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Libra Coin: Why Facebook Wants to Control Money

20 June 2019

Facebook just launched Libra Coin, but what does this mean?

With the launch of Libra coin by Facebook subsidiary Calibra, we’re entering a new age of financial processing and an even more important one, of data and control.

Facebook just announced a new type of currency with the goal of becoming a global coin used not only on its platform but everywhere.

Could libra coin become the first global currency, or will the people stay away from being monitored even more?

In this article we’re looking to understand the potential of this project and the kind of impact it could have on economies and on your personal data.

If you don’t feel like reading what is a fairly long piece of content, you can always enjoy the video version here:

With that said, let’s jump into it!

Introduction

Less than 72 hour ago, Facebook CEO, Mark Zuckerberg announced what could be the biggest play in fintech and crypto the world has seen, at least since Bitcoin went mainstream. Fintech stands for financial technology and you’re probably familiar with cryptocurrencies by now. This builds on this fast growing industry.

The project is called LIBRA Coin and it’s a new form of money, which you’ll be able to use on the Facebook platform meaning, Facebook marketplace, messenger, Instagram and whatsapp, as well as paying with it in the real world with very little fees. They’re positioning it not as an investment asset, meaning you don’t buy it because it will go up in value, but as a medium of exchange.

Above everything else… it is set up as a non-profit, but we’ll get to it in a second.

27 giant companies came together in order to build what could end up being the currency of the future, or at least the closest we’ve ever been to a universal currency. Some of the companies coming into this project are: PayPal, Visa, MasterCard, Uber, Coinbase, Spotify, Stripe, Vodafone and these other brands you’re currently seeing on the screen.

libra coin facebook alux

But how is this different than every other cryptocurrency out there?

How a Global Currency Would Work

This is the first big global play since the invention of the internet and the services that sprung because of it. Once we had the internet, we got google, youtube, reddit, social media and all the good stuff we keep consuming.

In case you’ve forgotten, 2.7 billion people use Facebook, WhatsApp, Instagram, or Messenger each month and more than 2.1 billion people use at least one of the Facebook family of services every day on average.

All these people will get a digital wallet in their profile and the ability to add funds in order to pay for goods and services or transfer it between other users.

You might be wondering, but ALUX, we already have this kind of tech today, we use VENMO or PayPal or direct internet banking or even crypto, and it’s a valid argument, but this time, you’re not the main target of the project.

World-wide there are 1.7 Billion people who do not have access to a bank. They do not have a credit card and they do not transact in any form of credit or digital currency. BUT at least 1 Billion of these people do have phones.

Giving these people access to banking services not only will take developing countries out of poverty but it will create a common marketplace where we can all take part in.

Libra Coin VS Bitcoin

We’ve personally read the whitepaper of Libra and to be honest it sounds like pretty much the same thing you here from every new alt coin popping up, with all the right buzzwords, but we’re not that quick to brush libra off.. This is because of Facebook’s scale & strategy coming into this.

Unlike Bitcoin, Libra is positioned as a STABLE COIN, meaning it’s value is correlated with assets like other currencies, which means the price will not fluctuate like crazy. This is very important if you’re looking to build a global currency. Will get to the pros and cons in a second but we want to keep comparing these 2 first.

Bitcoin is completely decentralized, meaning there isn’t a single entity or group that controls its fate or how the project evolves.

They state that Libra coin is decentralized as well, because it order to make strategy directions they require a 50%+ vote from the project backers, you know… the companies you’ve seen on the screen earlier and they’re looking to get at least 100 giant companies to take part in this.

While Bitcoin is a wild and untamed horse, here comes facebook with their corporate friends putting a viable solution on the table and the means to deploy it in the hands of billions of people world wide almost instantaneously.

The big difference between these 2 is that LIBRA will share its data with the government. Meaning that if the government wants to see your activity they have to deliver that info while with bitcoin they’re left with a big fat NOPE, that ain’t happenin’

Who’s Backing The Project

The biggest issue with crypo has been mainstream adoption. There is no seemingless way of using it on a large scale basis. Yes, you got your hipster-tech pop-ups that accept a variety of cryptos, but it’s not mainstream. You’re not paying your bills with crypto, your taxes, buying groceries or that pumpkin spice latte you love so much.

