Facebook finally unveiled its new cryptocurrency-Libra. We already have bits of information about the new currency, but we still need to understand what Libra is, its purpose, and what it means for the average consumer. Will it be the first truly global currency?
According to Facebook, the new cryptocurrency will be more accessible with instant fee transfers and lower fees charged.
But not as soon as you think. The social media giant announced on Tuesday that it wouldn’t be until the first half of 2020 when the cryptocurrency is made available for consumers. It will be built on blockchain technology and will be used to ease money transfers across the border more so for the population that is underbanked across the globe.
Besides the instantaneous transfer and lower fees charged for the new crypto, here are a few things you need to know about Libra;
What Is Libra’s Purpose?
Now, the ultimate purpose of the Libra project is to make money movement easy around the world as it is to send a text message.
Libra’s whitepaper which was released together with the announcement on Tuesday explains in details the purpose of the project. The whitepaper asserts that Libra is not an attempt to replace the financial system which bitcoins aims. Rather, its intended purpose is extending digital payment to the underserved populations that have little to no access to the traditional financial institutions.
The paper reads that there are over 2 billion adults worldwide outside the current financial system. They have no access to banks, while a billion of them have access to mobile phones. Half of the billion have internet access. And that’s where Libra comes in.
Besides the underserved populations, the U.S has unbanked consumers. FDIC estimates this population reaches 8 million households. Facebook’s potential, however, lies on the population elsewhere in Africa, Asia, and Latin American countries where the problem is more pronounced.
Nicholas colas of DataTrek research says the Libra is all about having a superior form of payment and wealth preservation.
How Libra Works
The Libra project will be managed by a Swiss non-profit organization. It is currently backed by Facebook and over a dozen of founding member companies Among them include Uber, Spotify, eBay, Lyft, Visa, MasterCard, Coinbase, PayPal and Andreessen Horowitz, a venture capitalist firm. The Libra coin will also be backed by government-backed assets by the central bank for stability.
Speculations that Libra would be made available for messenger and WhatsApp users also turned out true. Members can cash in on their local currency in exchange for Libra. As for the wallet, a digital wallet known as Calibra will be made available. Users of the Libra currency will be able to spend on products and services just like any other currency.
When you want to withdraw funds, you can convert the currency into a legal tender according to an exchange rate.
The Beneficiaries Of Libra
Colas also notes that the transaction fees will likely be much lower than those charged by current institutions. The primary beneficiaries of the trade will be merchants sending money routinely abroad to family members.
Although Facebook says that it won’t be making money off the currency at first, opportunities will present. For instance, the addition of services to Calibra, such as loans will earn the company huge returns.