How Facebook’s Libra could affect the Cryptocurrency market

Over the last ten or so years, cryptocurrencies have become an alternative to traditional modes of money, its success has been very profitable for early investors and since, cryptocurrencies have come and gone. Now Facebook is taking its own turn with Libra. A new cryptocurrency that will allow users to send money and make purchases with almost zero fees. The currency is still in progress but almost ready for consumers and will officially launch in 2020. But what does Libra do and what effect will it have on the cryptocurrency market? Read on to find out. 

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What is Libra?  

Libra is a new cryptocurrency that will be launched by Facebook and fellow investors. With Libra, users will be able to make anonymous purchases and to send money to other users with next to no fees and buy or cash out their Libra balances online or at exchange points such as grocery stores/supermarkets. Users will also be able to spend their Libra on interconnected third party wallet apps, such as Facebook’s Calibra wallet which will be installed into the Facebook app, Messenger and WhatsApp. 

Since Facebook is not the only investor of Libra, they will not have full control of the currency, instead, they will gain the power to vote on its governance along with the other libra Association founding members: Visa, Uber, and Andreessen Horowitz. The job of the association is to promote the newly open-sourced Libra Blockchain and developer platform. They are also tasked with encouraging businesses to accept Libra as a payment method and reward customers with discounts. This has also come with the launch of Calibra, a wallet company that will handle the protection of user privacy, meaning that your Libra information will be kept separate to your Facebook data. In order to stabilise the value of Libra, Facebook/Calibra and remaining members of the Libra Association will earn interest on the money users cash in, which will be kept in a reserve. 

If you’re interested in signing up for Libra, you can get in with the early access scheme, however, you will not be able to make or receives payments until the launch in 2020. 

How does it work? 

Simply cash in, cash out or send money to other users. The benefits are that you can cash out whenever you need to, you won’t be charged huge transaction fees, and what’s more, you have complete anonymity of your purchases and transactions. 

Just like any other Blockchain currency, you have a wallet, which is the method of making exchanges and transactions. This is the same in Libra’s case, although users will no doubt be encouraged to use Facebook’s own wallet, Calibra or Paypal. As we’ve mentioned before, Calibra will launch beside Libra and both will be available via the Facebook app, Messenger and WhatsApp via iOS and Android devices. 

Upon signing up, users will be guided through the “Know Your Customer” anti-fraud process in which, users will be asked to provide a government-issued photo ID to verify their identity. Like other money services, Libra will have to conduct due diligence on consumers and if they suspect any illicit activity, they must report it as such to the authorities. Once you’re all set-up and ready to go, you can deposit money into Libra, pick a friend or merchant then set the amount you wish to send to them, add an optional description and send them Libra. Like PayPal, you can also request amounts. Eventually, users will be able to make in-store payments with POS systems like iZettle. 

What does it mean for Cryptocurrency? 

The release of Libra could impact cryptocurrencies such as Bitcoin and Ethereum which have to be mined, they could potentially become seconded as favourites. However, the ease of Libra means that for those who have wanted to get into cryptocurrency but have previously been daunted by the concept, the buzz words and the process can buy into a simpler and commercialised version. The fact that it is realised by Facebook and is supported by PayPal makes the deal all the more sweeter because they are two brand names people are already using and trust. With that said, Libra may encourage users to learn more about cryptocurrencies like Bitcoin and perhaps join the market. 

There is no sure way to tell how Libra will affect the current crypto market, but it will be an exciting development to watch unfold.