> The largest leap will come last: Libra as a genuine currency, not simply a medium for transaction. This will be function of volume in the previous two use cases, and is understandably concerning to governments all over the world.
Well that's certainly an understatement.
This is literally the only mention of government through-out the entire article. The only mention of banks is in the previous paragraph stating there are no banks in the coalition.
Banks and governments go together like peas and carrots, they also control pretty much everything and have for hundreds and thousands of years. This control is derived from a few places, but primarily from a monopoly on the control of the currency and the monopoly on coercive force.
No government is going to let FB and any coalition do an end run around their national currency and their banking institutions. They're also not going to partner with an international consortium to have them replaced with something they only partially control.
I really don't know why this isn't a larger part of this conversation. I think people need to be cracking more history books and less William Gibson and Neil Stephenson novels.
>I really don't know why this isn't a larger part of this conversation.
That's been the elephant in the room ever since Satoshi published its paper more than a decade ago. When I discuss with cryptocurrency enthusiasts I often get the impression that they think that banks are this kind of useless parasite body that somehow appears like mosquitoes around a pond in summer. That they only serve to basically operate ATMs, send you your Visa card and crash the market every other decade or so.
This is of course a gross misunderstanding of what banks are, what they do, why they do it and where they come from. In particular the idea that "bitcoin is going to kill banks" (a very common sentiment in my experience in cryptocurrency circles) is about as meaningful as "this new type of snowboard is going to kill ski resorts!". No it won't, it might change some things about how they operate but after the transition period it'll be business as usual. Cryptocurrencies don't come even close to replacing most of the services offered by banks. Actually, they don't even come close to replacing most of the services offered by actual currency.
It's this weird cognitive dissonance that you encounter in conspiracy theory circles: the banking system is this hellish beast that steals money from the honest middle-class worker, operated from a global circle of elites acting from the shadows and that must be destroyed at all cost to save humanity. How do you do that? By replacing their currency by your own, they'll never see that coming, those idiots.
You think destroying bank records will remove the power inequality from the system? Good luck with that, kid.
Power has money, but money isn't power. It's the table scraps the rest of us chase after. It's also why you can tax the rich all you want and it won't take their power away. The transactions that truly matter to them aren't usually denominated in dollars. Cash is Plan B at best.
Don't believe me? Look at stories about nouveau rich not being taken seriously. You have to work your butts off to get your kids taken seriously (if you aren't lucky or fast enough, your grandkids, assuming your kids haven't blown their inheritance by then). You don't know anybody, and you don't have anything they need. All you have is money.
Trump talked about this every time he filed for bankruptcy. I'm sure his buddies would have preferred he kept his big mouth shut.
This is one of the reasons I dropped out of crypto for years, most of its supporters were completely delusional and tragically uninformed about actual banks.
I always considered two datapoints to be fulcral A) ease of use, which Bitcoin has never had and B) potential to be overtaken by an actual bank and twisted into whatever purposes it wanted due to the 51% error. That is, how hard would be it for JPMorgan or Deustche Bank to just buy 51% of Bitcoin and make it do whatever they wanted? I could never see the potential for either fact to be avoided, as much as the frothing Bitcoin-enthusiasts would like it to.
> This is one of the reasons I dropped out of crypto for years, most of its supporters were completely delusional and tragically uninformed about actual banks.
The reason I stayed in is because Bitcoin solved a seemingly intractable problem, it works in the real world, and it's survived and even thrived in the face of fierce attacks for a decade.
Yes, there are many shills who are delusional and ignorant. Yes, speculators and fraudsters are running wild.
None of that changes the fundamental characteristics that make this a fascinating and promising technology, network and social movement.
> and it's survived and even thrived in the face of fierce attacks for a decade
What fierce attacks has bitcoin faced?
Sure, lots of people mock and criticize it, but no real action has been taken. The people criticizing it have just as much influence (or maybe even less) than the delusional and ignorant true believers.
To me, a fierce attack would be regulatory action taken by various world governments, but that hasn't happened. To the contrary, even countries that probably should care (e.g. China, with its capital controls, and bitcoin mining seemingly used to evade them) appear not to. If anything, that shows just how insignificant bitcoin is.
My vague impression (I don't follow this closely) of US regulators is that they have given bitcoin reasonable or even slightly favorable treatment.
Bitcoin and crypto only survive because of trust. There was a time, especially on Bloomberg, when the news was constantly criticising it and sowing mistrust. "It's only used by hackers" or "hit men are murdering people for crypto on the dark web" or "terrorist are funding operations with crypto.". So there have been countless efforts to break the core of what makes a currency valuable.
Additionally, Bitcoin specifically is illegal in several countries, China being one of them. The US has also seized several piles of bitcoin and like they do with other seized assets they put it up for auction. These guys buy the stuff up cheap and immediately sell it. Now that's not a specific attack but it is damaging to prices. Lastly exchanges are requiring photo id to buy things now because of regulation which makes it even harder for people to get into. I can buy bullets and in some cases guns more easily.
So there is actually plenty, not to mention numerous attacks on the network in the early days. Who knows who was behind those.
With Bitcoin, there are certain elements that make it desirable as a bargaining chip during internal power struggles. The claim of banking and government being joined at the hip is true due to pragmatic convenience: If you want to have power over things like militaries and social services, you need a solution for financing and that sends you into the arms of the bankers. But if you start having an option to opt out, to say as a large institution, "we don't need you," then the banks have to start to compete.
At the end of that struggle, you still have a government in control of its financing, but the shape of it, borne through so many battles, is likely to be more efficient.
Yes true, this is why I “dropped out of it” then eventually came back to it. The fact that I have Venezuelan friends who started hoarding it to avoid capital controls in their country convinced me of its usefulness and long-term viability.
So long as someone is there willing to pay the same price for those coins. Do the grocery stores, butchers and other providers accept Bitcoin there? How do they value their goods against a 'currency' that is growing X00% weekly?
I'm not familiar with the history, but is Venezuela's currency constantly volatile or are recent events an anomaly? How do you define Bitcoin's fluctuations as 'mild' - i.e what are you comparing it to other than the local currency to determine stability?
The comment was mostly tongue in cheek. Venezuelan currency has been hyperinflating for a while. So people are used to referencing prices in currencies other than the one used for the actual payment.
I think you are misinformed about how bitcoin works.
Bitcoin doesn't care how much of it you have, as it uses Proof-of-Work not Proof-of-Stake. The only thing that matters is you computational power. Now it is true that large banks could just buy lots of ASICs and try to beat the network, but that would mean a continued investment: As soon as they stop mining, the network would return to normal.
They can hurt bitcoin (not that cheap anymore) by making it unusable for a period of time, but unless they are willing to keep mining until everybody else stops, they won't be able to kill it.
As far as usability goes i don't think bitcoin is that hard: Download an app, scan a QR-code, send money.
Not that complicated.
The transaction rate is a problem, though.
I agree that some people are too enthusiastic about crypto, but I think it still has its place. It doesn't have to kill banks.
I think the deadly attack on Bitcoin is not anyone gaining 51% of the network, but rather DoS'ing its ability to conduct real transactions. Bitcoin is not considered a threat right now but if that ever changes, just remember the US government "lost track of" $9bn while "reconstructing" Iraq and it didn't even seem to concern anyone. That kind of money could make transactions prohibitively expensive on the Bitcoin network for quite some time if the government's posture towards cryptocurrency ever hardens.
The transaction rate is deadly in my opinion, not just bad. A year or so ago the rates were running at ridiculous prices. It’s a black eye on the Bitcoin Core that they haven’t fixed this nor do they seem inclined to (the Bitcoin Cash Core seemed convinced they wanted nothing else but to control Bitcoin entirely).
It hasn't changed because the people who control the hard fork, the miners, benefit from the increased transaction fees that the low rate produces through competition to get in on the next (small) block. It's a textbook example of Tragedy of the Commons.
No, it's a credit to Bitcoin Core that they understand the tradeoffs involved in increasing transaction rate via blocksize increase. Continuously growing resource usage is a centralizing force and thus an existential risk to Bitcoin. Core is rightly unwilling to trade a little short-term pain relief for increased long term risk of catastrophic failure. The difficulty is that just how much of a centralizing force is difficult to measure, so there's a lot of uncertainty around it, opening the door for the more reckless to complain about transaction prices.
I do agree the transaction rate and fee are horrid. But there are other coins that solve this problem in a dectralized manner. Also there are some block chains that all cross chain atomic swaps. I've been working with a blockchain called Xaya and there is mentions of maybe implementing that as well. I might help on that front after my game is finished. More importantly though. Xaya implements merged mining and you can mine xaya( the coin is called chi) and bitcoin at the same time. So there are not so many problems as people claim or think with crypto.
The atomic cross-chain swapping means I can have assets or a coin on one chain and transfer it to another. In this case maybe transfer coins from bitcoin to the xaya blockchain for chi. It wouldn't really get rid of the transaction fees for bitcoin, but what it would do is allow you to transfer some amount of bitcoin out if you know you are going to be doing high frequency transactions. You could just do it on a lower fee blockchain and then put it back in your bitcoin account when you have done what you wanted to do.
There is another possibility on Xaya and I believe Ethereum has implemented as well now. On Xaya they are called game channels. The idea is that you allow a side branching chain to develop between an arbitrary number of people, then when a game is over you inject the end of the side chain back into the main chain and verify it. They invented it for near realtime verification between consenting parties, then you only pay the main transaction fee when you get back on the main block instead of very every action. But that type of system doesn't have to be only done with games obviously, that could be applied to anything.
If you are interested more in it, you can check this video out. They have lots of documentation and tutorials for the network as well.
> This is one of the reasons I dropped out of crypto for years, most of its supporters were completely delusional and tragically uninformed about actual banks.
I don't think you understand bitcoin as well as you think you do. 51% attacks do not work like this.
I would welcome a correction! My impression is if anyone has 51% of all bitcoin they can write whatever they’d like on the blockchain and validate it at will. Is this wrong?
Sort of, yeah. It would be 51% of verification nodes. If you bought 51% of all Bitcoin, but it was verified by everybody else in the network, you don't actually have any power to decide if your transactions were valid or not. If you controlled 51% of the nodes, you would have majority control over which transactions are valid.
Bitcoin uses proof of work [1] to verify transactions on the network. For someone to effectively rewrite the network they would need to control 51% of the total computing power (in hashes/sec) on the bitcoin network.
I see so I was mistaken about that. I still don’t understand why people don’t see that it would be trivial for a major bank (or now that Bitcoin has grown, a government) to look into making enough computational power they would destroy it.
Just having 51% of the network doesn't mean checkmate. It allows you to perform something called a double spend. I could buy something from you with bitcoin, while at the same time I attempted to send the same funds back to myself. If I controlled 51% of the network, there is a slim chance that would work, because the other 49% of the hash power is still validating the transaction where I sent you the funds, not the secret one I sent myself.
