By Yash Deshmukh
Facebook. This web-based tech giant has become a household name over the past 15 years. Many associate it with social media, photo-sharing, and due to recent events, a danger to personal privacy. However, through acquisitions and mergers, Facebook has bled into multiple other industries, such as fitness, virtual reality, and artificial intelligence. The February 2019 acquisition of Chainspace, a blockchain company, has allowed Facebook to enter perhaps the most buzzworthy market of the past few years: cryptocurrency.
Facebook dubs their crypto “Libra”, which is currently in development and is set to debut on June 18th, 2019. With Libra, users of Facebook’s messaging apps, such as WhatsApp and Messenger, would be able to send each other money securely with their cryptocurrency.
Facebook built Libra on its own blockchain and made it a stablecoin. A stablecoin is a type of cryptocurrency whose value is tied to a fiat currency. Fiat currencies are physical, government-regulated, currencies such as the US Dollar. This ensures that the value of the currency will not be volatile due to its relation to a nonvolatile currency. See our article on currency markets if you want to learn more about currencies: The Basics of Forex Markets. To those living in first world countries, this may not be major news. However, citizens of countries such as Venezuela, where inflation is rampant, the development of Libra is a reason to celebrate.
Libra gives people in developing countries an easy-to-access and stable currency that can be transferred privately on Facebook’s blockchain. Since its value derives itself from major first-world currencies, users in developing countries won’t have to let domestic wars, scandals, recessions affect their financial conditions. The appeal to developing and third-world countries is presumably Facebook’s motive. Their acquisition of WhatsApp and the expected implementation of Libra into WhatsApp supports that claim, as countries such as India, Brazil, Turkey, and Indonesia are among the heaviest consumers of the cross-platform messaging app.
As previously stated, Libra is Facebook’s attempt at providing financial freedom to those who may not have it in their country. But what’s in it for Facebook? Experts predict that Facebook will pay users of Libra interest if they decide to invest in the crypto.
For Facebook, this project stretches beyond tech. Libra unveils Facebook’s newest ambition: to become a worldwide bank or reserve of sorts. Facebook is taking cryptocurrency, which was impractical for worldwide usage just a few years ago, and normalizes it to an extent where individuals in war or inflation-ridden countries can own stable currency through the simplicity of Facebook suite apps.
Other companies, such as Google and Twitter, are also investing in their own blockchain.
While Libra only attempts to separate people from their currency, venture capitalist Tim Draper predicts that blockchain will free people of their inefficient governments. It’s quite possible to see the tech giants of today transform into the world banks of tomorrow.