Guides to Cryptocurrencies
Initial Founding Members:
Facebook/Calibra, Visa, Mastercard, PayPal, PayU, Stripe, Booking Holdings, eBay, Farfetch, Lyft, Mercado Pago, Spotify AB, Uber, Iliad, Vodafone Group, Anchorage, Bison Trails, Coinbase, Xapo, Andreessen Horowitz, Breakthrough Initiatives, Ribbit Capital, Thrive Capital, Union Square Ventures, Creative Destruction Lab, Kiva, Mercy Corps, Women’s World Banking.
On 18 June 2019, Libra currency is announced as an upcoming cryptocurrency supported by a consortium of partners including Facebook, Mastercard, Uber, Visa, Paypal etc. as stated above. Each of these partners will invest $10 million into the project and get a single vote to be used for its governance; Facebook will not fully control the Libra ecosystem. The project is still in development phase and the team had announced that they plan to launch Libra in the first half of year 2020.
The unit of the Libra cryptocurrency is named “Libra” and will be powered by the “Libra blockchain” with its open-source software available for everyone to view, use and build on it. The objective of the Libra project is to create a highly secure new global currency that is fast, fair, affordable and can be scaled to serve billons of people worldwide for their daily financial needs, for example, enabling anyone to buy coffee as easily as paying rent and sending money back home from overseas. It has to be flexible as well, enough to power future innovation in financial services.
Its whitepaper has stated that Libra will be backed by a reserve of real assets with short-term government securities and bank deposits kept in the Libra Reserve for every created Libra cryptocurrency. Libra is not pegged to a single currency and users may not be able to convert it into the same amount of a local currency because its rate may fluctuate due to the value movement of underlying assets. The whitepaper has stated that only reserve assets with minimum volatility will be chosen and the reserve will be kept by a geographically distributed network of guardians with investment grade credit rating, hence its owner can trust that the coin value will preserve over time.
Allocation of Earned Interests
Interests earned from the reserve assets will be used to cover system expenses, providing dividends for founding members that contributed the capital to develop the ecosystem, ensuring Libra users will only need to pay low transaction fees and, lastly, to fund future growth. Libra owners will not receive a return from the reserve and the interest allocation rules will be setup in advance and overseen by the Libra Association.
The governing body of the Libra Blockchain and Libra Reserve is the Libra Association with its headquarters in Geneva, Switzerland. It is reported to be an independent, non-profit membership organization and will be made up of diverse and independent members. Libra Association is the only group capable of creating and destroying Libra when authorized resellers purchased the newly created coins from the association with fiat assets or when the resellers sell the coins back to the association to be destroyed in exchange for the underlying assets.
The association together with the Libra network and reserve will be governed by the Libra Association Council consisting of one representative from each validator node but will initially be comprised of the above founding members. All decisions and changes will require two-thirds of the votes from the council before implementation can be allowed.
The team has stated that the ecosystem will start off initially as a permissioned blockchain, meaning access to run a validator node will be allocated, although their reported goal is to eventually change Libra blockchain to permissionless, allowing anyone to run a validator node if technical requirements are met. They stated that there is no existing permissionless solution that is secure and stable enough to support billions of people and transactions globally.
Libra blockchain records history of transactions and state over time with a single data structure, it is hence different with previous blockchains which consist of blocks of transactions. The team believes that this will simplify the process of applications accessing the blockchain via a unified framework. Libra blockchain is pseudonymous and users are allowed to use one or more addresses that are not linked to their real-world identity. The team stated that new improvements to enhance privacy in the network will continue to be evaluated together with regulatory impact.
Libra uses the LibraBFT consensus protocol to ensure that validator nodes will be synchronized in validating and executing transactions orderly and accurately. The BFT protocol allows the ecosystem to continue operating even if up to 1/3 of the validator nodes on the network failed. Its whitepaper stated that this approach uses less energy than the Proof-of-Work (PoW) consensus protocol.
Libra uses a new programming language named “Move” for implementation of custom transaction logic and smart contracts on the blockchain. The team reported that users can write codes more easily with “Move” and that the language is designed to forbid the cloning of assets while prioritizing security and safety.