Facebook unveiled the Libra payment method and the Calibra service with various partners on Tuesday. Through an app, users can pay each other ‘just as easily as sending messages’. WhatsApp and Facebook Messenger will receive standard support for this in 2020.
The Facebook announcement involves two parts; on the one hand, there is the Libra payment method based on the open source block chain of the same name. The non-profit Libra organization based in Geneva, Switzerland is responsible for this payment method with Facebook as the driving force, but other participants are Mastercard, Visa, PayPal, eBay, Spotify, Uber, Lyft and Vodafone.
On the other hand, there is Calibra. This is a wallet implementation for Libra, which is being developed by Facebook subsidiary Calibra. Calibra is therefore a financial service provider. The Calibra wallet for the Libra currency will be available in 2020 as an app for iOS and Android, and will also become a standard part of WhatsApp and Facebook Messenger. To be able to create a Calibra account, people must send a copy of their proof of identity. Users who do not have Facebook, Messenger or WhatsApp can also create an account via this route.
According to Facebook, Calibra should make it possible to send Libra to almost anyone with a smartphone “just as fast as sending a text message at low or no cost.” In the long term, users must also be able to buy their bills and products, for example by scanning codes.
The social network promises to offer similar verification, support and fraud protection as banks and credit card companies. The company also promises to reimburse if malicious people gain access to their Libra accounts. Furthermore, the promise is that Facebook will not use Calibra payment data for advertising purposes . After permission, the company does share data with Facebook and third parties, and without permission this happens for purposes such as fraud prevention and the ability to perform transactions. Calibra, on the other hand, will use Facebook data to ‘comply with the law, secure accounts, reduce risk and prevent criminal activities’.
The idea behind Libra is that people worldwide will pay less for financial services. The use of a blockchain must thereby prevent a single entity from gaining control of the network. The currency is supported by reserves to minimize volatility and to facilitate the exchange against existing currencies. The value does not seem to be linked to just the dollar: the Libra Association is talking about a reserve of a collection of bank credits “in the currency of stable central banks.” Users do experience fluctuating exchange rates when converting their local currency to and from Libra.
The Libra blockchain is maintained by a distributed network of nodes: the validators. They must reach collective agreement on the total number of transactions on the basis of a protocol. The transactions are based on smart contracts that have been developed in a new programming language with the name Move. In the first instance, smart contracts are drawn up in advance, but in the long term they must be adaptable by users. More details about the Libra blockchain can be found in the accompanying white paper .
Only members of the Libra Association are eligible to set up nodes, or validators. The Libra blockchain is therefore a so-called permissioned blockchain. The association now consists of 28 organizations but that must be 100. There is also the Libra Association Council, with a representative of the Founding Members per validator. The board determines the policy with regard to the nodes and reserves. Decisions require at least a two-thirds majority, as well as validation by nodes within the blockchain network.
To recruit new members for the association there appears to be a second token: Libra Investment Token. To participate in the Libra Association, members must invest at least $ 10 million. In addition, there are other requirements in terms of market value and money reserves. In exchange, they not only receive nodes and control, but also Libra Investment Tokens. These tokens can be issued to traders and other companies and generate interest based on the Libra money reserves. The more successful Libra becomes and the larger the reserves, the more investors can earn from their tokens.