Lately, the news has been littered with rumors and speculations regarding Facebook’s new cryptocurrency: Libra.
But why? What’s the noise all about?
Well, let’s find out!
What is Libra?
Libra is a cryptocurrency created by social media giant Facebook. The new crypto coin will be released in 2020 and it will act as a stable coin backed by central entities like banks and governments.
Why does it interest so many investors?
- Institutionalization and Adoption of Crypto
Cryptocurrencies have fought in a long, hard battle to become more mainstream. At the onset, crypto coins were perceived as a way for money-laundering, fraud and other unlawful actions.
A large corporation like Facebook investing in the crypto industry proves once again that it’s so much more serious than people thought in the past. This also helps people to trust crypto-assets more.
Adoption of the market is crucial because it brings more capital into the business, increases liquidity, market stability and makes the long-term future of crypto coins more promising.
- It Isn’t Your Average Coin
Libra is more comparable to traditional structures than those based on Blockchain (Bytom, XRP, Tron). This is because the new cryptocurrency is based on the traditional financial market.
Another major difference between most crypto coins and Libra is that it will initially be controlled by 100 corporations. These corporations will be the only ones allowed to have a copy of the Libra Blockchain. The list of firms includes Visa Inc., Ebay, Spotify, Paypal, CoinBase and many others.
Regarding the issue of privacy, Facebook created a separate organization named Calibra in order to store the data individually. However, if you use the Facebook friend-search function, the data will combine.
On the other hand, Libra is also a stablecoin. It is originally meant to stay relatively the same price. This is among the solutions for the instability of the crypto market. The value of Libra is tied to currencies such as the dollar, euro, yen and pound.
Why are some people rejecting Libra?
Many crypto investors have clearly expressed their hesitation towards Libra and there are some good reasons.
Cryptocurrencies were based on the notion that the power would be taken away from central entities. Libra, on the other hand, for at least the beginning of its existence, will be centralized.
Facebook’s Libra received a negative reaction in the capital of the United States. This, of course, left a bad taste in many investors’ mouths. Many banks aren’t that supportive of the new currency too. Since Libra’s target audience is the people that aren’t using banks or crypto coins, it might be harder for Libra to gain users.
Overall, Libra is an interesting currency and a big step towards the acceptance of crypto coins. Yet, it is still unrealistic to make predictions about how Facebook’s new crypto coin will influence the crypto-asset market.
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