If this were a big transaction, I might choose to wait for more than one confirmation before completing my end of the transaction. The longer I wait, the more expensive it becomes for you to conduct your 51% attack.
It really is prohibitively expensive, to conduct such an attack, when you consider a few other factors. I could double spend the money to myself, but after news of such an attack came out, the price likely could crash, reducing the prize.
Not to mention opportunity cost. If you have the means to conduct a 51% attack it means you have a lot of capital and expertise. You could put those two together to make a giant pile of money through legitimate means, like operating a hedge fund. The risk is a lot less.
The only group that would be motivated enough and capable enough to perpetrate such an attack would be a state, and why would they bother when, like was mentioned elsewhere, they could attack bitcoin with the stroke of a pen, via regulation etc. It's waaay less effort.
For Bitcoin specifically (by far the largest), the amount of computational power is now very large indeed. An argument often seen against Bitcoin is that of it's environmental damages - quotes like "it uses more power than the whole of Denmark!".
So yes, 51% control could be usurped by a dedicated attacker - but the resources are no longer trivial. And as noted, this "control" doesn't buy you a great deal unless you keep it going for eternity, and for the time period you do have control all you can do is basically stop it working properly by preventing new transactions - rewriting history is exponentially more expensive the farther back you try to go.
As others have explained, it's arguable that banks cannot do this. Though I am curious if there some way to outlaw cryptocurrency, possible go as far as impose sanctions to other countries.
Also, would like to note that Bitcoin can also function as store of value just like Gold.
Any news about Lightning? Is that running live now?
Banks have decade old hardware and take forever to upgrade software and protocols. You expect them to design a sophisticated attack and run it for however long. On top of that, it would be really easy to find out which bank was doing it and that has huge legal and customer based ramifications. Definitely not worth it.
Lol, we a major consumer bank here that have "system error" and everyone's payday salary is mixed up. I imagine some miserable dev tasked to run a batch script and forgot to do some steps.
For sure these banks wouldn't use their own hardware, but hire a new team, new hardware etc.
Even for PoS cryptos where you require 51% of the currency to control the network, it would become prohibitively expensive to buy up 51% of the circulating supply due to market dynamics. PoS is arguably more secure than PoW. Arguably.
Let's go with a proof of stake coin like tron. They have a 2.5 billion market cap. That's more than all of the pentagons ai budget. Congress was bitching about the f35's 94 million dollar price tag. Do you think they are going to vote to give a budget for not only the attack but the person ell and hardware as well? All for a, according to HN apparently, "insignificant financial threat". Doubtful. Easier to just regulate it with a single pen stroke.
> My impression is if anyone has 51% of all bitcoin they can write whatever they’d like on the blockchain and validate it at will. Is this wrong?
Completely wrong. There is a set of rules which define whether a Bitcoin block is valid or not, things like "the block's hash has this many zero bits" (simplifying a bit here, the actual rule is a bit more complex), "all transactions have a valid signature" (simplifying a lot here, it actually runs a sort of a small program) and "no transaction spends outputs which have already been spent". It doesn't matter how much Bitcoin you have or how much hash power you have, even if you have 100% of all Bitcoin and 100% of all hash power, if the block doesn't follow the rules it will be ignored by all validating Bitcoin nodes.
What having 51% or more of the Bitcoin hash power gains you is only that you can rewrite history. You can present a chain of blocks to other nodes, and later present a different "longer" chain of blocks to the same nodes, and they'll accept the "longer" chain and discard the older one. All these blocks, however, still have to be valid to be accepted.
My fundamental issue was that the value is so wildly varying and not being accepted at regular places that it fails horribly as a medium of exchange for goods and services.
> This is of course a gross misunderstanding of what banks are, what they do, why they do it and where they come from.
You're being overly reductionist.
The functions of banks are great and valuable but they are disproportionately so. Why? Because they get free money from the Fed and are using fractional reserves.
Do you think the Bank's services would be as pervasive if the working class had a stable store of value for their work? I don't. Banks need competition and with Bitcoin and the crypto space, they finally got some serious competition.
Also, there are plenty of startups in the cryptocurrency space that ARE doing functions that banks offer. SALT is one that comes to mind quickly but there are plenty of others.
Yes, there are many Bitcoiners who believe that everyone will become their own bank but I believe a more common sentiment is the idea off full backed reserved. But a great I feel that a more common belief held by Bitcoiners is that the "inherent" issues with capitalism come from fractional reserve banking. Now for the first time in history there is a form of money that you can prove in a matter of seconds that your money didn't move when you gave custody to the bank. In fact with multisignature transactions banks would simply act as a escrow service for those, I imagine a most people, who do not feel comfortable managing their own keys.
> Now for the first time in history there is a form of money that you can prove in a matter of seconds that your money didn't move when you gave custody to the bank.
Why do you believe this has any relevance at all? People want to buy stuff, not exchange bill with serial number #abcxyz with stuff.
And from my example you can easily understand why your assertion is quite wrong to begin with.
I care about my exact bills and your exact bills. I care. Maybe you don't, but I do and so does the person you replied to. That makes at least two of us.
You care about your exact bills? You actually take the time to look at the serial numbers of all the bills you use in a given day/week/month/year? For what purpose?
I check for cool serial numbers fairly frequently but I couldn’t say I care about the exact bills. A five’s a five. That’s why currency is great.
> No government is going to let FB and any coalition do an end run around their national currency and their banking institutions.
That's the point of confusion. This is not an end around. This is about extracting tolls - slivers - from economic activity. They will all comply with the status quo, they will say what needs to be said, they will bow as they need to bow, they merely want to get their little cut on a billion transactions. It's nothing more than an attempt to layer another transaction processing fee-based system into/onto the global economy. There is no other point, it's why Facebook has partners like Visa interested.
These guys could not care less about replacing national currencies or doing an end run around of political control. In fact it's the exact opposite: they would want the regulators to make sure Libra is the standard that they can properly exploit, and raise the walls to other competition. That is how these companies always behave, it's rather obnoxiously predictable. They will be thrilled to work with regulators to keep things exactly as they are, with a little exception for their new baby parasite that gets 0.3% of everything (and please regulators, while you're at it, make it really hard to compete, make the regulations impossible for everybody else to comply with).
They do not want the political power, responsibility and conflicts that come with national currencies. They want the money, the fat juicy profits, that come with extracting high margin tolls. It's ideal to leave the national fiat currencies intact, so they can extract additional fees everytime people want to change their money. Libra is a rider, national currencies come and go.
>That's the point of confusion. This is not an end around.
Whether that's the intention or not doesn't matter, it has the potential to be and that is simply not acceptable.
When a developing world country like India needs to use monetary policy to stimulate their economy but those transmission mechanisms aren't working because a significant part of the economy is using Libra, that's a major threat to their sovereignty. It's digital colonialism.
Just today, Nick Clegg,
former Deputy Prime Minister of the United Kingdom, and currently Vice-President for Global Affairs and Communications at Facebook, explicitly asks for FB to be regulated [1]: "We need governments and policymakers to engage with issues like these and help set the parameters for us".
Oligopolies do sometimes end when conditions change. People once thought that TV news, highly regulated by the government, would have an indefinite monopoly. Credit cards irritated incumbent banks in the 60s. It’s not inconceivable that banking’s control of money could end.
When you're talking about using a different currency, you're not replacing Bank of America or JPMorgan Chase. You're replacing the Federal Reserve, Bretton Woods, and the U.S. government. Government's grasp on what money should mean is one of the primary ways democratic governments exercise power.
> Government's grasp on what money should mean is one of the primary ways democratic governments exercise power.
Could you explain that statement? I can’t help but counter that isn’t often the government’s control of money that enables the rise of authoritarian governments! Perhaps privatization of currency might strengthen democracy not undermine it.
...I really don’t agree with that counter. Many, and probably most, governments on this earth today have divergent understandings of money and power. You can be rich in Russia, but that money can be easily rendered worthless by somebody pointing a gun at you or your family. There is no comfort in being rich if you are not politically connected, and even then you have to be more connected than the other guy otherwise you are dead. Stalin didn’t even carry a wallet; why bother when you can just say “see that rich guy? Kill him and bring me his money, I want to buy a bagel”.
In the U.S., there’s corruption and racism sure, but by and large money and power are congruent. The business community opposed Trumps’s response to Charlottesville because a rich black man stood up and said that’s not okay. That’s because democratic governments follow rules. You have green paper; here’s a coffee. Oh you’re black and it’s 1960? Let’s change the written rules so you can get coffee in any shop. Authoritarian governments have “rules” and rules. You have green paper? Too bad, you said something in newspaper and I am afraid of the government, so no coffee for you.
That’s what really grinds my gears about people breaking a societal paradigm like currency. Not just a fundamental misunderstanding of micro and macroeconomics (one guy on another thread said stealing money from a crypto exchange reduces the money supply and can be monetary policy), but also increasing the amount of societal chaos. How do you advance in life when common law will not protect your property?
I don't understand how your point of view conflicts with the parent's. Are you saying that yes, power over money can be used to tyrannical ends, but real tyrants needn't bother?
What I'm getting at is in closed societies, power and money are different things. In open societies, money is power. Parent says government control over money incentivizes authoritarianism. I'm arguing authoritarians have no need to control money to exercise power, because they have multiple ways to do the latter. For instance, during the Cold War the Soviet ruble was not convertible to U.S. dollars or British pounds, because the Soviet government didn't exercise power through open trade/commerce/finance, but rather through organizations like COMECON (https://en.wikipedia.org/wiki/Comecon). Money's power is observable, decentralized, and fine-grained, everything an economic pact is not.
I'd like to add. I think the 'open society' mentioned is simply not an opposite to 'closed society'. Imo, there is a big spectrum to how closed or open a society is.
How open a society is, are efforts mostly paid in blood by the plebians. Those who look down on others and want control are the ones who probably makes society more 'closed'.
Money is only a tool. A way to facilitate immoral exchange of earth's finite resources + human labour.
My leftist ideals would say, we shouldn't deny a fellow human access to food or a vacation just because he doesn't have anything in exchanges. Especially today that we have a problem of overbundance, and we are not even optimizing our production, but for profit.
The Anthropologist David Greaber in his book, we can observe this human compassion when in the park when some stranger kid is in danger, maybe drowning, we do not hesitate for a sec to help out, and we don't ask for anything in return.
Only when (and if) the majority of places we pay accept the new form of payment. Someone was frothing at the mouth the other day about being able to send cash to family in Africa using this. Not realizing that a toll must be paid to convert back to cash. Which is about all that works in many places there.
It's common trope in the history of revolutions for the lower upper class (or if available, the middle class) to position themselves as the heroes or the voices for the oppressed. Once the mob has displaced their 'betters' they step in to take over, becoming the new upper class.
Technically the oligopoly is overthrown. Practically, meet the new boss, same as the old boss.
