Facebook’s CEO, Mark Zuckerberg made an appearance before U.S. congress yesterday, October 23. Zuckerberg in his defense of its proposed Stablecoin pointed out a lot of items that many analysts consider unrealistic.
To many on the analytical side, Facebook’s Libra seems impossible. It seems Facebook is oblivious to the many challenges posed on the cryptocurrency side. The basic idea of Facebook trying to create a global cryptocurrency seems to be a herculean task.
What Facebook is unaware of is that Blockchain technology has its inherent challenges. Already, major financial players have refused solidarity for the Libra project. In this league of players who have refused solidarity are JP Morgan, Visa, and MasterCard. So what are the chances Libra has?
Up till now, Facebook has been unable to answer questions on the security of funds with Libra. What is Libra’s insurance policy for loss of funds due to fraud?
Facebook, however, seems to be pushing its positive side which is provision and accessibility of financial services in third world countries, and reinforcing America’s reign in the economic parlance, but not so much has been said on the negativity it may present.
Issues Around Libra
The proposition is that Libra may choose to function on a private network rather than function on the Blockchain technology. Blockchain technology has challenges in the speed of transactions and also security. However, this proposition may tend towards Facebook to lose the cryptocurrency status if it doesn’t function on the Blockchain.
Even with this, Facebook will not still be immune to crypto attacks. An earlier proposition by a financial analyst claims Stablecoins with Libra in view could lead to more crimes. The Libra cartel which is meant to be responsible for the cryptocurrency is silent on this.
Facebook is proposing alongside Libra, a wallet service, Calibra which will be responsible for protection against fraud.
So many questions seemed unanswered on Libra, one of those questions is it’s worth and how and where would it be accepted and spent?
Facebook has also failed to realize that it is not the first in the quest. Basis tried this and in less than a year, it packed up refunding back investor’s money. It claimed its failure was due to regulatory challenges.
Facebook is proposing the approach of being backed by fiat currency. It’s not the first as Tether has undertaken that approach and has received serious backlash from the community on its insufficient reserves and market manipulations. Gemini Dollar by the Winklevoss brothers is another good example.
However, Facebook’s approach doesn’t exempt it from the common issues with cryptocurrency which is the ease of theft of funds. The limitation of internet access is also posed by Libra and in a scenario of a lack of mobile phones, Libra can’t be accessed. Also, the psyche of putting one’s eggs in a basket as Libra supports custody of one’s asset by one’s self is risky.