A Closer Look at Facebook’s Libra and Calibra | Summary and Q&A

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July 16, 2019
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ARK Invest
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A Closer Look at Facebook’s Libra and Calibra

TL;DR

Facebook introduces Libra, a stable digital currency aimed at revolutionizing global payments by providing a simple, low-cost, and secure method of transferring money. However, regulatory challenges and competition may hinder its success.

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Key Insights

  • 💯 Libra represents Facebook's attempt to address the stagnant growth of its core business by entering the disruptive field of cryptocurrency and global payments.
  • ♎ The success of Libra largely depends on its regulatory acceptance and the ability to navigate the complex landscape of financial regulations globally.
  • 🖐️ Facebook's go-to-market strategy, particularly for remittances and partnerships with existing platforms like Uber and Instagram, will play a crucial role in achieving widespread adoption.
  • 👤 Libra's potential impact on financial inclusion and its role in introducing more users to the world of cryptocurrency should not be overlooked.
  • 🛟 Libra's launch and the response from regulators and governments worldwide will serve as a litmus test for the viability and future of private cryptocurrencies.
  • 🧘 The unique position of Facebook as a centralized issuer may make it an easier target for regulatory scrutiny compared to decentralized cryptocurrencies like Bitcoin.

Transcript

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Questions & Answers

Q: What is Libra and how is it different from other cryptocurrencies?

Libra is a stable digital currency fully backed by a reserve of real assets, designed to be a low-cost payment system. Unlike other cryptocurrencies, Libra is overseen by the Libra Association and uses a semi-permissioned blockchain.

Q: How does Libra's record-keeping model differ from Bitcoin?

Libra employs an account-based model where balances on each account are updated after transactions. Bitcoin uses the unspent transaction output (UTXO) model, where transactions spend outputs from prior transactions and generate new outputs.

Q: How does Libra compare to existing public and private blockchains?

Libra is a hybrid between permissionless and permissioned blockchains. While the Libra Association determines the validators, it aims to decentralize control. The underlying blockchain structure is more similar to Ethereum and Ripple than Bitcoin.

Q: What are the regulatory challenges facing Libra?

The regulatory environment for Libra is uncertain, with many governments expressing concerns about its impact on their monetary policies. The House Financial Services Committee has called for a moratorium on Libra's development, and France's finance minister has stated that Libra can't and must not happen.

Summary & Key Takeaways

  • Libra is a stable digital currency fully backed by a reserve of real assets, intended to create a low-cost payment system and enable global financial infrastructure.

  • The Libra Association, a non-profit based in Switzerland, will oversee the minting and burning of Libra coins based on demand from authorized resellers.

  • Facebook aims to revive the payments use case for cryptocurrency while also addressing financial inclusion and providing a global, low-cost mechanism for moving money through Libra.

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