I'm speculating here, but I think this isn't about challenging the monetary oligopoly as much as it is about Amazon.
FB isn't funding this project because it's a libertarian thought experiment. FB is funding it because it makes business sense.
FB's business model is using data to sell ads. Amazon.com's dominance in ecommerce- and it's entry into the ad market - puts pressure on FB's business if advertisers move their buys to Amazon.com. But I imagine if FB is able to directy connect social interactions to purchasing decisions, that's something that retailers that compete with Amazon are going to be interested in.
Banking has existed for a few centuries, and state controlled money is something recent too, it used to be that multiple sources minted coins. And bitcoin which has existed for 10 years and is far more threatening to governments has not been extinguished.
Bitcoin hasn't been extinguished because it's not a replacement for fiat. Transaction scaling still isn't there and no one in their right mind spends their bitcoin on coffee when it could 10x in a year and then drop 90% from there just to 10x again. It's become an investment class and governments are fine with that because people are investing their fiat into it and then pulling it back out to fiat later. There's no threat to their sovereign monetary policy yet.
Nonsense. T-Bills have the lowest volatility because they're backed by the biggest guns on the planet. What is Bitcoin's volatility and how is that a threat again?
i m not saying that they feel threatened of course, but that investment class is even more of a reason to want to shut it down than it being used as a currency.
Bills of exchange were privately issued by banks since the high middles ages in Europe and functioned a lot like dollars when convertability was still a thing. It's only relatively recently that they've been tightly controlled. they weren't in mass use like metal coinage was but they were essential to the re-establishment of long-range trade.
They always finally had to be exchanged to gold. Current dollars have no such peg, hence inflation, "quantitative easing" and other things only possible with fiat money. No king ever dreamed of monetary power like that of FRS.
Even in Roman times currency were debased though. Financial technology has a pretty long history (Money Changes Everything: How Finance Made Civilization Possible, was a pretty cool read on that).
Gold was used directly, too, as ingots, and as bullion (check out the gold rush of 1849).
But coins show the insignia of the state (and usually the monarch) that minted it; this is an important symbol, and also a guarantee of purity and weight, at least nominally.
> state controlled money is something recent too, it used to be that multiple sources minted coins
I don't think you're considering a long enough time scale, the minting of coins with the likeness of rulers and symbols of the power of the state is as old as the concept of currency and rulers.
There have been instances where companies printed their own script and new non-authoritarian nations might struggle for a bit early on with competing banks, but it's always resolved and power is vested in the central authority.
The role of currency from the point of view of the central authority is more than just economic - it's symbolic, it's propaganda, it's confidence in that government expressed by every citizen through the very act of accepting their currency as valuable.
Yeap what has changed is the scale. Never before have states exerted so strict monetary control in such vast areas. For medieval kings it was just impossible to prevent the use of other people's coins.
I’m not sure why anyone would really want to go back to a fractured system (inherently unstable, and very dominant in the early years in America) unless they live in an already unstable system.
Universality of your currency is kind of the best selling point isn’t it?
Is it? i dont know. My understanding is that dominant coins exist to subsidize dominant armies, which then protect the dominant coin in a virtuous/vicious cycle.
Also, barter worked very well since forever, in which every product is a different "coin", it just doesnt scale physically, while digital currencies do.
"Bottom 150" governments ability to borrow and issue money weakens, as Libra could often be more stable. When you citizens do not need or want your money the governments ability to control, e.g. tax, quickly diminishes.
>> No government is going to let FB and any coalition do an end run around their national currency and their banking institutions.
1. I can see the US government and perhaps the Five Eyes (https://en.wikipedia.org/wiki/Five_Eyes) wanting this because it effectively reveals lots of global transactions they are not currently privy to w/o tedious work. I find it difficult to believe that all the relevant FiveEyes agencies have not been an integral part of this from the planning stage.
2. I dont see how small nations can really stop it. They can stop transfers to/from their own currency, but can they really stop closed loop Libra systems? For example, someone in Whateveristan does some work on E-Lance/Upwork and gets paid 100 Libra. They spend 100 Libra on goods online and gets it delivered -- how could the local government stop this?
2. the finance watchdog verifies that balance sheet must close to 0 for everybody when everything is accounted for - i.e. I have 100 libra and I want to buy a printer, there has to be somebody to deliver that printer and take the 100 libra; the gadget shop can't account for the printer disappearing from inventory without accounting for 100 libra coming in, and the chain thus complete. the only thing you'd be able to buy are services and goods outside regulated economy, so sex and drugs?
Anyone doubting you just needs to look at what happened in 2008. They got bailed out with criminal immunity to tune of around a trillion dollars. The government doesn't usually do that. Also, Wikileaks went down not by governments but by Mastercard, VISA, and PayPal. Assange threatened to leak on a big bank. Zap! They all cut him off simultaneously.
The mega banks and Goldman Sachs are the most powerful organizations in this country. Even Defense arguably served their interests in many cases.
> No government is going to let FB and any coalition do an end run around their national currency and their banking institutions. They're also not going to partner with an international consortium to have them replaced with something they only partially control.
I disagree. Politicians from many countries have shown a willingness to sell out their own nation. With a high enough time preference it's entirely possible.
> No government is going to let FB and any coalition do an end run around their national currency and their banking institutions. They're also not going to partner with an international consortium to have them replaced with something they only partially control.
It's also strange to me that there is no discussion about that. Money is not only a currency you can use to buy goods and services. In case of US dollar it's a powerful political pressuring instrument. Most of goods on international markets are exchanged in US dollar. That's why US can print dollars and the rest of the world is paying the inflation costs. Additionally, money issuer (in this case US) can forbid anyone to use their currency, so they can shutdown Libra when they want and how they want, if pressured enough.
facebook has also proposed some sort of quasi-independent regulatory body to oversee facebook in an attempt to stave off government regulation.[0] It seems they really are trying to turn the nation states of the world inside out and make them subservient to corporations.
> They're also not going to partner with an international consortium to have them replaced with something they only partially control.
It seems that Libra is going to demonstrate exactly why only a decentralized design like Bitcoin’s or other similar cryptocurrencies has any chance of breaking that control. They will be much much harder to attack and shutdown once governments decide this competition in their monopoly of money is just not wanted.
Is that really truly settled by economists? Objectively. I mean there have sure been a lot of currency crisis and hyperinflation events in modern world history.
I don't think pure economics are the only thing to worry about here. Anti-money laundering/sanctions/stopping terrorist financing efforts are generally a good thing that not ideal from an economic perspective.
That looks like a pretty questionable line of logic, because, say for sake of argument, that it can be demonstrated from an economics objective that competitive private currencies produce higher levels of growth. Now the terrorists also have us hostage economically as we need to use monopoly government money as the only way to stop them!
Come on, it’s lazy thinking to believe that only centralized authoritarian control of currency is how to keep everyone safe from various bad actors, terrorists, criminals and rogue nations. My intuition says that just can’t be correct, otherwise let’s also just put cameras in everyone’s homes ... just in case.
the goverment's role isn't to be a monopoly, it's to provide and enforce rules. otherwise the strongest player will coerce everyone to their own rules via force. it's naive to think that without governments everything will suddenly be better and cheaper - on the contrary, there will be a period of anarchy where no fair trade is possible because fraud won't have any consequences and after that the strongest players will form a kingdom or whatever with support of many tired ordinary people who just want to live.
I’m confused. What rules will the government no longer be able to enforce?
There is such extremism in all cryptocurrency related discussions. Why in the world would there be anarchy if central bank monetary policy was no longer effective when private currencies are used or during a Free Banking period? Why does that follow at all, by what mechanism?
Also the exception. Ultimately, you have to wonder what problem you're trying to solve from going from a globally recognized stable reserve currency, to something that is synonymous with extreme volatility and fraud.
> No government is going to let FB and any coalition do an end run around their national currency and their banking institutions. They're also not going to partner with an international consortium to have them replaced with something they only partially control.
Libra is going to be backed by top currencies (probably USD, EUR, JPY, GBP). Why wouldn't the USA like that? They get to invade other countries for free.
Most countries do not like the USD. And most of them are fighting it with capital controls. The US is imposing the liberation of these economies. Through both threats and cookies. Check the FATCA for example. There is no reciprocity and yet countries are implementing it.
Libra could help the US and friends get into other countries easily.
> Banks don't make their money or derive their power through the 'creation of money'.
A bank just opened and has $0 in the vault
You give the bank $1000
The bank lends me $800
Your current bank balance = $1000
My current bank balance = $800
Total money in the bank = $1800
You might say that the money wasn't created because they can't afford to pay out $1800, but if for some reason at this point they need to pay back the $1000 they can ask another bank for a loan, and point to the $800 they're owed as collateral. On top of that, both the $1000 and the $800 would be insured against the failure of the bank by the federal government. This is a simplified example of course, but when the banking system is working normally it's hard to say that they don't make their profits on the creation of money.
Not sure that's correct though. For banks, deposits are liabilities, while assets are loans and cash-on-hand, which they are required to hold fractionally against the total amount of their deposits. In this example, the bank is holding $200, has assets of $800, and liabilities of $1000. Adding it up, you have ($200 + $800) - $1000 == $0.
In reality the bank can take your $1,000 and write loans for $9,000 or more. It’ll have net assets of whatever capital was paid in plus loans minus deposits.
This is why double accounting (?) was created. Too keep track of All the directions money flows. Your example is right, but only half-right (there are at the same time two debts to account for).
Adding the words blockchain and cryptocurrency to this new Facebook initiative gives it an air of "innovation", the sort that reacts to criticism with "this is too new and innovative for you to understand", and "stogy governments don't like to innovate like we do, so they want to stop us with old timey regulation (and consumer protections)".
Libra is essentially an ETF. It's a vehicle that will take deposits from customers and invest them in interest-yielding securities and currencies. Unlike a bank, customers forfeit their right to gain interest from their deposits and it will instead service operating costs (and any money left over goes to founder members). Libra is effectively planing to receive deposits, manage money and process transactions, despite not even attempting to meet regulatory requirements (though they plan to "shape the regulatory environment"--their words). What's so innovative about this venture is its potential for further data harvesting and potential income streams. Facebook isn't going to harvest any data produced from this venture--that is unless the customer willingly gives it to them. Why would a customer willingly provide this access to Facebook? I think anyone using FB for the past decade can answer that question--those regular TOS updates are hard to follow.
Libra isn't so much a subversion of the existing order, as it as an act of financial engineering to service a social media company. What it "could be" doesn't justify what it already is.
When was the last time you used an ETF to pay for Uber Eats?
Libra is not an ETF. Clearly it has different functionality and will be used differently by both Facebook and users. It would be more accurate to say that the risk profile should look to account holders like an ETF rather than a bank.
Never, because it's kind of absurd to create an ETF for user payments, which is kind of to GP's point.
