Is Facebook Libra Whitepaper Crypto 2.0?

Libra Crypto

Libra Crypto

Facebook Released Its Libra (Not GlobalCoin) Whitepaper.

There is a large amount of content to digest but we give our early thoughts and highlight some questions.
 

The company released a whitepaper which speaks to the concept of the project along with a technical paper, a document on the LibraBFT consensus protocol, information on a supposed new programming language called 'Move' and some details on a Libra testnet. All in the release was about 100 pages. The whitepaper, which focuses on the goals and philosophies of Libra, speaks to giving access to the unbanked and other well-known crypto philosophies while adding perceived credibility through integrating incumbents. As initial reports suggested the coin will have some form of basket of fiat currencies and low-risk assets 'backing' the coin. The launch-date is specified to be in the first half of 2020.

Takeaway:

We'll be doing a more comprehensive parsing of the technical documents but even conceptually there remain many questions around Libra's benefits and how Facebook will pull this off in a relatively short time frame. The benefits of being a validator and how one recoups the supposed cost of $10M to participate are still unclear. Furthermore, while the whitepaper underscores a greater stability versus the existing crypto landscape as a benefit they also imply that Libra will float versus a variety of fiat. This seems just like the existing crypto dynamic where a new and unstable numerator (i.e the crypto) trades against a variety of established and more stable denominators (i.e the fiat).

From Facebook's perspective, they appear to be taking quite a risk in going ahead with this project. Some, mostly European politicians, have already spoken out against the idea this morning, noting that Facebook should not infringe on the territory of the state. For a project which is having a centralized launch, creating a narrative within a crypto wrapper seems likely to further irritate politicians which have already suggested the company wields too much power.

The attention on crypto brought on by a large player like FB is positive for the space. That said, we believe the reports of this already being a massive change in finance or as one outlet described, 'the most bullish event in the [crypto] industry's history' are entirely premature given the many questions still unanswered and issues that will surely be faced ahead of the launch. We'll be keeping a close eye on developments and providing further analysis but this remains a 'wait and see' story for us.

About the Author

FRNT Financial is an Institutional Brokerage which offers clients a variety of products along with research & analytics in the crypto-space.