Facebook has recently announced its intention to go ahead with the digital currency Libra, amidst rising pressure from the US Congress to halt the project. Pressing against all odds, CEO Mark Zuckerberg is committed to bringing Libra to the world by 2020. After the difficulties that Bitcoin has suffered since its launch in 2009, cryptocurrencies have been flying beneath the radar; that is, until now. Will Libra be as disruptive as Zuckerberg is determined? What is really at stake in the emergence of digital currencies?
Digital currencies are hermetically linked to the emergence of another technology that may very well alter the way we not only do business, but also the way we deploy information.
Enter blockchain. Bitcoin originally launched under the guise of a new information infrastructure, that of the blockchain. The cryptocurrency was a first demonstration of the possibilities afforded by this new technology—a technology that a decade later remains a mystery to a majority of the population.
The concept behind a blockchain is simple enough. As blockchain researcher Bettina Warburg explains in her TED Talk “How the blockchain will radically transform the economy,” the blockchain is similar to how Wikipedia works. In the latter case, knowledge is distributed among a unanimous base of users that are constantly writing the content for each entry. The key word here is distributed. Knowledge is decentralized, it is no longer in the hands of a single person or institution whose authority is a source of trust. The blockchain is a similar infrastructure. According to Marco Iansiti and Karim R. Lakhani in their article “The Truth About Blockchain,” “blockchain is an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way.” It is a large database that decentralizes access to its information, relying on users throughout the world to monitor its entries—rather than a single company or government. Echoing Warburg’s words, we no longer have to trust someone else with keeping records.
Enter digital, cryptocurrencies. One of the most obvious applications of this distributed ledger known as blockchain are the exchanges of value that take place in the global market. Millions of dollars are spent on a yearly basis to cover bureaucratic and administrative services necessary to manage and record the economic transactions that are taking place at this very moment. We trust that each company will keep accurate records. We trust government agencies to double-check the records of transactions between businesses. Think about it—we trust a whole slew of people, institutions, and governments just because we really have no other option. What if this didn’t need to be the case?
“With blockchain, we can imagine a world in which contracts are embedded in digital code and stored in transparent, shared databases, where they are protected from deletion, tampering, and revision. In this world every agreement, every process, every task, and every payment would have a digital record and signature that could be identified, validated, stored, and shared,” explain Iansiti and Lakhani.
Imagine how unsettling this infrastructure could be for the worldwide economy. Key stakeholders that thrive on centralizing the record-keeping of exchanges of value would certainly be hard-hit by the application of blockchain in the form of digital currencies. Central banks across the globe would most likely struggle in such a context, especially since the records of transactions would be available for everyone to monitor. Businesses would also be challenged to find new and innovative ways of safeguarding private information. In this sense, the blockchain and digital currencies become a deep shift in information infrastructure.
Enter Facebook Libra. Not surprisingly, the Libra project is raising hell in the US Congress. Although Bitcoin has suffered some drawbacks, mainly due to the encrypting technologies, the concept of blockchain is very much alive. Several other cryptocurrencies are available: Ethereum and Stellar, for example. These are only available in select regions of the globe, mainly North America and Europe. What makes Libra different?
The message and purpose of Libra make it stand out. According to the Libra Association’s White Paper, the cryptocurrency’s aim is to “empower billions of people” still outside the economy, building “a lower-cost, more accessible, and more connected global financial system.” In other words, Libra is all about enabling access. Is distributing access to the global economy as disruptive as it sounds? Zuckerberg seems to think so. And so do the lawmakers that are ramping up their pressure on the project.
“An Introduction to Libra” Libra Association Members
“The Crypto-Currency” Joshua Davis
“The Future is Decentralised” Sarah Meiklejohn and Nicolas Cary
“The Truth About Blockchain” Marco Iansiti and Karim R. Lakhani.