Unless of course you stand to benefit from the transactional data, which I'm not convinced this Calibra isn't a trojan horse for Facebook to get the data from.
The 1000 Libras question is if a currency basket backed asset is a security, commodity and such - is such a bearer note allowed? Then you might be in the domain of securities transfer agents, not money transmitters. You would need to pay capital gains tax on every transaction.
Light touches of financial regulation (written by their lobbyists, in the most cynical case) will help Facebook immensely if they become a social payments platform.
If you want to pay your rent or split that bill with your friends using Libra, it seems reasonable that you might first need to do some Airbnb/fintech style identity validation with their friendly automated systems. Just a photo of your ID and a brief video, and you can have your Libra balance within 15 minutes.
And, just like that, Facebook has gained:
- a real identity to associate with that tracking pixel
- an extension of their network effects even further into the real-world, where you then need to maintain a (validated) account to participate in many common social transactions.
It has the potential to both slow the exodus of millennials and tie a slew of real identities to their accounts. If later on they get transaction data (I agree that this seems inevitable, weren't Google already buying it from CC companies?) or their currency grows to dwarf the dollar in global utility that's just icing on the cake.
For now, their model is still collecting valid + valuable personal data, then selling access to cohorts, and this plays right into that.
These sorts of "currency" are typically invested in short term, low-risk deposits. Think bank certificates of deposit, US treasuries and the equivalents in foreign currencies.
I can't help but think that Facebook doomed this "distributed ledger" possibility by trying to be first to market with a tarnished brand.
The developing world would hugely benefit from a scalable technology that can efficiently service digital transactions. The piece demonstrates this with how quickly WeChat Pay and Alipay penetrated China.
I can't imagine the possibility for prosperity when 3 billion consumers enter the global economy in a matter of years.
Alternative currencies were always going to have to compete (or at least deal with) with powerful governments, and all the most powerful governments are most easily manipulated by appealing to a mass audience.
The Facebook brand isn't capable of doing that right now. There's far more incentive for politicians to talk about breaking Facebook up than to encourage Facebook to embed itself in the financial lives of their constituents.
If a decision is made to breakup Facebook, spinning off Libra will be right at the top of the list. I can't see how it survives as a stand-alone technology without the support of Facebook's network effects.
> The developing world would hugely benefit from a scalable technology that can efficiently service digital transactions. The piece demonstrates this with how quickly WeChat Pay and Alipay penetrated China.
I hear this a lot in cryptocurrency threads, and I vehemently disagree. There's no doubt that using "some other currency" (currency or cryptocurrency) is better than using a corrupt, authoritarian regime's currency. But there's also no doubt that being able to execute monetary policy is a huge advantage for any country. Read anything about currency manipulation or currency markets. Not being able to control the supply of currency your goods (or others' goods, i.e. petrodollars) are valued in is a huge disadvantage.
It feels like there's a huge political push to try and get the "developing world" (with all the hand-waving that's been applied to this term) onto cryptocurrencies, but that permanently puts them at a disadvantage compared to countries that can manipulate their own currency. I think selling this is short-term-ism at its worst.
And honestly? It's also vaguely colonial. I would love to hear from people in these countries what they think about cryptocurrencies, if anything. Cryptocurrency advocates saying, "we know what's best for you" is super troubling to me.
Regarding a country’s ability to manipulate their own currency or execute monetary policy which is mostly in the direction of printing more: the end game of crypto seems to take this option off the table for all governments in the long term.
Why? Because assuming all other things being equal (convenience as medium of exchange etc.), an individual is always going to prefer holding currency that isn’t subject to inflation.
An individual is never going to generously allow their government to erode X% of their liquid cash voluntarily.
This future doesn’t require any crypto ‘dictating’ its money supply policy, it just requires at least one fixed supply crypto to exist in your country that is as convenient as existing cash / online payment to make governmental monetary policy useless.
The problem for governments is: the genie is out of the bottle regarding fixed supply.
Note that I’m not saying it’s good or bad that countries cannot effectively control money supply anymore but it seems inevitable they can’t in the long term.
>>"Why? Well assuming all things being equal (convenience as medium of exchange etc.), an individual is always going to prefer holding currency that isn’t subject to inflation."
And why should they spend a so wonderful asset? And what is the point of a currency that is always appreciating and nobody want to spend?
>>"The problem for governments is: the genie is out of the bottle regarding fixed supply."
Central banks don't target the quantity of money, they target the interest rate. The quantity of money is a function of the economic activity, as it should.
The idea that people is going to change to private currencies is a joke. The only thing a government have to do, in order to create demand for its currency, is accept only its currency as payment for taxes.
> what is the point of a currency that is always appreciating and nobody want to spend
Fixed supply doesn't mean it will always appreciate.
It just seems like it today because the first fixed supply currency that can be transferred over the internet was only invented 10 years ago. It (or an equivalent, or a mix of equivalents) has to rise from 0 USD to X USD over time where X is "the value of global, fixed supply currency". When X is reached, it reverts to being the worst investment you can possibly make, useful only for buying higher yield assets or exchanging for food, shelter and stuff.
> The only thing a government have to do, in order to create demand for its currency, is accept only its currency as payment for taxes.
Just because I pay taxes in USD/EUR doesn't mean I can't store my cash in a fixed supply currency, and anyone who does this avoids inflation. And if everyone does this, government no longer controls the money supply.
> Just because I pay taxes in USD/EUR doesn't mean I can't store my cash in a fixed supply currency, and anyone who does this avoids inflation.
(Let's just use BTC and USD)
Let's say yesterday milk was $2/gallon. But overnight, USD hyperinflated 50% and now it's $3/gallon. Yesterday, I invested 2 USD in BTC. Unless I can convince someone to give me 3 USD for my BTC, I can't buy a gallon of milk.
No rational person will help you avoid inflation like this, because they'd be losing money. They would have to think that the BTC they get from you will appreciate. In other words, they have to speculate.
So the only thing that you do by storing your cash in a fixed supply currency is speculate, and the only way you "avoid inflation" is if your speculation outpaces inflation.
--This is exactly the same as every other investment.--
But there's a huge difference: speculating in BTC helps no one (actually, it almost certainly helps super awful criminals like drug cartels and human traffickers). Please don't do this. Please invest your money in businesses that need it, or in real estate to help build homes, or in any one of a million ways that actually fuel economic growth and have the potential to help a human being.
> And if everyone does this, government no longer controls the money supply.
> Unless I can convince someone to give me 3 USD for my BTC.
This is exactly what would happen, no convincing required. Overnight 50% hyperinflation of the dollar would mean 2 USD worth of BTC/EUR/GBP/milk/anything bought yesterday could be sold for 3 USD today.
> Why do you think this is a good thing?
I’m not claiming it’s a good or bad idea. I’m claiming it’s an inevitable consequence of usable fixed supply currencies continuing to exist.
> Overnight 50% hyperinflation of the dollar would mean 2 USD worth of BTC/EUR/GBP/milk/anything bought yesterday could be sold for 3 USD today.
Ahh, but BTC doesn't belong in that list at all. The Euro and Sterling are backed by large, stable economies, used by each to value their exports. Milk is a commodity, which has intrinsic value (not to mention cost to produce, market, transport, regulate, and sell). BTC is an asset, but not anything like REIT or bonds, because it doesn't represent anything of actual worth. Or, skipping some steps, its only worth is that you can convince someone it will eventually have any value at all.
Cryptocurrencies are unique among all other assets in that, at the bottom of them, they are figuratively bankrupt and actually meaningless. There are no goods valued solely in BTC (even black market stuff is like "$100 / .0092 BTC") and no strong, stable economy backing it. At the end of the day, BTC basically says "someone will give you a lot of currency you actually care about for these zeroes and ones", and because those zeroes and ones have no additional value (i.e. it's not a cure for cancer or a TLS skeleton key), the proposition is literally worthless.
So yes. Normally that is what inflation means, but only for currencies that can actually purchase goods and services people want, or goods people actually want to consume, or services people actually want to use. Cryptocurrencies are none of those things.
Your position is that 50% USD inflation overnight would cause 2 USD worth of EUR/GBP/milk/gold/anything bought yesterday to be worth 3 USD today but for some reason 2 USD worth of BTC bought yesterday would continue to be worth only 2 USD?
This is wrong, assuming values of BTC hadn’t also changed overnight. It could only be true if BTC simultaneously dropped in value 33%, but that would be unrelated to USD inflation.
That is not my position. I do believe that BTC would also go for $3. But the only reason is that holders of BTC have so far managed to convince holders of other currencies that BTC has some intrinsic worth when, in fact, it has none (other than money laundering, frankly, which is no small thing, but not something people should be investing in). That's why I believe it doesn't belong in the same category as commodities or currencies. It's a huge bubble, and it will be very, very bad when it bursts.
Nah I don't buy that (oooh econ pun!). There are basic human needs: food, water, shelter, medicine, socialization. Goods and services that fulfill those needs have intrinsic worth (to humans). When those goods and services are valued primarily in a given currency (i.e. GBP, USD, EUR), that currency gains worth rooted in the intrinsic worth of those goods and services.
And even abstract financial instruments like mortgages, REITs, bonds, CDSs, CDs, shares of commodities, etc. are based on these fundamental things. Bonds are based on currencies--which are only worth anything if they're the primary denomination of goods/services with intrinsic worth. REITs, mortgages, etc. represent shelter. Commodities represent food, water, and medicine.
BTC represents... nothing? Energy loss? Honestly there's no analog. Snake oil is still oil, selling someone air--they still get air. And sure, you can still argue "well camgunz, even if it's literally nothing, if people want it, they'll put a price on it". But... isn't that really just super bad, like collapse of the civilization bad if it ever gets to scale? We really shouldn't be convincing people to turn their money into absolutely nothing. That seems very obviously not a good idea.
The worth of "food, water, shelter, medicine, socialization", financial instruments (including cryptocurrencies) depends on context.
For instance water might be extremely precious in some situations (if you're dying of thirst), and have zero, or even negative value in others (like during a flood, because you want to get rid of excess water, even if if by some miracle it happened to stay pure).
Hence, no "intrinsic" worth.
>>"Fixed supply doesn't mean it will always appreciate."
It seems to me that you believe that when the economy stay the same and the supply of money grows, money loss value.
Then, the other side of the coin ;-) is that when the economy grows and the currency don't, it increases value.
>>"[--] And if everyone does this, government no longer controls the money supply."
Governments already don't control the money supply. If a bank gives a credit, it's creating money in the system.
After giving a credit (and creating money in the process), it needs to increase its reserves. If the government don't give it enough reserves it have to go to the inter-bank market, that will create demand for reserves, and that increase the interest rate.
If the government want to control the interest rate it can't control the quantity of money.
>>"Just because I pay taxes in USD/EUR doesn't mean I can't store my cash in a fixed supply currency, "
You can do it already, for instance, buying gold. Note that the price of gold also move up and down. You can lost money buying gold and it will be not different with any other asset.
