With Libra, Facebook wants students to pay their rent “as easily as they can buy a coffee”. Facebook launched its much-anticipated Libra blockchain technology on Tuesday and it has everyone talking about the future of payments. It may be too early to anticipate or give a verdict on how successful (or unsuccessful) it may turn out to be in the future but it is without any doubt that the proposed business plan for it holds the potential of causing one of the biggest digital disruptions ever.
For instance, users spend nearly $50 Billion in terms of transaction charges when making inter-country transactions. With Libra, it will be possible to transfer money anywhere and everywhere with near-zero transaction charges.
Some experts see Libra as a highly evolved version of PayPal.
While existing cryptocurrencies, such as Ethereum and Bitcoin are still struggling for gaining mainstream recognition due to massive price fluctuations and difficult payment methods, Libra may outsmart them to become a medium of exchange. It is because of the fact that Facebook already has a relationship with nearly 10 million businesses that use Facebook ads in addition to over 1.5 billion active users. In addition, big names like Uber, Visa, E-bay, Spotify, MasterCard, Vodafone, and Lyft are on board. In fact, Facebook does not control Libra but only holds one vote on the Libra Association just like other members of the association.
Facebook has released over 100 pages worth of documentation to inform the public about features of Libra. The idea is simple and attractive. Get Libra with any existing currency, spend it anywhere just like dollars but with near-zero transaction fees and cash out Libra whenever you want. As opposed to other popular but unstable cryptocurrencies, Libra is designed to stay stable. This is done by maintaining a basket of diverse assets and currencies and constantly changing the basket composition to ensure a stable price in the long run.
Facebook also categorically informed that it plans to keep it entirely separate from Facebook. This is crucial as otherwise trust of people may not be guaranteed as Facebook could use Libra data to influence user decisions and target ads at Facebook which would ultimately mean a compromise on the integrity of the payment system.
The overall plan as announced by Facebook seems too ambitious at present but no one thought Facebook to become such a huge platform a few years back. It is time to closely monitor Libra for the opportunities it may have to offer.