That’s where these giant companies come in. In order to make this wildly accepted, it needs to be convenient.

How do you fund your LIBRA account: just use any of the big payment platforms, VISA, MASTERCARD, PAYPAL or Stripe..

Then where can you spend it.. Well.. you’ve got half the web powered by 2 big payment processing companies.. You’ve got ebay on the board… both UBER and LYFT joined so you get the transportation sector covered up and now your telecom companies like VODAFONE jumping in.

They’re looking to bring in at least 100 big companies in order to have a stronghold on your day to day financials.

Each of these companies are putting in an entry fee of 10 million dollars in order to get that initial ball rolling. Then the project will be backed by everyday users who are converting fiat currency, their local money into LIBRA and then using their smartphones to pay for everything they need. The money will be used to purchase stable currencies like the US dollar & the Euro.

The same concept

People already love digital currencies and fintech is the main battleground for giant tech companies these days.

Amazon is already seeing great results with their version called AMAZON PAY mirrored by ALI PAY of alibaba, just a couple of weeks ago, apple joined the race introducing their [sarcasm] revolutionary APPLE CARD and telegram has been raising money like crazy last year in the private ICO to offer basically the same thing with their cryptocurrency called Ton and who can forget google wallet.

The thing is, these didn’t have the CHAT function provided by whatsapp and messenger, which gets people engaged on the day to day.

But you know who did? WeChat!! If you’ve traveled to china or parts of south east asia, you know WeChat is the main payment platform everywhere. They all pay for goods and services by scanning a qr code and can easily send money from one person to another through the platform. WeChat was the proof facebook needed to understand that this is something big and they have the resources to make it even bigger. Since they can’t acquire it like they did with Instagram, they pulled a snapchat on them and built their own version.

The Largest Impact

If you’re living in the developed world, this project might not sound like such a big deal to you, because you more or less already have access to some version of this service.

Here in “the west” you mostly trust the government to not screw things infinitely bad, the US dollar or the EURO are pretty stable forms of currency and you’re not scared of your currency becoming obsolete in a couple of weeks.

That’s not the case of a large portion of the world. If you’re looking to countries like Turkey, Ukraine, Argentina and Egypt you can see that inflation is a real problem, meaning the money is losing power quickly. But these countries are still trying to keep things under control. It’s actually one of the biggest problems in the world that needs solving and also highly profitable:

Depending on the competency of the people in charge a countries entire economic system can collapse hitting something called HYPER-INFLATION. We’ve seen it numerous times and most recently in VENEZUELA and ZIMBABWE or pretty much the entire side of south Africa, where the government basically went: WE WILL PRINT MORE MONEY & MAKE EVERYBODY RICH!

south government print more money to make people rich

Because of this money quickly loses its value in the eyes of foreign investors and the entire system collapses on itself. Up to a point where the value of the money is worth less than the piece of paper it has been printed on. Venezuela is a great example: they had to sell half their gold in 2 years, the Venezuelan central bank’s balance sheet literally TRIPLED in a SINGLE MONTH and it all resulted in chaos.

In the meantime people ended up starving to death. This is where stable global currencies come into play. They will act as a store of value. If you trust this coin more than you trust your government, you can always exchange your local currency into digital because you trust that libra will hold its value.

Currently 31% of the world population doesn’t have access to financial institutions, but these people are quickly getting their hands on smartphones and jumping on the web. That’s why other billionaires like Mukesh Ambani and Elon Musk are pushing so hard on being the ones to provide this service.

Secondly this might have an impact on real-estate prices. Although LIBRA will not act like a bank, meaning you will not earn an interest on your money, it will be able to keep its value, something that has been incredibly important to South american and Asian investors, especially China, who got rich in their own countries, but because of the volatility of their currencies they’re forced to park their cash outside the country borders. They usually just buy and hold properties in prime locations around the world like the US or UK.

We made a video a while back called why is London filled with empty homes that goes through the entire phenomenon which you can check out below:

As for you and eye, it will simplify our lives even more, it will give us quicker access to a universal marketplace, you will get little to no-fees because of their nonprofit status and you won’t have to have different accounts for each store or platform, just sign in with Facebook.