Also, it is a joke that crypto will not have inflation.
The government will always require taxes and utilities to be paid in their currency. So, every one will need to sell cryptos to fulfill those electricity bills and taxes. This sell pressure will carry on a inflation into cryptos.
It won't have inflation caused by the underling supply being increased which is the largest component of inflation. But you’re correct to point out that inflation has other causes (eg. natural fluctuations in demand for goods and services) that will still exist in FixedSupplyCoin world.
Governments can easily ban and pursue anti-crypto measures to prevent anything such as money they can't control.
Yannis Varoufakis said it best: the idea of apolitical money is a fiction and a dream. Money has always been associated to and controlled by governments. Bitcoin currently is actually heavily manipulated/moved by Tether which is controlled by Bitfinex.
I agree governments will try to ban fixed supply currencies but I don't believe they will succeed.
China still can't stop its citizens accessing the open internet on VPN. North Korea still can't stop its citizens smuggling wikipedia into the country on USB sticks. Governments won't be able to stop citizens storing their wealth in fixed supply currencies.
> Bitcoin currently is actually heavily manipulated/moved by Tether
Yes Tether moves Bitcoin because it's literally people in Asia who want to dump their fiat to buy Bitcoin. There is no grand conspiracy here, people tried to claim Tether were printing money out of thin air to drive up BTC but even the NYSAG had a look at their operation and found no such result.
I saw him in person in london and he was asked about Bitcoin. As the last sentence of his answer he said and I’m paraphrasing: “If you’re asking about the idea of apolitical money [in relation to Bitcoin] I think that’s a fantasy”. I’ll try and see if he ever said something similar in other settings but I remember connecting it to what I was reading around the same time which was David Graeber’s Debt: a History book where he presents a similar anthropological-historical argument.
> assuming all other things being equal (convenience as medium of exchange etc.), an individual is always going to prefer holding currency that isn’t subject to inflation. An individual is never going to generously allow their government to erode X% of their liquid cash voluntarily.
"All other things being equal" will never happen. Too many things change. For example, maybe the world economy is on the brink of depression (2008), in which people would prefer their governments do something about the crisis, despite the risk of inflation. Or maybe you're trying to manipulate your currency to gain a trade advantage. Etc. etc. It's just not a useful thing to consider.
And although this is kind of anecdata, I'm perfectly happy for my (US) government to execute monetary policy that potentially devalues my savings and investments as long as it's justified. Hell I usually make it back with wage/benefit increases (although the same can't be said for most US workers) and interest on investments.
> This future doesn’t require any crypto ‘dictating’ its money supply policy, it just requires at least one fixed supply crypto to exist in your country that is as convenient as existing cash / online payment to make governmental monetary policy useless.
No one's saying what the future does or doesn't require. All I'm saying is that people who are extolling the virtues of a fixed currency should earnestly research why we moved off fixed currencies. There are a lot of really good reasons. No serious economist advocates for a return to a fixed supply of currency.
> The problem for governments is: the genie is out of the bottle regarding fixed supply.
This is comically untrue. It may be true in cryptocurrency circles, but it's absolutely not true in economic circles. It's an idea that's been widely considered and roundly dismissed as very bad. Its support in cryptocurrency circles is driven largely by libertarian ideology.
> Note that I’m not saying it’s good or bad that countries cannot effectively control money supply anymore but it seems inevitable they can’t in the long term.
On the contrary, countries that cannot effectively control money supply will continue to be at a disadvantage with countries that can. It's precisely because of its usefulness that countries will continue to employ it. What could possibly make you think otherwise?
> No serious economist advocates for a return to a fixed supply of currency.
I am not advocating for its return or extolling its virtues or claiming the world will be better or worse with fixed supply currency. I'm simply stating that a rational individual or business will avoid an X% tax on their stored wealth if they can legally do so.
I appreciate your anecdotal willingness to have your wealth devalued as a patriotic sentiment, but have to assume you are in a small global minority who would so if it can be avoided with the flick of a switch ('store my money in crypto') - consider countries where the tax is XX%, XXX%, XXXX% or even beyond (ie. Venezuela). Even X% is a rather large voluntary tax for US citizens with meagre savings.
> This is comically untrue. It may be true in cryptocurrency circles, but it's absolutely not true in economic circles.
It's true in the sense that fixed supply currencies exist today and usability will meet and eventually surpass 'traditional' currencies. The goodness or badness of the idea according to economists doesn't stop them existing today and won't stop them existing in the future.
> On the contrary, countries that cannot effectively control money supply will continue to be at a disadvantage with countries that can. It's precisely because of its usefulness that countries will continue to employ it. What could possibly make you think otherwise?
No government is going to voluntarily give up control of money supply but their mechanisms to do so are very limited in a world where every citizen and business stores their value in FixedSupplyCoin.
I'd also like to add something that I consider the elephant in the room. Haven't tech companies already proven themselves that they're willing to bend to governments' will in order to do business?
No authoritarian government will welcome Libra with open arms. If the currency won't bend to their will, then they will simply ban it and then it becomes (at best) a black market good.
There's also another issue: how do you value it so that it becomes useful to everyone? If I'm in Venezuela getting paid in bolivars then my money already has no power to begin with.
It will also be hard to manage for a lot of people. I doubt some average Joe in a poor country will want to complicate himself by buying something at 0.0000000231 Libra. It will require a lot of cognitive power to not get scammed.
People living in these country here. Thank you for pointing out these concerns. Besides currency manipulation, another issue with cryptocurrency is about responsibility and accountability. For traditional central bank, before a greedy bad policy made, local governors must carefully think about the aftermath like unrest and they might be held for account and get punished. In the worst scenario, people keep the choice to overthrow old bureaucracy to change the policy by force. But this is not the case for cryptocurrency. There might be no one punished for terribly wrong decision, just because the public have no idea who the decision maker is, or he/she is in another country and escapes the rule of law. Just like 1997 financial crisis for southeast asian people.
> But this is not the case for cryptocurrency. There might be no one punished for terribly wrong decision, just because the public have no idea who the decision maker is, or he/she is in another country and escapes the rule of law. Just like 1997 financial crisis for southeast asian people.
What kind of “decision” are you imagining? I thought part of the point of cryptocurrencies is to remove power to even have these “decisions”. So I’m not sure what the scenario you imagine is.
What if Gold was used as currency easily, is there a problem that would occur?
I don’t know if i’m correct on this. but i think members of the libra have the power to manipulate exchange rate more or less, although they might choose not to use it. Also, upgrading cryptocurrency with improper algorithm or parameters could influence the market, targeting certain countries for instance.
There are decisions in cryptocurrency. and they are “democratically” made in the computing power sense, which means, as a less computationally powerful country, it might lose policy independence in the global voting.
For gold, there would be much less space for policies, both good and bad, and hence less benefits and problems at the same time. I think that’s one of the reasons why it’s not widely adopted anymore.
I live in a developing country. I don't see any benefit whatsoever for using a cryptocurrency for digital transactions. I can transfer money instantly to someone else's bank account, they just need to give me their name & account number. I've used that to buy lots of things from places that don't accept credit cards.
For people who don't trust banks (my inlaws don't keep any money in a bank because they don't trust it, so they are unbanked) -- I don't see anything about Libra or Cryptocurrencies that is going to make them trust it. "There's some super-complicated math that proves you own this money and no one can take it from you" just isn't the kind of thing that is going to convince my inlaws to trust it.
Libra hasn't released any pricing on their processing fees so it is all vaporware & unfounded guessing right now.
Re: "we know what's best for you". We're talking about private companies offering people a free choice of an alternative to state monopoly money. Yes, Facebook has reach, but they're not the ones jailing people, etc. Even though I can't stand Facebook I think you have this backwards. (To the extent they succeed through dirty tricks, I'd be wrong about this.)
> there's also no doubt that being able to execute monetary policy is a huge advantage for any country.
I'm not confident about pretty much anything macroeconomic, but I do doubt the confidence of most talk about it. The U.S. was on the gold standard through the Industrial Revolution, for example.
>Cryptocurrency advocates saying, "we know what's best for you" is super troubling to me.
How is this fundamentally different from an unelected monetary economist working at the IMF or Federal Reserve deciding they know what's best for millions of people in a country? Given that you're presenting a country that can manipulate their own currency as the superior choice.
Because the monetary economists work to improve the economy of their whole country, while "cryptocurrency advocates" are more likely to be vouching for a system that stands to personally benefit them?
> there's a huge political push to try and get the "developing world" (with all the hand-waving that's been applied to this term) onto cryptocurrencies,
Is there? There's a lot of discussion around it. But I've never seen a legitimate push.
I was thinking the same thing. Either the product managers or the PR people are tone deaf (or why not both?).
I once saw a PR person talk about how you had to earn your way to allow yourself to be part of certain larger societal conversations. Start at grass roots, earn trust there, step up to communities, earn trust there, step up to local governments etc etc. Being big doesn't earn you anything out the gate. I liked this idea. However charitably you think about Facebook, I don't think you could possibly surmise that Facebook has earned its way to the conversation of its stated aims of helping people who can't get credit cards use digital currency.
I think Libra would have been marketed much better if it had been a separate company with FB taking a 51% controlling stake, and these other validators making up the rest.
I think the real PR disaster will come when FB tries to "square the circle" and explains exactly how they are gonna keep people's Libra transactions fully isolated through the Colibra foundation while simultaneously allowing every FB app to have a built-in Libra wallet... I can't wait to hear the mental gymnastics that will be required to continue to uphold that claim.
> the product managers or the PR people are tone deaf
Evidence points to a massive lack of co-ordination with this launch. Government relations (together with the relevant House and Senate committees) learned about the launch from the news briefing. This whole thing appears to be a shambling mess, born out of desperation more than ingenuity.
The fact that people are willing to trust FB with their personal photos or favorite political memes doesn’t mean they’re willing to trust them with money.
And it doesn’t matter who controls Libra if everyone thinks of it as ‘the Facebook money thing’.
No, it doesn't matter if everyone thinks of it as 'the Facebook money thing' if that's not what it is. The only thing that people's perception effects is whether or not governments influenced by said perception allow Facebook to build a wallet in with their service in those regions. Libra the currency will be a thing regardless.
China has WeChat & Alipay.
India has PayTm & PhonePe (+others), the government also has a really good initiative called UPI.
South East Asia has a bunch of similar apps as well.
I think the developing world is ahead of US & EU in this regard, card & bank account usage is bound to decline in the long run.
Although Facebook's brand is a bit tarnished then the general public doesn't look at it so negatively as we here. Compare it to, say, politics: plenty of corruption, yet we still have it around (and what would the alternative be?).
Libra will probably be a success, perhaps even a huge one.
Which consumer brand at this scale isn’t tarnished? Amazon? Google? Apple (not even applicable since they build only for their device users? Walmart? Bank of America?
