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Libra (cryptocurrency)

Libra (cryptocurrency)

A cryptocurrency created by Facebook that is backed by real-world assets (a basket of bank deposits and short-term government securities). Libra is managed by a non-profit organization regulated by the Swiss financial authority known as the Libra Association; consisting of Facebook, Calibra (a subsidiary of Facebook), and 27 other companies.

Libra is a blockchain-based cryptocurrency that is price-stabilized (see stablecoin) through the backing of a basket of bank deposits and short-term government securities held in the Libra Reserve. 



The Libra Reserve is managed by the the not-for-profit Libra Association, that is headquartered in Geneva, Switzerland and is regulated by the Swiss Financial Authorities. The Libra Association is made up of Facebook, a subsidiary of Facebook called Calibra, and 27 other companies. The purpose of the Libra Association is to develop permissionless governance and consensus for the Libra network. 



Facebook plans on allowing people to purchase the Libra cryptocurrency online and at various brick and mortar locations around the world. 

Announcement

On June 18, 2019 the American social media company Facebook, released a white paper with details about their plans to launch an open-source cryptocurrency project, called Libra, in the first half of 2020.

Purpose of Libra

According to Libra's white paper there are approximately 1.7 billion adults around the globe without access to traditional financial infrastructure, however, 1 billion of those adults have a mobile phone, and about 500 million of those 1 billion also have access to the internet. Libra is trying to create a global cryptocurrency capable of bringing secure financial services and financial infrastructure with low fees to the unbanked people of the world with access to the internet and a mobile device.

Regulatory issues and public reception

Facebook's Libra has seen some pushback from the US treasury secretary, Steven Mnuchin, regarding regulatory issues surrounding Libra. Mnuchin told reporters the Libra cryptocurrency is a national security issue because of its potential to be used by "money launderers and terrorist financiers". Mr.Mnuchin commented further about his concerns towards Libra's potential as a cryptocurrency by saying:

Cryptocurrencies have been exploited to support billions of dollars of illicit activity like cyber crime, tax evasion, extortion, ransomware, illicit drugs, and human trafficking"

Facebook executive and head of Calibra, David Marcus, appeared before the United States senate on Tuesday July 16, 2019 to discus regulatory issues surrounding Libra. Prior to the senate hearing David Marcus went on record saying: 

Facebook will not offer the Libra digital currency until we have fully addressed regulatory concerns and received appropriate approvals. 

During the senate hearing law makers questioned David Marcus about why people should trust Facebook to manage their money and why Facebook should be trusted to pioneer financial technology regulations which could drastically change global financial systems. On May 9, 2019 the Mark Crapo and Sherrod Brown of the United States Senate Committee on Banking, Housing, and Urban Affairs sent a letter to Mark Zuckerberg asking him to respond to several questions which were the primary focus of the senate hearing on July 16, 2019. These questions were:



  1. How would this new cryptocurrency-based payment system work, and what outreach has there been to financial regulators to ensure it meets all legal and regulatory requirements?
  2. What privacy and consumer protections would users have under the new payment system?
  3. What consumer financial information does Facebook have that it has received from a financial company?
  4. To the extent Facebook has received consumer financial information from a financial company, what does Facebook fo with such information and how does Facebook safeguard the information?
  5. Does Facebook share or sell any consumer information (or information derived from consumer information) with any unaffiliated third parties?
  6. Does Facebook have any information bearing on an individual's (or group of individuals') creditworthiness, credit standing, credit capacity, character, general reputation, personal characteristics or mode of living that is used (either by Facebook or unaffiliated third party) to establish eligibility for, or marketing of a product or service related to, (1) credit, (2) insurance, (3) employment, or (4) housing?
  7. How does Facebook ensure that information bearing on an individual's (or group of individuals') creditworthiness, credit capacity, character, general reputation, and/or personal characteristics is not used in violation of the Fair Credit Reporting Act?

The Libra Reserve

Libra is a stable cryptocurrency because each unit of Libra is backed by a reserve of tangible real world assets held in a reserve called the Libra Reserve; consisting of a basket of bank deposits and short-term government securities. The participating members of the Libra Reserve are required to have an investment-grade credit rating. 



Compared to traditional stablecoin projects, Libra's price will fluctuate as the value of assets backing the cryptocurrency fluctuate in price. This will occur because the value of Libra is not pegged to a single fiat currency, but is instead pegged to assets held by a geographically distributed and regulated group of institutional custodians participating in the Libra Reserve. 

Libra Association

Facebook does not fully control the Libra cryptocurrency, but does have an agreement with the companies partners to form a non-profit organization regulated by Swiss financial authorities called the Libra Association. 



