Blockchain and digital currencies do have several properties, which solves the problems of the current financial work. Some of the benefits of blockchain technology and digital currency are , it is distributed, no single point of authority and anyone can participate with or without consent based on the nature of the blockchain.
But do you know? Blockchain is still yet to be mainstream, due to lack of scalability and use of a huge amount of resources it is yet to be mainstream and scalable. Various other reasons, like volatility and and scalability, hinders it from being mainstream. But in order to solve the problem of scalability, several projects have been launched with an aim to make blockchain more scalable and mainstream.
Out of all such projects, Facebook, a leading social media, came up with its white paper in which it announced Libra: A cryptocurrency. According to facebook’s whitepaper of libra, facebook believes that with collaboration and innovation, it needs several expertes and regulators from several industries. Since it is the only way to build a secure, sustainable and trusted framework. Also such an approach would lower down the cost, connect the global financial system and would be accessible with several other people.
It came up with Libra, as they believe.
- Everyone should have access to the financial sector. If we look at the current scenario, around many citizens in several countries do not have access to banks.
- Every citizen has the right to control the best of legal labober.
- Global finances need to be more global and have less processing fees, since it will create more opportunity and commerce in the whole world.
- It will bring more trust among people, when there the governance would be decentralised.
- A global currency and finances should be designed in such a way that it is good for the public.
- Integrity should be maintained in the ecosystem.
In order to fully fill all these points, Libra was announced. A reliable digital currency would provide the best infrastructure. Libra aims to be a digital cryptocurrencies, which would provide a strong financial infrastructure, which would empower several nations.
- Libra is built on the blockchain, similarly to most popular digital currency bitcoin. It will be more secure,scalable and reliable.
- Its intrinsic value would be decided based on the assets on which it will be backed.
- Libra would be governed by an independent Libra association, which is specifically formed to evolve the ecosystem.
Blockchain can be of two types, permissioned and permissionless. The key difference between both of them is in a permissionless blockchain anyone can join a network and validate transactions after meeting all the technical and resources needed. Whereas in permissioned, a validator node would decide who can join the network and who not.
Currently Libra Blockchain is permissioned blockchain,since it wants to be stable, secure and scalable. Acquiring All these properties in permissionless blockchain, are full of challenges hence libra blockchain is permissioned blockchain. But, the Libra association would keep on doing research to make the transition from permissioned to permissionless once it is launched in public.
Libra blockchain’s main goal would be to serve as a foundation for several financial services and reach all the nations for financial needs.
Libra Blockchain would stand on three pillars which are following.
- Scalable, high transaction throughput, efficient, high capacity storage and low latency.
- Secure, a safe transfer of financial data and funds.
- Flexible, it would power, Libra ecosystem’s governance.
For building up a libra blockchain, A new programming language is used called Libra.
It will use the Byzantine Fault Tolerance consensus approach.
It would be iterated on several widely used blockchain data structures.
We are in great need of a digital currency that needs to be global and with properties like, stability, global, fungibility and invitational. Libra is designed in such a way only. It is a stable digital currency which would be backed by reserves of real currencies. It means that Libra can be converted to any fiat currency just like other digital currencies.
In contrast to fiat currencies, it would not be backed by gold instead it would be backed by several low volatility assets such as bank deposits, short term securities by the government. So if you want to sell it, you won’t be able to convert it into the same amount of the local currency since the value depends on the movement of assets. Also the value of Libra gets fluctuated.
A most important key concern was once the Libra would be launched, it would interfere with monetary policy and monetary sovereignty. In case the network becomes scalable it would become the substitute for domestic currency.
But the Libra association believes that it would introduce foreign exchange exposure for several coin holders.
Another concern was, that if libra is backed by a single currency stable coin and each single coin currency stablecoins would be minted and burned according to the market demand. Hence, this approach would not let the new net money creation.
But Libra association believed it would lower down the cost and would enable several new functionalities. Also it would give maximum flexibility and central banks would have authority to control the Libra payment system.
So for such countries, LIbra can be used as a settlement coin in several cross border transactions. Also, people would have the advantage of converting LBR into local currency to spend it on several goods and services.
Let us take an example, suppose you are in the US and you would like to use USD as a libra coin that could be used to make a transfer. If your receiver lives in a region with a different single currency stablecoin. it would be converted to the currency where the receiver lives. But in case your single currency stablecoin is not listed, you can make a transfer in LBR and the receiver would be able to convert it into local currency.
Libra association aims to bring simple financial infrastructure that would empower several billions of people and a simple global system. In the current scenario, around 1.7 billion people are unbanked or underbanked. With such an invasion, they will get a chance to become part of financial infrastructure.
Libra 2.0 has brought up several changes that would be useful to achieve the goal of modernizing payment in infrastructure. Also it would create a core transport lawyer, that would add low cost, and make it interoperable and compliant.
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