the users Facebook is targeting—not crypto enthusiasts living in developed countries, who trust Libra much less than major cryptocurrency Bitcoin. Facebook’s own Calibra wallet will be built into WhatsApp, Messenger, and its own app, and users will be able to buy or cash out Libra online or at local exchange points like grocery stores, a concept that’s deeply familiar to people living in developing countries.
A Boon to Bitcoin or a Curse?
“I believe that Libra will allow users to be more inclined to use Bitcoin as a peer-to-peer payment system while the uncertainties of the global markets are having investors flock into bitcoin as a store of value,” believes author Ryan Waldoch.
As the graph above illustrates, the reveal of Facebook’s Libra has created a massive wave of interest in Bitcoin, with major newspapers mentioning the two cryptocurrencies in the same breath to explain the difference between them.
“The halo effect as it relates to bitcoin is that people are asking: What’s the difference?,” said Abra CEO Bill Barhydt. “What’s the difference between internet-scale decentralization, which is why we’re all here, versus a permissioned model that basically says pay ten million and you can become a validator on the network?”
It’s likely that many people who discover Bitcoin as a decentralized and time-tested alternative to Facebook’s cryptocurrency won’t resist the temptation to visit an online cryptocurrency exchange and experience it first-hand. Likewise, it’s only a matter of time before the more than a billion of unbanked people living in developing countries escape the Facebook bubble and learn that the internet is much, much larger than they realized.
Being the first and most popular cryptocurrency in the world, it’s only natural for Bitcoin to become the main object of interest of those who found themselves trapped inside Facebook’s vision of the internet, which is why cryptocurrency enthusiasts have a reason to see Libra as a potential starter of a new bull run.