After months of speculation, Facebook finally announced details about its new cryptocurrencyon Tuesday morning. The digital currency, called Libra, will be available starting next year to the billions of people who use Facebookservices like Messenger, WhatsApp, and Instagram.
If the new currency catches on, it has the potential to change how people save, spend, and send money, and could disrupt big parts of the tech and banking industries.
Here is a Q&A about Libra, and what it means for you.
What’s the point of Facebook’s Libra cryptocurrency?
If adopted by companies and users, Libra can become a more convenient way to pay online. Facebook likely plans to sell products on Instagram and WhatsApp, but other websites could also use the cryptocurrency for e-commerce.
But beyond e-commerce, especially for people in developing countries that lack a banking infrastructure, Libra could be useful for storing and transferring money, without paying high fees. So, if you want to send money to another country, Libra may be a cheaper way to do it than what’s currently available.
Does Facebook’s Libra have anything to do with Bitcoin?
Libra transactions will be recorded on a blockchain—a tamper-proof ledger that runs across multiple computers. This is the same technology that Bitcoin and other cryptocurrencies are built on. So, yes, there are some similarities, including the ease of moving money and creating secure transaction records.
But there are also key differences. For instance, the price of Libra is more stable than Bitcoin, since Libra is backed by a reserve fund, while the value of Bitcoin just floats.
Also, Bitcoin is recorded on a public blockchain that allows anyone to build on it. On the other hand, to build on many features of Libra’s blockchain, developers must seek permission from Facebook and its partners who administer it.
What about privacy? Will Facebook know what I’m spending?
That depends. Facebook is setting up its new Calibra wallet as a separate company, and is promising not to combine user data with its other apps, like Facebook and Instagram—unless you give it permission. So, in theory, only Calibra will have a record of your transactions. But many Calibra users may decide to use its integrated Facebook friend-finding feature, and if they do, their data will be combined.
Libra may be stored in competing digital wallet apps built by other companies that provide higher levels of privacy.
How much are Libra worth?
Facebook and its partners are backing Libra with a pool of real world money, promising users that they will always be able to trade the cryptocurrency in for cash. The day-to-day value of Libra, which uses the monetary symbol of three waves, is pegged to the average value of a basket of world currencies, made up of U.S. dollars, U.K. pounds, euros, and Swiss francs.
Calibra’s wallet shows how many Libra users have, as well as their value is in the local currency.
How do I get my hands on some Libra?
You’ll have to wait awhile as Facebook says the new digital money will only be ready by mid-2020. When it’s ready, users can download Calibra—which will work a lot like Venmo—and buy some by connecting your bank account.
It’s important to note that Facebook’s Calibra is not the only option for obtaining and spending Libra. Facebook is working with dozens of partners, including PayPal and Coinbase, many of which are expected to build digital wallets of their own.
All of these companies will also let users convert Libra into regular cash, and many other companies are expected to join the coming months.
In addition, there is a very good chance Facebook will give away some small amounts of Libra to its users to promote the currency when it launches in mid-2020.
Compiled by Olalekan Adeleye