Libra Coin is a permissioned blockchain digital currency proposed by the American social media company Facebook. This currency and transactions are to be managed and cryptographically entrusted to the Libra Association. The Libra Association is a membership organization founded by Facebook’s subsidiary Calibra along with 27 other companies. These companies range across Technology, Telecommunication, Online Marketplace, Venture Capital and Nonprofits.
Facebook’s Libra is a new cryptocurrency. A digital currency that uses cryptography, a method of protecting information, to verify transactions that Facebook will launch next year.
People who use Facebook’s Messenger service, WhatsApp or who download a stand-alone app will be able to access it through a digital wallet. It is an alternative to bitcoin that is powered by blockchain. However, Facebook hopes it will be used by a much wider base.
In ancient Rome, the Libra was a unit of weight.
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What you need to know about blockchain.
Blockchain is a type of digital ledger that is distributed across a large network of computers and run by powerful mathematical computations. It is like a giant spreadsheet that is shared widely. Every time someone updates the spreadsheet, for instance by logging a financial transaction, every other user can see the change. That theoretically provides transparency and prevents any single central source from controlling the flow of information or money.
Libra Coin and bitcoin comparison
Both are essentially digital versions of cash designed to allow users to directly exchange value online, but there are major differences.
Facebook is looking to build a payments network by creating an online ecosystem on which users can buy things and pay each other. Bitcoin earlier conceived as a payment mechanism. But its network has had trouble processing a large number of transactions quickly. Instead, bitcoin evolved into a kind of digital gold used to store value rather than exchange it.
Libra Coin as a currency
Libra token shall be backed by financial assets such as a basket of currencies and US Treasury securities in an attempt to avoid volatility. Facebook has announced that each of it’s partners will inject an initial $10 million. In doing so, it has full asset backing on the day it opens.
Libra service partners within the Libra Association, will create new Libra currency units based on demand. Libra currency units will be retired as they are redeemed for conventional currency.
Initial reconciliation of transactions will be performed at each service partner. The blockchain’s distributed ledger will be used for reconciliation between service partners. It’s intent is to prevent everyone except members of the Libra Association from trying to extract and analyse data from the distributed ledger.
Compared to other cryptocurrencies such as bitcoin which use “permissionless” blockchains, Libra is centralized. Relying on trust in the Libra Association as “a de facto central bank”.