- Facebook has published a revised white paper for Libra, which is fundamentally different from the first version.
- A smart contract functionality enables the issuance of stablecoins and digital currencies, such as a digital dollar or digital Euro.
- However, regulatory authorities worldwide criticized the new version after only a short time.
After Facebook announced the development of its own digital currency, Libra, the tech giant met with strong resistance worldwide. Governments, central banks and large sections of the population showed in surveys that they are sceptical about Libra. A revised version of the white paper has now been published and is currently being reviewed again by governments and financial authorities worldwide.
Smart Contract functionality and stablecoins on Libra
Christian Catalini, Chief Economist of the wallet for Libra, Calibra, explains that the concept has been fundamentally revised and streamlined, but that the creation of a basket of several currencies is still being pushed forward:
We retain the construction of a multi-currency Libra, but it has been fundamentally changed, streamlined and relatively simplified from its original form.
Andreas Krautscheid of the Association of German Banks (BdB) is sceptical about the new proposal, as countries worldwide and within the European Union would become even more dependent on America and China:
This is another wake-up call for politicians and central banks: when it comes to digital payment systems for their economies, Europe and Germany must not become even more dependent on American or Chinese providers and continue to lose digital sovereignty.
The Libra Association also states that members from 20 different countries from central banks, public authorities and financial institutions will sit on the Steering Committee’s supervisory board and will have a say in the payment traffic licence application. Financial regulators around the world have already announced that the new proposal differs significantly from the first version, but that further time is needed to reach a final verdict.
In addition to the Stablecoin Libra, Facebook will also be able to issue Libra-based Stablecoins such as LibraEUR, LibraGBP or LibraUSD. The whitepaper says:
In this way, individuals and companies in the regions whose local currencies have stable coins in a single currency in the Libra network have direct access to a stable coin in their currency.
Each stablecoin would be fully financed by financial reserves of cash, cash equivalents and short-term government bonds available for the relevant fiat currency. Libra initially intends to cover the major fiat currencies and, in close cooperation with central banks worldwide, to regularly expand the currency basket.
In addition, a new programming language called “Move” has been introduced, which should enable the creation and use of smart contracts on the Libra blockchain. Furthermore, Libra will use the Byzantine Fault Tolerant (BFT) Consensus. Libra will make adjustments and optimizations so that finally the Libra Byzantine Fault Tolerance (LibraBFT) will be used. Overall, Libra will have a complete smart contract functionality that can keep up with the complexity of Ethereum.
Libra assures that all known risk interfaces have been thoroughly reviewed in advance with security experts so that more than 2.5 billion could benefit from the Libra launch in the near future. The launch is planned for the fourth quarter or the end of this year.
Facebook Libra has a trust issue
However, Libra must first convince central banks, governments and financial institutions, and ultimately the population as well, so that it can get off the ground and ultimately be used. The data scandals of the past will certainly play a role in this, as Ripple CEO Brad Garlinghouse also explained:
How they got here and whether or not it’s fair, the reality is, and they acknowledge it, there’s a trust deficit. And I think for any financial service, you have to have that foundation of trust. So I think the timing is interesting to see Facebook lead on this. I thought another interesting nugget of Mark Zuckerberg’s testimony was that they’re helping America’s leadership. Yet they set Libra up in Switzerland.