The CONs

This is the most amusing part of the video. The company that’s been most hated by the public for selling their private data now wants access to your money and your spending data.

Although LIBRA has been incorporated independently of Facebook and of course they present it as this secure enterprise with a major focus on privacy, we all know Zuck and his friends.

This entire package has been perfectly summarized by this tweet of Sarah Jamie Lewis:

“ Can’t wait for a cryptocurrency with the ethics of Uber, the censorship resistance of Paypal, and the centralization of Visa, all tied together under the proven privacy of Facebook.”

Hilarious!

The thing is, there are ways to take control of your digital privacy today, but most people haven’t taken the leap because they were too expensive until now. That’s why if you go to alux.com/vpn and sign up you can get 75% off a 3 year plan and a full month to try a vpn service for free, thanks to the great folks at nordvpn, who’ve sponsored our channel and offered this great deal to our community. VPNs are simple to use pieces of software that anonymize your data online, meaning hackers, online providers and corporations can no longer see what you do online. Go to alux.com/vpn and start protecting yourself today, because with the way things are going, they’ll begin monitoring everything.

Jokes aside, we’re coming really close to what could potentially be a Corporatocracy. A word that’s being run by corporations who get to vote on what direction projects like LIBRA Coin go towards. This kind of practice where large companies come together to create virtual monopolies on services is something we should all be careful about, no matter how much we like cat videos or food delivery.

We’re already living in times where if the company disagrees with your attitude they can ban you from their platform directly affecting your livelihood and we’ve seen this recently with YouTube, Twitter and Facebook.

Now imagine the possibility that this companies can actively block your funds and your access to the main marketplace and payment option the world is using.

These are important technological changes we’re witnessing.

The Long-term play for Facebook

So why would Facebook create an entire company that’s a non-profit, it can’t be because of the goodness in their hearts right? From our perspective, Facebook is playing the long game here.

There are 3 main objectives Facebook is looking to attain through this project:

  1. LOCKING YOU INTO THE FACEBOOK PLATFORM
  2. DRAMATICALLY IMPROVE THEIR AD MODEL and
  3. PAVING THE WAY FOR A NEW GENERATION OF NANO-TRANSACTIONS

Facebook is already making a boat load of money, 55 Billion dollars per year to be precise. 98% of this revenue comes from its advertising model.

At this moment every Facebook or Instagram user is worth approximately $35 to Facebook.

In order for them to make even more money, they have 2 options:
1. increase the number of users and
2. Increase the value per user.

This service will achieve both. More people will join the platform because of the access to these tools and since you’re using money to pay for things, Facebook now will have a clear understanding of your spending so they will get exponentially better at targeting you with ads driving the value of each user up.

It’s a brilliant move on Facebook’s part.

Lastly, the ad-model as we know it might not survive for that much longer, mostly because it’s not a pleasant experience. That’s where the future of nano-transactions comes into play. There are numerous companies taking a crack at this, but none of them have the scale of Facebook.

Basically, instead of seeing 1 or 3 ads to watch this video, you would spend 5% of a penny to watch this video. Because of transaction fees, this had not been a viable model until now and we’re still not there yet.

But instead of seeing ads all over the web, you will theoretically be billed very small amounts which go directly to the places you consume content on the web. Add all those up and you’ll get access to an improved version and an ad-free internet. It’s like paywalls 2.0 without the actual walls in place.

We found that people are willing to pay their fair share if the experience is great.

This is also the future we’re envisioning for media companies and content creators and we can’t say we’re surprised Facebook has been the one to take the initiative while YouTube is playing catch up with twitch trying to push their premium service and channel memberships.
If they do manage to become the global currency that unites us all, it’s something we’ll just have to wait and see.

Conclusion

Facebook’s LIBRA Coin initiative is the first step to a more connected global community of internet users.

It’s a crucial step in the freedom to transact but could be the first domino that leads to a world where corporations control almost every aspect of your life.

We’re living in the most interesting times to ever exist. Let’s see where libra coin takes us!