From UPSC perspective, the following things are important :
Prelims level : Libra, Calibra
Mains level : Blockchain technology
- There’s a new cryptocurrency called Libra to be rolled out by Facebook by 2020.
- Facebook also announced a dedicated wallet app called Calibra, which will be built into WhatsApp and Messenger as well, to let users store and use these Libra coins.
What is Libra?
- Libra is a cryptocurrency built on a blockchain network, though Facebook was quick to insist that it will respect user privacy and transactions will in no way to be linked to the user’s real world identity.
- Libra is like any other cryptocurrency powered by blockchain technology.
- It wants to be a ‘global currency’, one that can be used to transfer money anywhere in the world without any transaction fees.
- The claim is that Libra will be accessible to anyone with a smartphone, even a low-cost budget phone, and a network connection.
- Of course, there are several mobile payment services already offering seamless payments, though with real-money.
- Calibra is the digital wallet from Facebook to let users store these Libra coins.
- Facebook says this is a separate company, and data will not be shared with them and it will respect user privacy.
- Calibra will have a dedicated team of experts in risk management to prevent fraudulent use.
- Also if someone loses their Libra coins from the Calibra wallet, they will refund users. Libra will also work with other third-party wallets.
- Calibra will also be added to WhatsApp and Messenger.
How will Libra blockchain work?
- Libra is also being governed by the independent Libra Association, which is not what you see in typical cryptocurrency.
- A new programming language is also being built for Libra called Move, which the organisation claims is more secure and private.
- The Libra Blockchain will record the history of transactions and states over time, rather than the typical blockchain where each transaction is added a new block.
- The network is still far from ready. The Libra blockchain will be tested over the coming months.
- While there’s no word on exactly how someone will buy Libra, the Calibra wallet from Facebook will probably be one way.
- To purchase Libra, user will have to pay in their local currency, provided the laws allow it.
- Libra will also be backed by a reserve of assets designed in order to “give it intrinsic value” and ensure stability, which is not seen in typical cryptocurrencies.
- These assets includes securities and fiat currencies (like dollar, pound) etc as part of this reserve.
- The website says Libra will be backed by “short-term government securities in currencies from stable and reputable central banks.”
- Still the “value of the one Libra in any local currency may fluctuate,” cautions the page.
- The idea is to ensure Libra is stable to give more users confidence in this, while ensuring that currency does not fluctuate wildly like other cryptocurrencies such as Bitcoin which had at point had reached a high of $20,000.
Is Facebook the sole company involved in Libra?
- Facebook is not the only company, though it has leadership role for all of 2019, which means it will have a significant role in deciding the direction for Libra at least for this year.
- Facebook’s teams have also helped build the technology for the currency.
Will Libra work in India?
- Cryptocurrency is illegal in India and the draft bill right now is recommending a maximum of 10 year punishment for those who mine, trade, buy or sell these.
- In India, if the bill passes, trading in cryptocurrency could result in hard punishment.
- So one of the biggest markets, which is India, will not be able to use Libra, which could limit its potential.
- The Supreme Court of India is hearing a matter regarding regulation of Bitcoin in India and the matter will now be heard on July 23, 2019.