In a document published by Facebook, the company described the objectives and specifications of a new cryptocurrency called Libra. The cryptocurrency, which has been in development for more than a year, is designed to allow payments to be processed through the Internet worldwide, and to allow the 1.7 billion people worldwide who do not have a bank account or A line of credit can make payments. We tell you, then, what Libra is and how it works. While the cryptocurrency will not be fully launched until 2020, this is what you should know before adopting the platform.
WHAT IS LIBRA?
Rumors have been circulating about a cryptocurrency developed or managed by Facebook for at least a year, and have finally been confirmed under the name of Libra. Libra is a cryptocurrency managed by the Libra Association that allows users to exchange fiat currency for Libra (that is, buy and sell Libra) for use in online transactions. To encourage wider adoption, Libra does not require users to have a bank account or a line or credit card: it is enough to convert money inside or outside Libra to use it.
Libra Association, the body that regulates the budding cryptocurrency, is formed by partner companies. The most notable participants are known payment processors such as Visa, Mastercard and PayPal. Together, these partners ensure that payment processing is fast, accurate and reliable, so that transactions are as simple as possible.
HOW DOES LIBRA WORK?
The main protagonists in this currency are the Libra Association and the Libra reserve.
The Libra Association is responsible for running the validation nodes, the computer server clusters that process the transactions and, as such, are the only ones that can add or remove Libra from the circulation. At launch, the association will execute 100 of these nodes but the number will increase as the scale requires and as more partners are incorporated.
This configuration distinguishes Libra from most other cryptocurrencies: while the most common cryptocurrencies, such as Bitcoin, are decentralized and take care of the individual to keep the global ledger through mining (that is, perform “proof of work” calculations ”Cryptographically verifiable), Libra is centralized and completely calculated by the nodes of the Libra validator. To maintain accuracy and avoid double-spending attacks, the Libra validator nodes use a system known as Byzantine fault tolerance (BFT), in which nodes can find a way to reach a consensus (in this case, on the state of Libra), even when those nodes cannot agree on the state of other nodes. This system uses a variant of the HotStuff BFT protocol called LibraBFT, which is supposed to validate error or unknown states for up to one third of all validation nodes.
The other important piece for Libra is its reserve. Many decentralized cryptocurrencies, especially Bitcoin, suffer an extremely volatile valuation. While this can be very lucrative for high-risk investments, Facebook aims to create a more stable cryptocurrency to consolidate it as a means to facilitate online consumer transactions. Libra does this by backing all its digital currency issued by a reservation. The founding Members must group the money in the reserve, with the possibility of a return on their investment through dividends from the low yield investment of the reserve assets. You can also contribute to the reserve when you change the fiat currency for Libra. By linking Libra with a currency issued by the government, it is pursued that the value will remain relatively constant.
WHAT DOES THIS HAVE TO DO WITH FACEBOOK?
While Libra is an original Facebook idea, and the giant developed much of its base code, the company insists that it serve as a regular member of the Libra Association, without being granted any special authority or privilege. Essentially, Facebook argues that it will only get one vote, like any other member. However, it is not clear whether Facebook will have an equitable participation in the validator nodes. Apparently, given that Facebook probably has the greatest computing power of any of the partners, it is suspected that it will house most of the validation nodes.
What is also not clear is how Facebook plans to use Libra in its various applications and services. It is not difficult to imagine the integration into Facebook Messenger for peer-to-peer transfers or to buy products on the Facebook Marketplace, but so far no end has been confirmed.
CAN WE TRUST?
Facebook has been accompanied by scandals and data breach in the last two years, so some legitimately doubt the privacy of these financial services. That said, Libra has some important security features to protect your money.
The platform is programmed in Rust, which is generally considered good in memory management, and the smart contract is written in Libra's own movement language, which strives to restrict the way data can be moved.
In terms of privacy, it is not clear how to be managed by the platform. The Libra website insists that “the association itself is not involved in the processing of transactions and does not store any personal data of Libra users”, but they are responsible for executing the validation nodes, composed with part of their data . They also insist that they will help enforce the law, which will not be possible unless they retain a certain amount of user data. Even if the operators of the validator node did not share data with each other (beyond what is necessary to complete user transactions, obviously), there could be problems. If this platform is truly global, as Libra intends, even the part of the traffic that a node could handle could be profitable for data monetization purposes, especially with a network that starts at only 100 nodes.
The Libra website also promises that "the transactions do not contain links to a user's real-world identity." This also seems hard to believe. The complete basis of how cryptocurrencies work is that any observer can verify where the funds have gone, a function that Libra has retained despite its centralized architecture. Even if this statement is true, behavior patterns can easily identify users in the absence of explicit identities.