18 Jun 2019
Today, Facebook has officially confirmed what has been a “public secret” for months: they are issuing a new cryptocurrency.
The details of how Libra will work are laid out at the libra.org website. While we already knew Libra is going to be a stablecoin, it was also unveiled that it will have its own programming language for smart contracts and that it plans to become a permission-less cryptocurrency within the next 5 years.
If you initially dismissed Libra as a “not real cryptocurrency” and “just another stablecoin”, you might need to think again. Libra aims to shake up the current cryptocurrency world and many crypto projects can rightfully be afraid of it.
Let’s see who can be afraid of Libra and who can still sleep calmly (for now).
Ripple (and similar cryptocurrencies, like its fork Stellar) do not fight the traditional financial system as Satoshi intended to with Bitcoin. Instead, Ripple wants to help financial institutions to transfer money in a fast and inexpensive way throughout the globe. Basically, Ripple wants to be a settlement layer that will replace SWIFT some day.
After seeing Visa, PayPal, and Mastercard joining Libra, we think Ripple can be very afraid of the new cryptocurrency. Libra set its eyes on the same goal: fast and reliable global payments system, and better believe it will be much easier for them to persuade other traditional financial institutions to join them.
Also, note that Libra basically copied Ripple's consensus protocol. Another signal that Libra is Ripple's direct competitor.
Due to high fluctuations in the crypto world, the need for stablecoins has arisen during the past two years. Tether is perhaps the most well-known among the bunch, but there are others such as USDC, Gemini Dollar, DAI, etc.
Libra will be backed by a basket of fiat currencies which will ensure its stability. With well-known crypto companies, such as Coinbase and Xapo, joining the Libra Association, you can be sure there will be a bridge between Bitcoin and Libra, thus making Libra available as a sanctuary during the crypto bear periods.
Probably the major point of disagreement within the Bitcoin community was whether Bitcoin should be more like a digital currency or more like digital gold.
Because these two views could not live together under the same cryptocurrency anymore (due to a technical obstacle: block size), the part of the community which saw Bitcoin as a currency broke out and created a separate cryptocurrency: Bitcoin Cash.
Why is Libra more of a threat to Bitcoin Cash than Bitcoin? Because Libra and Bitcoin Cash follow the same goal: using cryptocurrency for small everyday payments, fast transactions, low fees, less fluctuation.
That said, it’s not just BCH being affected here. It’s also other cryptocurrencies that want to function as digital cash, including systems like Lightning network and Raiden.
Perhaps the most surprising revelation today was that Libra will not only be a stablecoin, but it will also function as a smart contract platform.
While there are many smart contract platforms out there, the most affected will be the ones that are not censorship-resistant. The most prominent of the bunch is EOS, where block producers can censor certain transactions or decentralized apps if they “misbehave”.
Libra will also have the ability to censor dApps and transactions. Not just the ability, it will need to do this in order to comply with the law.
Fast transactions and censorship-compliance? Sounds like Libra will directly compete with EOS.
No doubt Ethereum will take a hit if (when) Libra properly implements their smart contract platform. But it won’t be affected as much as EOS, because Ethereum is censorship-resistant and it will still be the only real option for dApps that cherish the importance of censorship-resistance.
Bitcoin still carries the first-mover advantage and its clear positioning as digital gold undoubtedly separates it from Libra’s goals. This is enough for us to claim that Bitcoin will probably be one of the least affected by the emergence of Libra.
Another less-affected cryptocurrency will be Monero. And not just Monero, but also other privacy-oriented cryptocurrencies, such as Zcash, Beam, Grin etc. Their purpose is the direct opposite of what Libra aims to be (and is allowed to be).
To conclude, with Facebook introducing Libra, it’s hard to shake off a feeling that an open source technology meant to liberate people is again being overtaken by big corporations. (Netscape vs IE, anyone?) Also, we’re not sure what to think about crypto companies that joined Libra: Coinbase and Xapo.