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Libra whitepaper initial analysis: The only digital currency other than bitcoin that matters, and it could succeed massively. But it does not compete with bitcoin, it reinforces bitcoin's value proposition, and will likely need to rely on bitcoin if it succeeds. Thread👇
Facebook has some 2 billion accounts, and extremely detailed data on them. Its extensive data mining & identity verification capabilities mean it has the potential to build by far the largest platform by user number of any financial institution.
To on-board billions, Visa or Paypal need to go through people's banks to verify their identity, which is highly expensive, manual and unscalable. FB tracks your every move & knows you better than you or your mom do. They don't need a bank & can scale much faster.
An international transaction on the Visa network has to go through clearance & settlement through many financial institutions and central banks, entailing costs & risks. On Libra, users can transact peer-to-peer through only one institution. The perks of 2b+ users!
Libra being backed by national currencies means it is backed by the USD, since all other national currencies at this point are backed by USD and managed by central banks to try to stay stable against the dollar. Other government coins are just dollars + issuer risk.
For billions of people, a dollar-backed Libra on your phone globally is infinitely superior to national currency in market depth & maintaining value. If it succeeds, Libra will likely destroy most 3rd world currencies, or force them to be fully pegged to & backed by the US dollar
For billions of people, a FB-based payment network will offer more and cheaper transactions than any other KYC/AML platforms. If it succeeds, Libra will likely eat most fiat payment processors like Visa, Paypal, and Western Union, particularly those functioning in the third world
Dot not underestimate how powerful and beneficial such a network could be. If access to global finance & the USD were as easy as access to a FB account, billions of people's lives would be improved drastically.
Having said that, it's important to remember all of this is far easier said than done. Regulatory approval internationally is the main hurdle to overcome. But given the money, power & influence FB has, they might pull this off.
But to be clear, Facebook is building a centralized payment processor on the US dollar and calling it a blockchain. Like all centralized shitcoins, they've set up a 'Foundation' to pretend the thing is independent. They're even pretending its development will be open source.
As shitcoins amply demonstrate, these pretenses are far easier to maintain in the whitepaper stage. Good luck to the Libra team keeping your development and blockchain open when people try to use them to send money to Iran.
The foundation will remain independent until it tries to do something against FB's wishes. Will FB just allow its billions of users to seamlessly shift to a Libra they don't like? FB users' access to Libra can be turned off by FB, utterly subjugating the foundation to FB's will.
The only functional advantage of calling this centralized system a blockchain is arguably in regulation. Easier to get things by regulators by using crypto buzzwords than admitting to just running a bank. Otherwise, everything would be more efficient if centralized.
FB's comparative advantage is in processing peer-to-peer payments between its members, not in building the monetary system on which these payments are based. As long as government currencies rule, FB are beholden by their regulators.
In search of bribes, political favors, and attention-whoring, every politician worldwide will want to put barriers in the face of Libra. The French are already leading the way: fxstreet.com/cryptocurrenci…
A global payment network governed by dozens of governments is unworkable in the long run. The 'monetary nationalism' problem Hayek identified in 1930s can't be solved with payment processors, it needs a global free market money free from government control mises.org/library/moneta…
No amount of cryptography, blockchains, or independent foundations will stop you from being politically controlled, unless you are bitcoin, for reasons explained in detail in my book's last chapter: amzn.to/2L95bJW
Further, no amount of appeals to 'decentralization' or 'blockchain' buzzwords will mask the fact that the system will be completely authoritarian, with FB maintaining full surveillance and censorship capabilities.
So if it is to succeed, FB has to become the executive arm of the US Government's financial, intelligence & foreign policies. And its decentralized foundation will have to do USG's bidding on everything from monetary policy to banking regulations and sanctions.
But by increasing people's financial freedom while remaining politically controlled, Libra would be digging its own grave. All the problems of political money in the 20th century would remain, but people would find it much easier to opt out from than regular govt moneys.
There are no armies forcing you to accept Libra, but a world in which everyone has their money on an app is a world in which everyone is a click away from bitcoin. History shows us hard moneys tend to kill easy moneys when the two are exchangeable: amzn.to/2L95bJW
Bitcoin is hard money, it is apolitical, neutral, censorship free, and it can't even spy on you if it wanted to. All of these are things FB can never install on Libra.
FB shouldn't think of itself as competing with Bitcoin, as that's how they'll becoming an irrelevant stupid shitcoin like the thousands we have. In the long-run, Bitcoin represents the only chance for FB to build Libra on a global neutral protocol, and not on a political currency
So, if govts let it, Libra will likely kill most KYC/AML fiat processors & currencies, producing a global digital payment system based on USD. The problems it'll face then are the same problems faced by any political monetary system, to which bitcoin is the only working solution.
In the short-run, Libra will only survive by being subservient to the USD & pegged to it. In the long-run, it will only survive by being subservient to bitcoin and pegged to it. The only other fate possible is the life & inevitable death of yet another irrelevant stupid shitcoin.
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