Facebook is in a lot of hot water lately.
Facebook was recently hit with a $5bn privacy violation fine by the US Federal Trade Commission.
Now, with cryptocurrency Libra’s announcement on June 18, 2019, and 2020 launch date, Facebook could perhaps be facilitating illicit trade activities.
A new report shows Facebook dealing with scams related to its Libra cryptocurrency. According to the Washington Post, a raft of fake accounts and scams purporting to sell libra have cropped up on Facebook itself, including one video offering a discount on libra coins that have been distributed to early investors and a fake website called “buylibracoins.com,” which remains online.
All that aside, could the entire concept behind Libra have been stolen?
Alleged Facebook theft
In the latest stream in attacks, the whitepaper of Facebook’s cryptocurrency Libra was reportedly plagiarized.
According to CoinDesk, Alexander Lipton, a Connection Science Fellow at the Massachusetts Institute of Technology (MIT) and adjunct professor at New York University, claimed that Libra copied the concepts of a coin he proposed in his academic work.
“I can tell you that the actual structure of Libra is pretty much lifted verbatim from the paper which Sandy Pentland and Thomas Hardjono and I published last year,” Lipton, referring to the paper entitled “Digital Trade Coin: Towards a More Stable Digital Currency,” said.
Tradecoin tackled a transmission coin, which like Libra, is backed by a basket of tangible assets specifically oil, gold, base metals, and agricultural commodities, while Libra’s chose government-issued bonds and securities.
Tradecoin was also poised to be managed by a consortium of companies, which is similar to the Libra Association that consists of big names including Mastercard, Paypal, Visa, and Uber.
Not tough to discern a pattern here.
Libra workings in more detail
1. The Libra is the unit of the Libra cryptocurrency.
Libra is represented by three wavy lines:
Libra is Facebook’s global digital currency reportedly intended in part to create inclusion for those without access to banking services (1.7 billion people lack a bank account).
2. Libra is backed by a basket of currencies and U.S. Treasury securities.
The currencies backing Libra include the U.S. dollar, UK pound, euro, Swiss franc and Japanese yen. The amount of the reserve is estimated at $1 billion.
3. This backing means Libra has full asset backing from the day it goes live.
Full asset backing is the same as that provided by governments who issue currencies. In those cases, the currency is backed by the country's national treasury, its mint, its central banks and its commercial banks.
4. Libra is administered by the Libra Association
Facebook doesn't control Libra, it is controlled by the Libra Association, a not-for-profit organization which is headquartered in Geneva, Switzerland. Members of the Association include:
Payments: Mastercard, PayPal, PayU (Naspers’ fintech arm), Stripe, Visa
Technology and Marketplaces: Booking Holdings, eBay, Facebook/Calibra, Farfetch, Lyft, Mercado Pago, Spotify AB, Uber Technologies, Inc.
Telecommunications: Iliad, Vodafone Group
Blockchain: Anchorage, Bison Trails, Coinbase, Inc., Xapo Holdings Limited
Venture Capital: Andreessen Horowitz, Breakthrough Initiatives, Ribbit Capital, Thrive Capital, Union Square Ventures
Nonprofit/Multilateral Organizations and Academic Institutions: Creative Destruction Lab, Kiva, Mercy Corps, Women’s World Banking.
The Association hopes to have 100 members by the time of Libra's launch. Each founding member must pay a minimum of $10 million
5. The initial value for Libra will be close to the value of a dollar, euro or pound.
While the Libra Association hasn't set an exact amount yet, the initial value is thought to be close to that of a U.S. dollar, euro or UK pound.
You will be able to buy Libra using whatever is your fiat currency through a third-party wallet app, Facebook's Calibra wallet app, or a reseller.
The Calibra Wallet will be a standalone app that will plug into Facebook Messenger and WhatsApp and allow it to be sent just like a text message at "low-to-no-cost," according to Facebook.
6. Libra will run on a blockchain platform called the Libra Network.
The Libra Network is made up of a series of servers, also called "nodes", that record and validate every transaction made on the network. Libra will be able to do about 1,000 transactions per second while a traditional payment processor such as Visa does about 3,000 transactions per second. Bitcoin only does 7 transactions per second, and Ethereum does 15.
7. Reaction to Libra hasn't been all positive.
In the U.S., the Chairperson of the House Committee on Financial Services, Maxine Waters, asked Facebook to halt development of Libra, saying that "the cryptocurrency market currently lacks a clear regulatory framework." Democrats on the House Committee on Financial Services cited concerns of privacy, national security, trading, and monetary policy.
On July 10, 2019, the chairman of the Federal Reserve, Jerome Powell, testified before Congress that the Fed had "serious concerns" as to how Libra would deal with "money laundering, consumer protection and financial stability." French Finance Minister, Bruno Le Maire, warned the French Parliament of concerns about Libra and privacy, money laundering and terrorism finance.
German MEP Markus Ferber warned that Facebook could become a shadow bank.
In a July 2, 2019 story in The Guardian, writer Joseph Stiglitz stated that Libra's business model would encourage "nefarious activities — corruption, tax avoidance, drug dealing, or terrorism …"
The real danger is that Facebook has 2.38 billion registered users worldwide and the U.S. Senate banking committee is afraid this massive number of users could undermine the stability of the global financial system.
Videos: explaining cryptocurrency Libra and Digital wallet Calibra
How the Libra cryptocurrency works: Calibra: How Facebook's Libra Cryptocurrency Wallet Works