> The developing world doesn’t care about the reputation Facebook has on HN
The developed world does: "based on an analysis of SimilarWeb Android data, Jefferies analyst Brent Thill found daily average users for core Facebook have declined in the U.S., U.K., Germany and France over the last 12 months—although he notes sequential user growth across geographies in April and May. In the U.S., time spent on core Facebook and its photo-and-video-sharing platform Instagram also has declined over the last 12 months, with users spending sequentially less time on both apps most recently" [1]. Antagonism to Facebook not a niche issue.
Autocracies won't cede power to Zuckerberg. Poor democracies have no incentive to sign up to a cartel without rich countries' wealth. Without at least some OECD support, the project is DOA.
> Poor democracies have no incentive to sign up to a cartel without rich countries' wealth
Of course they do. The cartel will easily bribe them - whichever politicians need incentivized - to leave the door open. They don't require much of an opening.
Visa is now worth more than every US or global bank - such as JP Morgan, HSBC or Bank of America - and worth more than twice what the largest tech company in Europe (SAP) is worth. Mastercard is worth 70% more than SAP.
These types of massive companies can trivially grease any and all wheels to embed themselves deeper into the global economy. What else do companies like Visa and Mastercard have to spend their extreme brand-bullshit margins on? If you're those guys, the only thing worth directing your flood of endless high margin profit at is to get locked deeper into the global economy. They can afford to purchase infinite lubrication for all practical purposes. Take Visa as an example. They have 50% net income margins - laughably extreme - because they have absolutely nothing else to do with their business other than collect the cash as it rolls in, and then look at ways to ensure their parasite position is perpetual and continues to expand.
I'm crossing my fingers that this pseudo crypto money never takes off. Having Facebook control this would be so terrible and the proof that we didn't learn anything over the last couple months. Don't fool yourself even though they released a white paper and some pseudo decentralized schemes this is no different than a casino chip.
Unfortunately I feel like it might pick up and become a thing.
That's the way they marketed it. They know they had to do this little concession in order to get Libra to pick up so that people would repeat tirelessly that it's not controller by Facebook and therefore it's good.
But it's controlled by Facebook and friends and the influence they would get over any decision is absolutely huge
Do you have any citations that contradict the article?
The Validators
Who, then, are the validators? Well, Facebook is one, but only one: currently there are 28 “Founding Members”, including merchants, venture capitalists, and payment networks, that meet two of the following three criteria:
More than $1 billion USD in market value or more than $500 million USD in customer cash flow
Reach more than 20 million people a year
Recognition as a top-100 industry leader by a third-party association such as Fortune or S&P
These “Founding Members” are required to make a minimum investment of $10 million and provide computing power to the network. In addition, there are separate requirements for non-profit organizations and academic institutions that rely on a mixture of budget, track record, and rankings; a minimum investment may not be necessary. Libra intends to have 100 Founding Members by the time it launches next year.
They are the ones selecting the "members" and they will have a huge influence on any updates or any controversial topic or potential fork.
Don't fool yourself, this whole thing has been carefully orchestrated to look like if it was an open community but it is very tightly controlled by Facebook and friends.
Again, that’s not what the article says. They have clear list for what the membership requirements are and all of those requirements are administered by a third party.
I've dabbled out of morbid curiosity in the space previously—but I'm in the same boat.
Out of all of the good-will projects they could spearhead if they want to turn the tides of FB's reputation, they decide to try and supplant money. To me it just screams that it's one more domain they want to assert some control in.
The incentives don't seem to align in that direction. What would be the point for Facebook to create a promote such a currency if they can't control it at some level?
I fully expect that even if the core of the cryptocurrency might actually be decentralized and not directly controlled by Facebook (and I don't believe that either, for the record) the practical implementation of this will give Facebook more than enough weight to shut anybody down if they so desire. A bit like how email is supposed to be decentralized but if these days gmail decides it doesn't want to play with you you're effectively screwed.
Facebook (and other tech giants) have absolutely nothing to gain from decentralization and privacy when their entire trillion dollar business model relies on siphoning as much data as possible. Anybody thinking that Facebook is somehow going to usher the golden age of cryptolibertarianism and the decentralization of money is frankly shortsighted. Then again, shortsightedness is a common symptom of libertarianism (or is it the other way around?).
The author explained this (quoted below). Even though FB doesn't control Libra (protocol), they do own Calibra (digital wallet). If Libra takes off, Calibra stands a good chance of becoming the default way of transacting in Libra. FB then becomes the de facto leader and holds outsized influence over the direction of the project/industry, much like Gmail/email, Chrome/web and Google/web search.
> And this is when this bet would pay off for Facebook (and the second point I missed in my earlier analysis): the implication that digital currencies will do for money what the Internet did for information is that the very long-term trend will be towards centralization around Aggregators. When there is no friction, control shifts from gatekeepers controlling supply to Aggregators controlling demand. To that end, by pioneering Libra, building what will almost certainly be the first wallet for the currency, and bringing to bear its unmatched network for facilitating payments, Facebook is betting it will offer the best experience for digital currency flows, giving it power not by controlling Libra but rather by controlling the most users of Libra.
The white paper explicitly gives the Libra Association (i.e. Facebook and its partner validators) governance control over the cryptocurrency.
Here's an easy scenario to imagine that shows how incentives would get misaligned: Facebook and the other validating nodes of Libra are financially compensated by interest from the collateral for Libra tokens. If Libra is successful in its mission, it will become a global currency that's stronger than the assets that underly its collateral.
When this happens, suddenly Libra being a collateralized stablecoin stops making sense. Kind of like when the US Dollar no longer needed to be backed by gold since it was a strong enough currency/unit of financial measurement on its own. The US then got rid of the gold standard and has since saved itself untold money in custodial expenses they would have been paying to hold all that gold.
The Association would never do this for the Libra however since it is literally how they are funding their own operation. Even if it's in the best interest of all Libra users, the centralized governance association with all of the authority to make this improvement would choose not to because it's not in their best interest to do so.
There's no leap of imagination there - it's just how power and incentives work.
Seems to be an excellent breakdown of how the Libra Association (of which Facebook is an equal among many) would control Libra, but not Facebook alone.
I think the strongest argument towards the latter is the long-run aggregation theory one re: Calibra owning the most Libra users, and not having to own the underlying Libra system itself.
Correct, my issues with Libra's centralization has to do with the Association, not Facebook alone. I see what you're saying though where Calibra could itself be used used as leverage by Facebook.
> The white paper explicitly gives the Libra Association (i.e. Facebook and its partner validators) governance control over the cryptocurrency.
> Here's an easy scenario to imagine that shows how incentives would get misaligned: Facebook and the other validating nodes of Libra are financially compensated by interest from the collateral for Libra tokens. If Libra is successful in its mission, it will become a global currency that's stronger than the assets that underly its collateral.
> When this happens, suddenly Libra being a collateralized stablecoin stops making sense. Kind of like when the US Dollar no longer needed to be backed by gold since it was a strong enough currency/unit of financial measurement on its own. The US then got rid of the gold standard and has since saved itself untold money in custodial expenses they would have been paying to hold all that gold.
> The Association would never do this for the Libra however since it is literally how they are funding their own operation. Even if it's in the best interest of all Libra users, the centralized governance association with all of the authority to make this improvement would choose not to because it's not in their best interest to do so.
> There's no leap of imagination there - it's just how power and incentives work.
Your basing this argument on the fractional reserve monetary policy that the libra association is hedging against. I believe we are moving towards a world in which global currencies become the norm. There will be 2 types of global currencies, corporate currencies and decentralized currencies, aka Libra and Bitcoin.
Both forms will have to have a mechanism that prevents inflation, Libra will do that by being fully backed, Bitcoin does that through Nakamoto consensus.
With digital currencies it becomes possible to move your entire "cash" holdings in a matter of minutes, so a fixed supply currency like Bitcoin insures that Libra will never dilute it's supply because the barrier to exit the currency is so low. In democratic countries like the US the mechanic that prevents massive inflation is mostly voters' influence over the federal reserve. Of course it isn't perfect the dollar has been inflated ~300% since leaving the gold standard. With corporate global currencies we don't have such voting powers.
I don't think Libra's collateralization is a hedge against fractional reserve monetary policy, I think it's just Facebook's way of ensuring consumer confidence that a Libra is actually worth something, and the most proven way to peg a stablecoin to a value.
I don't think this is necessary in a mature crypto economy where digital currencies are being used more than fiat currencies.
I agree though that crypto monetary policy will play a huge role in the future though, and in the case of Libra, policy will be decided by the Libra Association. All I'm saying is that the Libra Association is not necessarily the best group to be making those decisions because collateralization is how they're funded. The US Fed doesn't have that same conflict of interest... they're paid by US taxes regardless of how their decisions turn out.
> I think it's just Facebook's way of ensuring consumer confidence that a Libra is actually worth something, and the most proven way to peg a stablecoin to a value.
Or even just to have people use it.
I can’t afford to hold crypto right now because I don’t have any savings, only debt.
But if there was a crypto that had a stable price and which was accepted by merchants, and I perceived it as trustworthy I’d use it for my purchases instead of using a credit card or debit card.
Libra is not going to be it for me because I don’t trust Facebook and I don’t want them to have any involvement over my money. But I will admit that it has potential for a lot of the Facebook userbase to start using it.
> What would be the point for Facebook to create a promote such a currency if they can't control it at some level?
It gives them their a payment processor they can put into WhatsApp to compete with WeChat in China. They know they can't do "Facebook Coin", so they are doing the nearest thing they can, a consortium.
Personally, I don't see anything suspicious about Facebook's stated intentions. They benefit by having more potential customers with frictionless access to digital purchases. They don't need to control the currency if they control the wallet. Like Gmail, they'll refuse to connect with certain groups, but if a controversial group like Infowars is banned by Calibra, you could just move money into a secondary wallet and then to Infowars if you wished. Unlike Gmail, you will know immediately if what you sent is being rejected by the platform and needs to be funneled through another channel.
Facebook has nothing to gain from decentralization when all their business depends on slurping up data? That couldn't be further from the truth. Reliance on selling personal data is a huge flaw in the business models of companies like Facebook and Google, and they're eager to diversify. Moving money around has been one of the top businesses to be in since the start of civilization, and it's an obvious target to diversify into.
Your last comment about libertarians being shortsighted is somewhat unrelated, but I have to disagree. That philosophy is all about avoiding expedient means of doing things if they have long-term consequences. Using the force of government is almost always the fastest and most effective way of accomplishing a goal, but the escalation of centralized power over time can lead to catastrophic results, and libertarian-minded people are willing to give up short-term benefits to avoid those long-term consequences. Likewise, businesses can also be short-sighted at times, but they do occasionally employ people who see that too much centralization can lead to collapse in the long-term, and the thinking behind Libra seems to reflect that mindset.
