What if you could have a global, digital currency like bitcoin but without the crazy price swings?
That’s what Facebook and its partners hope to create with Libra, a blockchain-based digital currency that people can use to buy things from vendors all over the world.
Libra hasn’t launched yet, but its developers have released quite a bit of information about it. Here’s everything you need to know about Facebook Libra cryptocurrency.
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What Is Facebook Libra Cryptocurrency?
Facebook hopes that Libra cryptocurrency will offer consumers a stable cryptocurrency. Some people have already started calling it a stablecoin, although no one knows yet whether Libra can meet that promise.
Facebook hopes to control Libra’s volatility by pinning its value to a basket of fiat currencies. The basket will probably include U.S. dollars, euros, and yen.
Bitcoin, today’s most popular cryptocurrency, doesn’t have any financial backing. Its value comes from nothing more than demand. In this way, bitcoin s a true demonstration of capitalism. Without anything supporting bitcoin’s value, however, the price can change suddenly.
In 2010, you could purchase one bitcoin for just a couple of dollars. By December 2017, bitcoin reached an astounding value of $19,783 before falling to about $6,000 a year later. It subsequently dipped even lower than that before finally rebounding.
By placing controls on Libra, Facebook and its partners believe that they can create an online currency with a fairly stable value. In practice, no one knows how well the hypothesis will work. Facebook’s plan, however, will almost certainly give Libra more stability than bitcoin has.
How Does Facebook Libra Work?
Since Libra uses blockchain technology, it should work quite a bit like bitcoin and ethereum. When you buy Libra, the purchase gets registered and confirmed in a public ledger. By using blockchains, Libra eliminates the need for a bank or central processor.
What’s the advantage of using blockchain technology to make Libra? Blockchains will make financial exchanges more efficient and reliable.
Facebook recently created a company, Calibra, that will manage Libra transactions.
When you buy something with Libra, every computer in the network confirms the transaction. This may sound cumbersome, but it works much faster than a bank or even PayPal. If built properly, transactions should take seconds instead of minutes or hours.
Facebook also believes that it can charge lower fees than services like PayPal. Again, we haven’t seen precisely how this will work. If Facebook can make keep fees in check, increase transaction speed, and maintain Libra’s value, then it might create one of the world’s most useful currencies.
Some of the companies partnering with Facebook include:
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When Can I Use Facebook Libra to Buy Online?
Facebook hasn’t said exactly when it will introduce Libra to consumers. The company has promised to release Libra in 2020.
Look for more announcements in late 2019 or early 2020.
What Can I Buy With Facebook Libra?
That’s a big question that will likely change over time. Facebook has said that it hopes consumers will use Libra to pay for goods advertised on its platform, such as its Marketplace that mimics Craiglist. Facebook will also accept the currency for advertisements placed by companies.
Outside of that, it’s difficult to say. Facebook hopes that many of its partners will accept Libra. That could mean that can use Libra to pay for rides from Uber and music from Spotify.
It’s almost certain that Facebook users will be able to send Libra to each other. For example, if your friend pays for lunch, you can repay her with Libra.
Facebook probably hopes that Libra will become the internet’s de facto currency. If Libra succeeds, you could possibly use it to pay for everything from groceries to your monthly utilities. We’ll just have to wait to see how consumers and companies respond to the new digital currency.
Is Facebook Libra Safe?
That depends on what you mean by safe.
After the Cambridge Analytica scandal, many Facebook users lost faith in the company. If you want your financial information to remain private, then you probably won’t consider Libra safe. There’s good reason to believe that Facebook will use your spending information to make money somehow.
If you use the word “safe” to mean that your money will not disappear, then the answer is probably “yes.”
If nothing else, your Libra wallet will have better security than most bitcoin wallets. You probably won’t wake up one morning to see that you’ve lost access to your Libra, which happened to some bitcoin owners in early 2019.
Will Libra have the stability that Facebook claims? Time will tell. It remains an experiment. No one yet truly knows the outcome.
Do I Need a Facebook Libra Wallet?
Yes, you will need a wallet to own, spend, and receive Libra. Facebook says that all of its users will have access to Libra, so that may mean that the wallet gets built into platforms that you already use. During the first quarter of 2019, Facebook had 2.38 billion active monthly users.
Facebook says that Messenger and WhatsApp members will also have access to Libra.
More likely than not, you will need to provide a government I.D. before you activate your Libra wallet. The I.D. will help Libra Association verify your identity.
Third-party companies may also have the opportunity to create Libra wallets for their users. Little is known about third-party wallets, though, except that Libra Association will vet them.
Libra could change the way that people use money. It could also fade like many other internet fads. Only time will tell.