- Facebook in June unveiled “Project Libra,” its plan to bring cryptocurrency to the masses.
- This week, Facebook’s cryptocurrency chief David Marcus, formerly president of PayPal, testified before a bipartisan Senate committee to answer questions about why Facebook should build a digital currency, given its recent track record of privacy-related scandals.
- Facebook says the idea is to let people shop on Facebook and other apps, or even pay other users, using a single global currency – and that if they don’t do it, a foreign company will build this instead.
- Libra could be a good idea, but I don’t like that Facebook is spearheading the project.
- Visit Business Insider’s homepage for more stories.
I use Facebook, but I don’t trust it.
That’s why I’m sceptical of Libra, a new cryptocurrency that Facebook is spearheading.
Facebook is in Washington, D.C. this week as its cryptocurrency chief David Marcus answers questions from the Senate Committee on Banking, Housing, and Urban Affairs about the Libra cryptocurrency, which is scheduled to launch sometime in 2020.
In the first day of questions on Tuesday, Facebook’s Marcus answered questions for over two hours, with many senators remaining extremely sceptical that Facebook is capable of handling such an important responsibility like designing and overseeing a digital currency, given its past. Facebook was the center of dozens of scandals in 2018, including the Cambridge Analytica scandal, where a UK firm illegitimately harvested data from tens of millions of Facebook profiles in 2014 without their knowledge or consent, in an attempt to influence the 2016 presidential election.
“Trust is primordial, and we’ve made mistakes in the past,” Marcus told the Senate committee on Tuesday. “We’re continuing to work really hard to get better … we’ve invested in a number of programs to get better.”
To address this issue of trust, Facebook promises that it won’t launch Libra until regulators’ concerns are satisfied. The company also insists it won’t be responsible for all of Libra; that responsibility belongs to the Libra Association, where Facebook is only one member. The Libra Association plans to have 100 members.
How Libra is designed to work
Here’s how Libra is supposed to work:
- Libra will be an independent cryptocurrency. Facebook engineers are making significant contributions to the code base, but the company says it will become more decentralized over time.
- A new non-profit called the Libra Association will oversee Libra, with Facebook’s participation, but crucially, not its control – at least, in theory.
- Facebook really wants you to trust the Libra Association: It’s based in Geneva, Switzerland (neutrality!), and while Facebook has a vote at the table, it theoretically has no more power than anyone else in the group, which is currently comprised of 28 different companies.
- Facebook also built a new subsidiary, called Calibra, which will build financial software and services on top of the Libra blockchain, including a payments app. Calibra will make it possible to send Libra through Messenger, Instagram, and other Facebook apps.
This tweet sums up the supposed benefits of Libra pretty well:
Libra is a big deal.
– Blockchain without proof of work or value volatility (so no environmental footprint or wild coin speculation)
– Inclusion of payment processors for wide real world support
– Commercial grade wallet built into apps used by billions
– Backed by real currency
— Ben Werdmuller (@benwerd) June 18, 2019
Why you might use Libra
Libra is built upon three compelling pillars:
- Convenience. Libra will eventually work in every Facebook-owned application, and include businesses from around the world – likely including Spotify, Lyft, and Uber, which all signed on with the Libra Foundation. You don’t have to do any fancy currency exchanges, and it all works right in the app. Given how many people and companies use Facebook apps, buying things and sending money around should be pretty easy.
- Security. Facebook says Calibra was created so your financial and account information stays separate. Facebook also says Calibra apps will keep your transactions private, include fraud protection, and offer 24/7/365 support in Messenger and WhatsApp.
- Stability. Cryptocurrencies have a reputation for being volatile, which is why Facebook-owned Calibra promises that “Libra is backed by a reserve of assets so that its value stays stable.” We’ll have to see about that!
On paper, Libra sounds like it might be a compelling cryptocurrency. It’s being backed by one of the biggest tech companies in the world (Facebook), it will be available in apps that you use every day, it promises privacy and security, and it aims to be more stable than other cryptocurrencies.
Still, I have no plans on using Libra.
Why I don’t trust Libra
Facebook doesn’t want you to think that Libra equals Facebook.
In fact, if you visit the newly-minted website Libra.org, you won’t find a single mention of the word “Facebook” on its homepage. Facebook and Calibra, the company’s new subsidiary that will build financial services and software on top of the Libra blockchain, are only mentioned halfway down the page of “founding members,” after eBay and some group called Booking Holdings. This is the only instance where Facebook and Calibra are mentioned on the Libra website (save for one image that includes all of the companies participating in the Libra Association).
Facebook seems to be going out of its way to separate itself from Libra, with Calibra designed to be the intermediary.
But Libra and Calibra are ultimately Facebook products.
Yes, they may eventually evolve to become completely differentiated and decentralized, and the Libra Foundation is insisting that it’s out of Facebook’s control. But make no mistake, this initiative was born in the midst of Facebook’s great public rebranding into a privacy company.
Almost two months ago, at Facebook’s F8 keynote in May, CEO Mark Zuckerberg declared “the future is private.” He spent several minutes waxing poetic about privacy, but it was a lot of rhetoric about “plans” with little to actually show for it.
At one point early in his speech, Zuckerberg laughed before saying, “I know we don’t exactly have the strongest reputation with privacy right now.” Check out the 20-second clip below to see what I mean.
A lot of people didn’t like this moment from Zuckerberg. Facebook was still reeling from endless controversies that happened in 2018 – the Cambridge Analytica scandal, the Myanmar controversy, the list goes on, and on, and on – but choose this moment to address any of its faults at F8. Instead, he tried to make a joke out of it.
Buzzfeed reporter Pranav Dixit summed up the sentiment from F8 pretty well.
Nobody on stage at the Facebook event showed any remorse, looked sorry, or apologized for the company's terrible year. When Zuckerberg admitted that their record on privacy wasn't very good, he was giggling like a naughty school boy like it was *funny*.
— ¯_(ツ)_/¯ (@PranavDixit) April 30, 2019
Keep in mind, this event was less than two months ago! Now, Facebook thinks the world is ready to trust a global currency it’s built.
I support Facebook as a social network, but I have no intention of becoming a user of Libra or a customer of Calibra. I don’t think enough time has passed for me to give Facebook the benefit of the doubt with my personal information, not to mention my financial information.
Trust is crucial to me, when it comes to the apps and services I choose to use; I trust Facebook enough to post photos and comments, but not enough to put my actual money there.