Libra: Facebook’s new cryptocurrency
In recent years, cryptocoins have become a global phenomenon. Within this rapidly growing marketplace of digital coins, corporate giants are also trying to make their mark. Facebook has launched its own cryptocurrency named Libra in association with other corporate giants such as Visa, Uber, Mastercard and others. As notified by the company, the objective of Libra is to “enable a simple global currency and financial infrastructure that empowers billions of people”.
This announcement has created both negative and positive reactions among people. Some people think that Libra will destroy the method of traditional banking. Some also think that Libra is going to help developing countries in several ways. But without listening or discussing random speculations, let us talk about the basics of Libra.
What is Libra?
Libra is a new cryptocurrency that has been proposed and created by Facebook Inc. it is considered a cryptocurrency because cryptography is being used to maintain the value of the currency and protect it from tampering. Also, the whole payment process will be extremely secured.
Libra is backed up by several different corporate organizations such as Facebook, Vodafone, Uber, Mastercard and Visa. All of these organizations are assembled under the name Libra Association. Libra does not have any traditional bank as its backer.
The exact difference between Libra and other cryptocurrencies such as bitcoin?
Common cryptocurrencies like bitcoin, ethereum are meritocratic in nature. The reason for these currencies being meritocratic is that there is no single authority that verifies and controls these coins. Anybody can approve these transactions for which they earn a coin themselves. This process of earning a coin is called mining.
In the case of Bitcoins, a process called proof-of-work is used where a person has to prove that he has done the work. To process a bitcoin transaction, a person will have to solve complex mathematical problems using powerful computers. But this proof-of-work process is very much power consuming and causes major environmental concerns.
On the other hand, Libra will use a consensus mechanism called proof-of-stake or maybe a variation of this method. The particulars of this method are that only people with ownership or stake of this currency will be able to authorize the transactions. Also, the criteria to become a member of this Libra association is to pay a fee of US 10 million dollars, have an enormous amount of money in the bank and have the power to influence a large amount of people.
What can we expect from Libra?
With the corporate giant’s backing, we can presume that the payment process is going to be smooth and easy to use. Libra associations have also stated that they will control the value of the currency so that, like other cryptocurrencies, it does not fluctuate randomly. Also, the low transaction cost will surely benefit people. We expect that the stability of this currency will surely help people a lot.