I think Libra is a distraction from Facebook for people to forget Cambridge Analytica etc. FB may have unleashed this as a weapon for people to rally up or againast and Fb doesn't care if it succeeds or fails because it is a new category and doesn't affect it's bottomline.
My primary concern is that with a set of 20 or 100 validators, you can’t call it a decentralized platform (it’s a blockchain run exclusively by a centralized consortium). The article discusses the fact they intend to to decentralize it in 5 years, but that would be the equivalent of a dictator stepping down and promoting democracy which... doesn’t always come to pass.
I've been wondering about this too. I don't see how the incentives are setup that the Association would want to move towards an entirely permissionless network. Especially if Libra gets heavily adopted at 100 nodes (as they don't need to improve trust at that point and letting more companies into the association will decrease transaction throughput).
There are also some technical barriers on the path to a permissionless network. The consensus algorithm Libra is using currently requires full connectivity between validators and is only robust so long as 2/3 of the validators can be trusted. Much has been made of the risk of a "51% attack" against Bitcoin, but one need only control 1/3 of the validator nodes to disrupt Libra, which is a far lower threshold than 51% of computation capacity. Your standard botnet isn't much of a threat to Bitcoin since the participating devices aren't optimized for mining, but Libra would be an entirely different matter.
The 1/3rd / 2/3rd pattern in a lot of blockchain BFT protocols is really elegant. If 1/3 of the voting power of a chain wants it to stop, then it probably shouldn't be running. It takes 2/3rds of the voting power for the validators to actually steal anyone's money or alter history.
Your botnet example is a non-sequiter. Since power in BFT protocols does not stem from the wasting of electricity, botnets have nothing to do with any possible attacks on a BFT system.
On the contrary, botnets are far more of a problem in systems designed to make it cheap to run a validator node. This creates an obvious opportunity for a Sybil attack: spawn a few thousand nodes on other people's insecure IoT devices and you immediately control far more than the requisite 1/3 or 2/3 of the network. It's a lot harder to control 51% of the hash rate for a PoW design like Bitcoin which effectively requires specialized hardware to mine competitively.
I'm assuming they implement countermeasures against simply running a bunch of VMs or containers masquerading as a large number of independent nodes, for example by looking for multiple connections from the same IP addresses or subnet. Otherwise botnets would indeed be unnecessary to carry out the attack—anyone could do it from home with a modest PC.
This article seems to be making the claim that the Libra blockchain will not be viewable by anyone other the validators. This is counterintuitive - even if only validators can confirm new blocks I expected the chain would be public, there would be explorers, etc. Does anyone know if this question has been answered somewhere definitively?
A huge amount of person-to-person sales take place through FB marketplace. If FB can drive some % of those people to use Libra that will be a good start to adoption.
I am someone you might consider early adopter. I enjoying tinkering with the latest gadget, getting that fancy domain name with an extension like .ooo ( yeah! not kidding :-D ) but .. when it comes to FB, I don't mind being a luddite. Add to that, the country I live in currently (India) has a ban on cryptocurrencies and we have tons of alternatives like Paytm[0] and UPI (Inter-bank transfers in an instant)[1]. So, Mr Zuckerberg et al, thank you but no thank you.
To me , the most interesting part is towards the end of the article (emphasis mine)
> This applies even more to the Calibra wallet: Facebook promises not to mix transaction data with profile data, but that entails, well, trust ...
This article captures one of the biggest problems I've seen in the discussion about Libra, which is that everyone has been writing it off as a currency that Facebook can control. In reality, Facebook's control is limited to being equal to the other members of the Association. Facebook controls the Calibra wallet, _not_ the currency as a whole.
The thing that really drove this point home for me was when I browsed to both websites. Browsing to the Calibra wallet website, the entire site broke because I have blackholed all Facebook and tracking domains through NextDNS. When I browsed to the Libra website to view the whitepaper, everything worked just fine. This is a great demonstration of who is in control of what.
That being said, I think this article also outlines the clear incentives as to why Facebook would like to promote Libra in the first place, which is the data they have the potential to gather through the Calibra wallet.
Disappointed Ben didn't add a paragraph or two about privacy concerns. The MC, Visa will float on top of libra unencumbered by bank fees, but our relationship with credit card firms and our privacy is regulated in the western world. The Calibra wallet logic is going to need greater privacy protections for the user or we will have a situation worse than the current platform monopolies, with only pea shooters like the EFF working for users
https://www.eff.org/issues/privacy
We need new law like the US section 230 for personal rights and privacy as well as free speech
https://www.eff.org/issues/cda230
What about privacy? Most of these Internet giants make money hoarding user data; will Libra open up a new dataset to collect and monetize for these companies? Will Libra transaction data be more thorough than what they're currently able to get from 3rd parties?
No worries, they're just gonna take a pic of your government ID and fingerprints for KYC requirements which are securely isolated in a vault in Switzerland where they will remain 100% safe, except in that rare instance where you need to buy a cup of coffee, and they therefore need to inspect all your records to make sure you're not funding terrorism. /s
Yeah, that's really what this is all about- Zuck probably keeps asking stuff "can't we just have a payment button right here in an FB baby shower announcement?" and his legal departments says "you can't do that for lots of regulatory reasons, including KYC" and so Libra was born.
Pretty interesting. It's good to see a deeper analysis of this.
This part though:
> ...while its members — who again, are the validators — do control the Libra protocol, Facebook does not control the validators. Which, by extension, means that Facebook will not control Libra.
That's true, but from my point of view, that distinction isn't too important.
In either case, there are a relatively very small number of individuals who control Libra in an opaque way.
By spreading the control out a little, I think it reduces short-sighted and single-perspective thinking, which is good, but it's still going to be run in a self-interested way for the handful of companies that control it and the executives that control those companies.
> In practice, it is much more complicated: while a limited set of “validators” — aka miners — share a history of transactions in (individual) blocks that are chained together (i.e. a blockchain), what Libra actually exposes is the current state of the ledger. In practice this means that adding new transactions can be much quicker and more efficient — more akin to adding a line to a spreadsheet than rebuilding the entire spreadsheet from scratch.
The author seems to be referring to the two different accounting models in crupyotcurrency: the coin model and the account model.
The coin (aka UTXO) model mimics physical cash. A transaction changes ownership of a digital token, leaving a chain of ownership in its wake. This is the model used by Bitcoin.
The account model credits and debits specific amounts from an account. This is the model used by Ethereum.
The author seems to imply that the speed of a network depends on which accounting model is being used.
It doesn't. In both cases, signatures must be validated, and this is the most costly computation. In neither case is the entire chain of transactions reloaded to verify a single payment. Instead, the most recent state is extended.
Transaction volume is largely a function of how open the network is and how trusted the parties are that write blocks. The more open the network to membership by arbitrary players, the slower it will be. The less trust in those writing blocks, the slower it will be.
Bitcoin users value censorship resistance and insist on validating their own blocks (or at least they should). The network is configured make this possible by, for example, setting a block size limit among other features.
Libra will need none of this. Validators will be implicitly trusted. What they say goes. A certain minimum hardware spec can be set and enforced, ensuring fast payment processing, at the expense of censorship resistance and openness.
I haven’t found many “takes” on Libra talk about Calibra, which is FB’s Libra wallet and, if this thing takes off, would likely by default be the top wallet for Libra transactions.
Calibra would require full identity verification e.g. submitting SSN and a copy of your picture ID. Getting that info is way beyond what FB has about you now.
Do companies that bought in to join the Libra alliances for 10 million each mean that they'll receive all transaction history and purchasing patterns of everyone on the Libra network as well as receive a share of the fees in the future? Sounds like a bargain if that's the case
Thing with libra is that its not a cryptocurrency nor does it move the distributed agenda forward. It moves transactions from happening off-the platform to being on it.
FB is in it for themselves. The consortium of third party players is for shielding themselves from anti-trust concerns
"while its members — who again, are the validators — do control the Libra protocol, Facebook does not control the validators. Which, by extension, means that Facebook will not control Libra."
Within the designed protocols, yes, Facebook gets one vote equal to the the single vote of any other node.
Outside the system lens, Facebook brings this product to potentially 2.38 billion users. That dwarfs the value that any other validator can bring.
If Facebook becomes unhappy with what the consortium is doing, it can simply say "Hey, we're gonna stop using Libra, and start a new fork." So while they may not control other validator members, they can certainly strong arm them into falling in line.
Forgive my stupidity, but I don't understand this statement by Ben (Stratechery):
"In practice, it is much more complicated: while a limited set of “validators” — aka miners — share a history of transactions in (individual) blocks that are chained together (i.e. a blockchain), what Libra actually exposes is the current state of the ledger. In practice this means that adding new transactions can be much quicker and more efficient — more akin to adding a line to a spreadsheet than rebuilding the entire spreadsheet from scratch."
How is this different than Bitcoin, and why does it require a different level of trust?
You are still trusting the validators (miners) either way, correct? And how is it more efficient?
Libra intends to use Proof of Stake. This means that the initial members will "stake" some amount of Libra and now all transactions can only be validated by them. You as an individual can't validate any new transaction. The assumption is that because the PoS validator has a huge stake in this currency, they will behave rationally or otherwise they would devalue their own stake. The trust here is completely centralized and is a rich get richer model. If FB or PayPal or a member doesn't want to add your transaction, they can completely block you. They control what is true.
Bitcoin uses Proof of Work. Consensus is decentralized. Anyone can do some "work" (hashing in this case). If they find the magic number to get the right hash, they get rewarded by the Bitcoin protocol itself. This is also the only way new Bitcoins are created. It is only when one of these magic numbers gets found that transactions get added to the Bitcoin ledger (every 10 minutes). The rule is that the longest ledger chain wins so everyone is running in parallel. You don't need to own any Bitcoin to do mining to get "free" Bitcoin. The trust is decentralized (in terms of control) and no one can prevent anyone else from validating Bitcoin transactions as long as you follow the same rules as everyone else.
Probably too late to keep this discussion going, but...
I understand Proof of Stake vs. Proof of Work. But what Ben says about only "publishing the current state of the ledger" doesn't seem to relate to whether PoS is used. It's certainly not inherent to PoS that the entire blockchain isn't published.
Maybe he's just confused about how PoS works (but I somehow doubt that). I understand how PoS makes things more efficient by entrusting a single validator (or any small subset of validators) rather than having essentially a contest, and I understand why this is also inherently less trustworthy than PoW.
But Ben never mentions Proof of Stake anywhere in his explanation, just that the blockchain's "current state" is the only thing "exposed".
I'm juse trying to understand what he's getting at there.
Gotcha, I assumed that it was a little handwavy on the details to be more accessible to a wider audience. It is very possible that they don't let others download the complete ledger and only let you ask for a certain private key's current balance. I agree that this is even more concerning (if true) than regular PoS. I also didn't read the proposal deep enough to know if you can register to be a node that sees all proposed transactions even though you can't actually validate them. If there is on way for external monitoring or audit, this truly is not blockchain even in name only. Then it is simply a replicated database with restricted access.
