What’s Behind Facebook’s New Cryptocurrency?

The news electrifies the Crypto scene. It looks as if Facebook has been working for a long time on its Cryptocurrency called “Libra.” With this token tied to a currency basket (“Stablecoin”) the total payment traffic between the 2.7bn users via the proprietary platforms Facebook, WhatsApp, and Instagram shall be realized. The consortium of investors, specifically created for that purpose, is made up of numerous prominent players in the payment, retail, and technology sectors, such as VISA, Paypal, Spotify or Uber, who – in addition to a seat on the Board of Directors – should also gain control over their network nodes.

The project can be regarded as disruptive and visionary in many ways. What are the motivations? 

First of all, massive cost saving potentials and benefits. Inefficiencies as in the identification of new users and costs of payment processes from third parties can be reduced or entirely avoided, while tailormade new compensation models can be created (for example watching advertising) using smart contracts. Secondly, Facebook reaches up to nearly 2bn new users from developing countries who do not dispose of their own bank account yet and thus making themselves independent from existing payment processes. Understandably, the first reactions of regulators and governments are negative since the project impacts the existing order of money supply and creation. 

Finally, it can be seen as a smart move and “strike back” of an Internet giant, which thrives on protecting its Web 2.0 “Data control model” against an ever-increasing threat of purely decentralized blockchain providers, to secure its business model for the future. This “hybrid” approach between a central data model and a decentralized ledger technology could be the start of a new era of Crypto developments. In any case, the news has already heaved the Bitcoin course to new annual highs.