Facebook announced on June 18, 2019 its plan for Libra-a global digital currency that will be introduced into circulation in 2020. Libra is based on blockchain technology. Blockchain technology enables those who use it to be able to organize an independent, self-regulated and closed market of regardless of-sized transactions without the need for control by any state authority.
In fact, for the first time it is possible to fully implement the Liberal economic policy Laisser-Faire, Laissez-Passer.
by Thanos S. Chonthrogiannis-https://liberlglobe.com
The operation of Libra
The Libra will be based on a reserve capital that will be in the form of deposits and/or securities of different values. The “central bank” that will run and administer the Libra will be an institution that will consist of 100 other different member organizations.
These member organizations’ will form through their capital deposits the necessary initial reserve capital to which the Libra will be covered, and it will again be those member organisations responsible for the nodes that validate the transactions in the Libra system.
The entire concept of this digital currency is based on the users’ ability to trade online with the same convenience that they can send an SMS or MMS today. Facebook has 2.4 billion users that overwhelming majority use mobile phone or laptop.
With the use of Libra, its users will be able to make a transition from the tangible assets to the digital assets to date. The members-organisations participating as members of the institution which will exercise the Libra administration and oversight are companies of different interests and business actions as well as non-profit organizations.
Such member companies will be Amazon, Uber, Visa, MasterCard, PayPal, eBay, Andreessen Horowitz, Union Square Ventures but also and non-profit institutions and organisations such as Kiva, Mercy Corps, Women’s World Banking etc.
Photo by Author: Libra Association
Source: https//libra.org,
licensed Public Domain, https://en.wikipedia.org/wiki/Public_domain
Facebook and Libra
In this way the Libra will not be controlled by a company such as Facebook, because in this case critics of the figure will blame the Libra for unreliability, since in the past personal data of Facebook users have been lost.
Facebook with the introduction of Libra, will create a digital wallet called Calibra. Surely Calibra will not only use a digital currency like Libra, but the user of Calibra will be able to use also other digital currencies.
Given this, Facebook will be able to maximize the potential Calibra customers who will in this case be billions of people belonging to the digital assets area.
In addition, Facebook bases the Libra architecture on blockchain technology that enables Libra users to use the Libra network in order to create and then promote their own products and services which are based on Libra.
In this case, the few barriers entry of Libra users into its network will drastically increase competition, reducing costs in any transaction with Libra, and always favoring the consumers-users of Libra.
A Blockchain open resource code technology available to all, promotes transparency in transactions and compliance with the rules in the Libra network, removing any disputes and doubts about it.
A compact protocol of consensus that is the Bible of the rules applicable to Libra and its network will guarantee that these rules will not change and will not be violated in the interests of any organizations.
On the other hand, the Libra will not offer interest to its users, at least in the first stage and perhaps this was decided to appease the fierce reactions of the global financial system, which in such a case would lose the basic of its business activity that is based on buying and selling money with the profit of being the attached interest.
The global financial system vs. Libra
The global financial system sees in the face of Libra and its network “a serious threat to its interests”.
Bank for International Settlements (BIS), as the representative of the central banks of the world, in the report of “Big tech in Finance: opportunities and risks’, https://libra.org/en-US/White-Paper/ published on June 23, 2019, it closely reports the risks that the financial system will face from the Libra digital currencies and cryptocurrencies in general. More specifically,
1. Technology giants type Facebook, Amazon, Google because of their global network of users and always through the issuance of these digital currencies will slowly or quickly conquer dominant position in Global (digital) financial market.
2. In response to these emerging practices of these technological giants, large banks are trying to draw profits from activities foreign to classical banking activity, by trading their customers ‘ personal data and selling them to retail companies.
3. BIS in its report recognizes that digital currencies like Facebook’s Libra can import billions of people into its system, especially the citizens of developing countries, who do not have a bank account so far, and thus giving them the opportunity to participate in financial transactions.
The distress of the global financial system
The financial system is rightly possessed by phobias and concerns about digital currencies such as Libra. We could summarize these fears and concerns:
1. The fact that Facebook, and always through the digital currency, is essentially gaining permission to print money by indirectly acquiring the size of a global central bank.
2. In fact, Facebook can evolve into a “shadow bank”, absorbing customers from the classic financial system.
3. With the possibility of Libra not being controlled by the central banks of the countries by integrating it in their system through BIS, the governments of the countries, and always through their respective central banks who print the money in their economies, lose the superpower they have over their uniqueness to print this money.
4. For the above reasons, the central banks and not only these but large commercial banks are trying through the governments of countries such as the USA, the EU, Japan, etc. to impose regulations around the world so that banking competition does not take a blow by setting rules that will be the same for everyone.
5. That is why a proposal by the Democrats has already been tabled in the US House of Representatives’ Committee on Economic Services, that big technology companies cannot function as financial institutions, that they cannot issue cryptocurrencies, they cannot manage “digital assets intended for widespread use as a means of exchange, they cannot manage an account unit or a property storage medium. Based on this proposal in the event of violations of these rules, these companies will be faced with fines of $1 million per day.
All these reasons make the participants of the global financial system worry vehemently about developments in digital currencies. Ignoring while only digital currencies using Blockchain technology can implement in practice the liberal economic policy of Laisser-faire, Laisser -passer, globally.
The Libra Project
To achieve the Libra project:
1. The initial reserve capital covering the Libra should consist of 60% of gold reserves and the remaining 40% of other securities and main currencies used as reserves currencies e.g. $ US, € EU etc.
2. There should be a strict Libra Network consensus protocol that will not leave “open windows” for violating the rules by anyone.
3. There should be the utmost protection of the personal and financial data of the users of Libra.
The battle between the major technology companies and the global financial system has just begun. Let us hope that the outcome of this conflict will be in favour of citizens and consumers.
Thanos S. Chonthrogiannis
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