Facebook debuted plans for a new crpytocurrency called Libra on Tuesday. It was an unexpected move, but one that indicates the future direction of the company.
What is Libra?
According to Facebook Head of Calibra David Marcus, Libra is “a new cryptocurrency which, unlike other cryptocurrencies, is not volatile, so it’s not an investment asset. It’s designed from the ground up to be a medium of exchange, a great form of digitally native currency.”
Marcus was quick to draw distinctions between Libra and other cryptocurrencies like Bitcoin: “Bitcoin today, I see it as an investment asset… but it’s not a great medium of exchange today, because good currency is very stable, and bitcoin is volatile.”
And Libra will have a better support system, too. “The other difference is the network on top of which Libra will run,” Marcus said. “This blockchain is designed from the ground up to be able to process thousands of demands per second, eventually meeting the demands for potentially billions of people that will end up hopefully one day using this new network and asset.”
What About Criticism?
People will have many questions about the viability of Facebook as a currency network, though. And Marcus is prepared for those questions.
“To use Libra you will not need to use a Facebook product if you don’t want to. There will be plenty of wallets using similar services to what Calibra will offer, so you can choose whatever wallet you want… All the wallets will be interoperable with one another because they will run on top of the same network.”
There are currently 27 companies involved in Libra. Among them are giants like Visa, Mastercard, and PayPal, as well as Spotify, Ebay, and Lift. Marcus hopes that number will grow:
“Hopefully by the time this network goes live over a hundred different global organizations that will help manage and govern this new network.”
Practically speaking, the inclusion of so many other companies diffuses Facebook’s responsibility for the network. “To use Libra you will not need to use a Facebook product if you don’t want to,” Marcus explained. “There will be plenty of wallets using similar services to what Calibra will offer, so you can choose whatever wallet you want… all the wallets will be interoperable with one another because they will run on top of the same network.”
Most importantly for those suspicious of Facebook, Marcus clarified: “Facebook, Inc. will not have access to financial data you’ll have inside Calibra.”
Wall Street’s Response?
Despite Marcus’ promotion, Wall Street is not yet totally sold on Libra. The stock dipped slightly on the day, and is currently down .28 percent. That’s not a huge drop, but it is a clear signal that Facebook will need to do more. A shiny new product isn’t enough to convince investors; they’ll need to see results.