According to Libra's website the officially stated goals of the Libra Association are: 



  1. The transition to permissionless governance and consensus node operation, lowering the barriers to entry for participation and reducing the reliance on Founding Members.
  2. Minimizing the association's role as manager of the Libra Reserve by fully automating reserve management.
  3. Over time, the objective is for the association's primary role to be the coordination of the open-source community to define and develop the technical roadmap of the Libra network.



The Libra Association consists of Facebook, Facebook's subsidiary Calibra, and 27 other technology companies (such as eBay, Uber, and Lyft), financial service providers (such as PayPal), venture capitalists, and other non-profit organizations. Each member of the Libra Association has equal voting rights to make decisions regarding the development of the Libra cryptocurrency; ensuring Facebook does not control the entire cryptocurrency network itself. 



The Libra blockchains consensus mechanism will initially only grant voting rights for governance purposes to founding members. As the Libra cryptocurrency grows the Libra Association will grow to include any entity operating as a node validator that holds a sufficient stake in the Libra network. The two main purposes of the Libra Association is to ensure effective coordination and governance of the Libra network by attempting to align validator nodes and the open-source community around Libra's technical roadmap, and to manage the Libra reserve and allocate funds for social-impact projects managed by the Libra Social Impact Advisory Board (SIAB). 

Founding members

Each member of the Libra Association, and founding member of LIbra, invested a minimum of $10 million USD into Libra in order to help build up the platforms reserve of fiat currency. The 28 founding members of Libra, organized by industry, include:

  • Payments: Mastercard, PayPal, PayU, Stripe, Visa
  • Technology and marketplaces: Booking Holdings, eBay, Facebook/Calibra, Fartech, Lyft, Mercado Pago, Spotify AB, Uber Technologies Inc
  • Telecommunications: Iliad, Vodofone Group
  • Venture capital: Adreessen Horowitz, Breakthrough Initiatives, Ribbit Capital, Thrive Capital, Union Square Ventures
  • Nonprofit and multilateral organizations, and academic institutions: Creative Destruction Lab, Mercy Corps, Women's World Banking

Social Impact Advisory Board (SIAB)

The Libra Social Impact Advisory Board is an advisory board of the Libra Association lead by a group of social impact partners (SIPs) consisting of nonprofit organizations and academic institutions. SIAB acts to influence how the Libra Association allocates its grants and social impact investments by measuring and reporting on the social impact of its previous projects, developing future social-impact initiatives, increasing the effectiveness of grantees, and to serve as a convening party focused on bringing new SIPs into SIAB. When each grant/funding recommendation is agreed upon by members of SIAB it is brought to the Libra Association for approval. If a grant/funding is approved, SIPs are given the opportunity to serve as nodes delegated by the founding members of Libra. 



SIAB will initially consist of the managing director of the Libra Association (elected by the Libra association every 3 years) and 4-6 members elected by the Libra Association during their first council meeting. The Libra Association can vote to expand the number of members of SIAB. Each member of SIAB serves a one year term before elections take place to re-elect or elect new SIAB members. Each SIAB member has the right to be re-elected indefinitely by the Libra Association, and the Libra Association has the power to remove any SIAB member at anytime with a majority vote. 

Calibra cryptocurrency wallet

Facebook created a company subsidiary called Calibra that will be offering a cryptocurrency wallet for users to buy and sell using the Libra cryptocurrency. The wallet will allow users to send Libra over their messaging a platforms such as WhatsApp and Facebook Messenger. The Calibra Wallet will also be available as an IOS and Android application for people who do not have Facebook accounts. 



The Calibra cryptocurrency wallet is a subsidiary of Facebook, but will not share any financial data with Facebook or third parties without customer consent. The company states in their Customer Commitment document that their data will stay completely separate from data originating from Facebook's social platforms unless consent is given by users using the Calibra wallet. 

The Libra protocol

The Libra protocol is the blockchain protocol powering the Libra cryptocurrency. The following image is a visual representation of how the Libra protocol operates. The Libra protocol uses a single merkel tree to provide an authenticated data structure within the Libra network. 

Logical data model

The Libra protocol uses the Move language for implementing all deterministic executive functions for storing and updating all information on the Libra blockchain in a single versioned database ledger. The Move language is used to allow blockchain validators to execute transactions against the latest version of the ledger state, and to respond to client queries regarding the history of the ledger. The ledger state uses an account-based dat model consisting of key-value stores that map account addresses to account values. Each account address on the Libra blockchain has a 256-bit value. 

