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1/ Thoughts on Libra (and my first tweetstorm!): first, zoom out for a second and realize how far this industry has come. The biggest companies in the world are now launching cryptocurrencies. BOOM.
2/ I know, I know, “it’s not a cryptocurrency!!!” some will yell. Well, yes and no. Relative to PayPal or to the US dollar, Libra is very much a cryptocurrency. Relative to Bitcoin or ZCash or DAI, Libra is not all that crypto-y.
3/ Libra deserves nuanced analysis, it is neither “great” nor “horrendous.” This brings up an important point too often missing in discussions of crypto: digital assets and blockchains have *many* attributes, optimizing for certain ones can detract from others, and that’s okay.
4/ Lots of blockchain projects will be created and played with while the world rebuilds the financial system upon this new technology. Different assets will serve different markets, at different times, in different ways.
5/ Libra will serve the mass market, and be the single largest bridge toward decentralized finance that has ever been built. Prior to this, the largest bridge was Coinbase, which has played an integral role in crypto’s rise.
6/ The Good: Libra is built on an actual blockchain (based on HotStuff BFT, similar but not identical to, and compatible with, Cosmos’ Tendermint protocol). Much/most of the important components are open-source and can be built on in a permissionless way.
7/ Next, Libra made the (great) decision to NOT back itself solely with USD. This has profound implications. Libra can arguably become a medium-term replacement to any single government fiat currency. Libra is, arguably, superior/above the US Government dollar.
8/ To whomever bravely navigated Facebook into creating a currency above the US dollar, kudos to you. That took balls and probably a lot of work. It was the right decision. I was worried FB Coin would just be a lame proxy for US dollar, and it is not.
9/ Next, Libra has the potential (and current plan) to go from “a little decentralized” on day one, to “moderately decentralized” within a few years of launch. The plan is clearly to gradually decentralize with time. Good plan, we’ll see if they can actually do it.
10/ Finally, and let’s not minimize this one, Libra has a good chance of helping hundreds of millions of people avoid middlemen fees and increase their wealth and financial sovereignty *relative to the status quo banking system* Humanitarians rejoice.
11/ Now the bad: Libra is clearly not a “pure cryptocurrency.” Nobody should expect privacy by using it. Nobody should expect the true borderless standard of most cryptos. Libra will never be available in Iran due to sanctions, for example.
12/ Next: the governing consortium can explicitly block/prevent txs. You won’t find unstoppable finance here. Again, in this, traditional cryptos are far superior. But let’s be realistic, there’s no way FB could create an unstoppable coin (at least, not in its 1st phase…)
13/ Next: Libra achieves stability (a critical feature for most normies) by backing the coin with a basket of a) government fiat, and b) government debt (bonds). Personally, I want nothing to do with either of these “assets.”
14/ Over the long term, any currency based on fiat will fail relative to hard assets (Bitcoin, gold, etc.) Politicians debase currency as their modus operandi, and thus if Libra maintains fiat backing it tend toward zero long term. BTC and “real” cryptos will crush it long term.
15/ Over the short/medium term, this relative stability derived by fiat/bond backing will enable Libra to capture marketshare and onboard literally hundreds of millions of people. They will be moving partially away from banks, and partially toward true decentralized finance.
16/ Libra, because it is *kinda* a cryptocurrency will *kinda* run up against many of the legal/regulatory challenges that real cryptos and crypto companies do. FB has the resources (and hopefully the balls) to fight some of the battles.
17/ Libra may also become the whipping boy of cryptocurrency. As the politicians of the world get irate at having their fiat supremacy challenged, they will call on FB to answer for it. These struggles, playing out over the coming years, will be fascinating.
18/ Libra has a chance, if they are brave and tactical over many years, to ultimately move away from a fiat basket toward either a real basket (BTC, gold, etc), or possibly just becoming a hard asset on its own (requiring knowable supply with zero or low debasement).
19/ Ultimately, Libra’s relationship with those of us in crypto will be mixed. It will be a love/hate relationship, and that’s okay. Libra is challenging the status quo of fiat more than it challenges true crypto, and will pull millions toward sound-er money long term.
20/ Anything that causes normal people to consider new forms of money (apart from their default position of "my nation, my currency") is a good thing. Libra will crack open further global discussion about what money is, and that sunshine will hurt fiat, and help all sound monies.