> You are still trusting the validators (miners) either way, correct? And how is it more efficient?
Who can be a validator (miner) is controlled by the consortium, and therefore the blockchain algorithm doesn't need be to as computationally expensive as bitcoin's proof of work, which is designed to contend with the fact that anyone can be a miner.
Instead it can just serve the purpose of enabling a distributed ledger.
Something I haven't seen yet: If my computer has a bit of malware land on it, do I lose my entire wallet worth of Libra irrevocably? If so, this seems pretty questionable as a mass-market money...
Maybe we can store libra in some sort of institution that would provide some guarantees, like returning your libra if they get stolen. They could make money by investing the libra they hold and keeping the interest.
Since this is something similar to a old school money lenders table over which exchanges took place, we shall adopt the Old Italian word for table, banca, and call it a "bank"!
Might not be enough: what if this institution fails? It would be even better if governments could ensure deposits in such an entity (up to $100k worth or so might be sufficient) to stabilize the Libre economy in the worst-case scenario.
It's a bit early to tell but... do you lose access to FB, whatsapp or whatever when your computer/smartphone gets infected? Or are you talking about malware designed to transfer money from your account to someone else's?
Centralised systems like paypal can just un-transfer the money; for the other examples, you can usually get the account back through some out-of-band account recovery process.
For a decentralised system, you're on your own. It's not clear which one Libra really is.
Paypal can reverse transactions, can Libra? Or is it like bitcoin, where I must protect my private key by any and all means, and then if it's lost, sucks to be me?
And yeah, I mean "lose all your money due to a 0 day in your browser".
At least in crypto, that's why things like the Ledger or Trezor are really important, at least if you're storing any non-de-minimus amount. Protects against things like 0-days, etc.
And my question was if Libra was any different. If it's like Bitcoin, there's zero chance this wont' be a hacker's paradise, and fail miserably as a way to immediately have your money stolen.
How would Libra ever work if general population using it have the normal level of computer security?
I foresee a headline like: "$20m worth of Libra stolen due to newly found security flaw. Facebook says 'sucks to be you, it's irreversible'".
(or is the protocol different, and it is reversible? How? Who controls that?)
A brand new highly technical protocol with a brand new language has been announced along with open-source codebase and I am yet to come across a meaningful critique or review of the tech side of Libra. Politics aside, just the tech is quite interesting.
I think it is silly that they think this will become big among the unbanked (in countries like India) when they can do only 1000 transactions per second. Nuts! Don't you think so?
Here is the important thing to understand about the Libra Association: while its members — who again, are the validators — do control the Libra protocol, Facebook does not control the validators. Which, by extension, means that Facebook will not control Libra.
But Facebook does control Libra just by virtue of providing infrastructure. They're also part of the consortium. So again, why is the author trying to make it seem like Facebook has no control?
It's a kind of mind-trick that only occurs in articles and white papers about cryptocurrencies and blockchain technologies. I've noticed that they often end up proposing a distributed private shared database controlled by a corporate cartel and call it "freedom."
Where is the Visa press release? Where is the Uber CEO interview on Libra?
The Libra membership list is kind of meaningless, given that none of the partners seem to have any interest of promoting the project... mainly Zuck just asked these companies "Hey, you want to be on a list for a tech project for some free PR?" and until we hear more from the partners there's no reason to take this list seriously.
It's not entirely free: those companies are paying $10M to run a Libra node. That's still pocket change as a hedge in case it actually takes off.
So maybe they're happy to shut up for now, let Zuck take the regulatory flack, and if it seems like Libra will take off on FB's efforts, they're positioned to benefit from adoption.
> those companies are paying $10M to run a Libra node
Please show me a citation of where is says concretely that Visa/Uber/etc have handed $10M to this project. The Libra project so far is just wishful thinking about things that maybe, might possibly happen sometime.
What kind of proof do you expect? Even if I somehow had the wire transfer receipt in hand, Facebook could simply be giving Visa and Uber a $10M rebate on their advertisement bill in return. This is not a material sum for these companies when it comes to such a major partnership.
However, since these rules are supposed to apply to everyone who wants a seat at the Libra Association, I do assume that Uber and Visa are paying the fee.
It's likely going to be more stringent than that. I doubt Visa/MasterCard would allow their logo next to Libra without knowing what they're signing up for.
I'm sure Zuck & Visa signed an agreement that says "We agree to talk about some tech ideas and do some exploration under the name 'Libra' with no commitment from either party long term for anything." The talk about having to pay 10 million dollars is a red herring, I guarantee you Visa hasn't paid FB anything so far.
That's not going to happen. As soon as it does, we'll be seeing a crackdown on a wider swathe than just banks. What scares the bejesus out of me is what happens when tooling to link up personal data from data aggregators plus sufficient tooling around blockchain analysis is built such that a realtime tracking system of financial to other activity becomes possible. A full public record of all financial transactions is a hell of a surveillance tool, and with enough ancillary data, transactions are trivially deanonymized (assuming Libra is structured in a pro-anonymity way, which it won't be, because otherwise, banks won't have a thing to do with it.
Monero for the win....the only truly fully anonymous cryptocurrency. Even if it never takes off, the existence of privacy-oriented coins like it can help influence public awareness of the importance of financial and personal privacy.
I really think their play with Libra is to become a new M-PESA rather than a Paypal. They've got a good shot at doing it. Still makes no sense to me for it to be a cryptocurrency though?
The missing information here is how much of this currency will belong to facebook, and to each constituent. No matter how many orgs are added to the coalition, if facebook owns 50% of the coin then it's all a sham.
Technically what Ethereum, Bitcoin and Libra are doing are each variations of Byzantine Fault Tolerance based consensus. The key difference is that the former two are permission less and the latter is permissive. Permission less in this case means that anyone can start a validator node and verify transactions this typically involves either proof of work or stake. Permissive means that only some validators are able to do that and that the consensus is based on verified identity: each validator has a known identity and only explicitly trusts certain other well known validators.
As the article nodes, it would be a mistake to assume that that is only Facebook. What Libra does is actually similar to Stellar and Ripple, which are also based on permissive BFTs.
Since I've used Stellar, I know a bit more about how that is structured. In short, in Stellar, anyone can start a validator and start validating transactions. This is commonly done by people with a need to validate transactions for scaling reasons. Every validator is configured with a list of other validators that they trust and a consensus quorum that needs to be reached between those for a transaction to be acceptable.
The flip side is that for your transactions to be acceptable to others, they'd have to trust you. In practice these sort of bi-directional trust relations only happen on a need to have basis; for example because you and your business relations are swapping the same tokens with each other and have a business need to trust each other's work. The extended network of mutually trusting validators that trust each other directly or indirectly is the basis for the consensus. After some incidents with the Stellar network halting its consensus, Stellar is actually moving to reduce the reliance of the network on their own validators. The recent outage in May was actually root caused by several non SDF owned validators going down. This sounds bad but it is actually a safety feature: stellar will prefer partition tolerance and consistency over availability. Ethereum and Bitcoin have had issues with favoring availability over consistency. If you are running a bank, that is kind of a big deal.
Libra is launching with a quite broad consortium that each will run validators. I imagine that like in Stellar, each of those validators will eventually be able to start trusting other validators at their own discretion. I'm assuming that that is what Facebook means when they say they will eventually open up.
It seems like initially this will be tied to deals with Calibra, which is a subsidiary of Facebook and which is responsible for hosting the reserve that backs the Libra, and other stable coins that will be running on the network. A key difference with Stellar, which is run and controlled by a foundation representing its members, Calibra is instead a commercial entity owned by Facebook. Presumably the consortium members have some kind of contractual agreement with Calibra about this. In other words, Facebook as a owner of Calibra is a bit more special than everyone else. I imagine they also hold patents, trademarks, etc. as well. To be clear, the software itself is Apache licensed.
In short, what they are doing makes sense practically, technically, and legally. People are obviously talking a lot about legislation currently and Facebook's motivations. My impression is that governments are mostly still applying and interpreting existing laws when it comes to blockchains and are actually quite slow in responding in a coherent and timely fashion with new laws. My guess is that Facebook and others are counting on this and are looking to create a financial reality where shutting this down becomes economically more difficult. In short, once they are moving lots of money around, shutting them down becomes impractical.
Probably because the author mentioned that Bitcoin is not efficient (7 tx per second). But Lightning Network can make Bitcoin more efficient. I haven't looked into Lightning Network thouroughly so I can not make any comment whether it is up to its words.
They didn't mention it because Lightning network is only brought up and pushed by people who have a stake in it. It only scales with transactions, not users, and is still pinned to Bitcoin.
I think Apple is doing that because they’re out of growth otherwise. They’ve sold most all the iPads and iPhones and Macs they can. The numbers may go up but nothing like when the iPhone was still growing.
Services is the only part of the business that may have more than small growth levels left in it.
No. Apple cares about privacy and security because it wants to become a bank and payment processor. It had/has so much liquid capital it just makes sense. They've been moving that way ever since 2013 or so. All the concentration on security is so that their phones can be payment terminals and Apple can seek rent.
Tangential, but has Facebook done anything to reduce the power-consumption in Libra?
I'm not enthused about supporting anything that worsens the global climate crisis and its irresponsible of large companies to support cryptocurrencies with its terrible power usage right now.
What is the benefit of Libra exactly? Why not just set it up like WeChatPay or Paypal as a centralized database?
I guess like gambling chips or video arcade tokens, the lack of belief that it's real money might confuse some people into spending it more freely.
Another thing is is that they can take all the money that's paid into Libra and run a hedge fund with the reserves because they can write their terms and conditions so they can do whatever the heck they want with the "reserves" and not tell anyone what they're doing.
Another benefit is that they can facilitate illegal commerce on facebook by letting people conduct cross border transactions outside of AML/KYC land that a PayPal like system would require.
They can also tie identities to coin transactions to analyze transactions for further ad targeting.
Pink plane reasoning like this makes you dismiss bitcoin as not scalable. The blue idea is to scale off chain with smart contracts whether centralized or not.
Compare cos fighting this to those not like cash app which are building on top of bitcoin.
Well that's certainly an understatement.
This is literally the only mention of government through-out the entire article. The only mention of banks is in the previous paragraph stating there are no banks in the coalition.
Banks and governments go together like peas and carrots, they also control pretty much everything and have for hundreds and thousands of years. This control is derived from a few places, but primarily from a monopoly on the control of the currency and the monopoly on coercive force.
No government is going to let FB and any coalition do an end run around their national currency and their banking institutions. They're also not going to partner with an international consortium to have them replaced with something they only partially control.
I really don't know why this isn't a larger part of this conversation. I think people need to be cracking more history books and less William Gibson and Neil Stephenson novels.