Transaction structure

The following is a generic overview of the data present in transactions on the Libra network: 

  • Sender address: Details containing the account of the users address sending the transaction. The senders address is read by the Move virtual machine and contains the sequence number, authentication key, and LibraAccount balance.
  • Sender Public key: Corresponding public key to the private key used for signing the transaction. The hash of the public key matches the authentication key stored inside of the senders LibraAccount.
  • Program: The Move bytecode of the transaction script required for execution, optional list of script inputs, and and optional list of publishable Move byte modules.
  • Gas price: Price of Libra coins the transaction sender is willing to pay for the processing of their transaction request.
  • Maximum Gas price: Maximum number of Libra coins, or gas units, a transaction is allowed to consume before transaction execution is stopped.
  • Sequence number: Unsigned number that is required to be equal to the sequence number of the senders LibraAccount. After transaction execution the sequence number increases by 1, and the transaction can never be replayed.
  • Signature: The senders digital signature.

Executing transactions

Libra users submit their transactions by updating their ledger state, and each tranaction is charged a transaction fee denominated in Libra coins that is based on the gas model used by Ethereum. Each transaction is made using Move bytecode to create a transaction script containing information with the recipient account address or the number of Libra being sent. A validator receives the transactions script and runs it using the present ledger state as an input. The validator process the transaction and produces a deterministic transaction output that is committed during consensus after agreeing to a binding commitment regarding the output of the transaction. Once the transaction is officially committed by the consensus protocol the ledger state is updated. 

Byzantine fault tolerant consensus

The Libra consensus protocol uses a byzantine fault tolerant consensus mechanism that is a variant of the HotStuff consensus protocol named LibraBFT. The LibraBFT consensus mechanism replicates transactions submitted by Libra users across a network of validators, executes the transactions against the current ledger state of the Libra blockchain, and creates a binding agreement among validators regarding their transaction results and ordering of transactions on the Libra blockchain. 

Performance

In the Libra blockchain technical white paper the blockchain performance is expected to support around 1000 transactions per second with a 10-second processing time for each transaction to be committed. The white paper assumes each transaction requires approximately 5 KB of bandwidth and each validator would require a 40 Mbps to support 1000 transactions per second. The LibraBFt protocol was designed for commodity CPU to handle a transaction validation rate of 1000 transactions per second. Each validator needs to store the current ledger state, and it's estimated that each account is about 4 KB in size making servers with 16 TB of SSD storage capable of storing up to 4 billion accounts. 

Timeline

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Further reading

Title
Author
Link
Type
Date

Facebook announces Libra cryptocurrency: All you need to know

Josh Constine

Web

June 18, 2019

Facebook announces the Libra Cryptocurrency with the release of Libra Whitepaper



Web

June 18, 2019

Facebook Confronts Bipartisan Resistance to Cryptocurrency Plans

Dave Michaels, Kate Davidson, Sam Schechner

Web

July 15, 2019

Facebook Says Libra Cryptocurrency to be Regulated by Swiss Financial Authorities--Update

Dave Michaels

Web

July 15, 2019

Facebook's Calibra is a secret weapon for monetizing its new cryptocurrency

Nick Statt

Web

June 18, 2019

Facebook's Libra could be misused, says treasury chief Mnuchin

Russel Hotten

Web

July 15, 2019

Facebook's Libra won't be as power-hungry as Bitcoin

Mary Beth Griggs

Web

June 20, 2019

Facebook's New Libra Coin: How Does It Work, and Should You Buy It?

Nick Douglas

Web

June 19, 2019

Facebook’s Libra Coin: Everything You Need to Know



Web

June 25, 2019

How to Become a Founding Member | Libra

Libra

Web



Libra stablecoin wants Swiss financial regulatory control

swissinfo.ch

Web

July 15, 2019

Libra's mission is to enable a simple global currency and financial infrastructure that empowers billions of people

Munee Bali

Web



The Libra Blockchain

Zachary Amsden, Ramnik Arora, Shehar Bano, Mathieu Baudet, Sam Blackshear, Abhay Bothra, George Cabrera, Christian Catalini, Konstantinos Chalkias, Evan Cheng, Avery Ching, Andrey Chursin, George Danezis, Gerardo Di Giacomo, David L Dill, Hui Ding, Nick Doudchenko, Victor Gao, Zhenhuan Gao, François Garillot, Michael Gorven, Philip Hayes, J Mark Hou, Yuxuan Hu, Kevin Hurley, Kevin Lewi, Chunqi Li, Zekun Li, Dahlia Malkhi, Sonia Margulis, Ben Maurer, Payman Mohassel, Ladi De Naurois, Valeria Nikolaenko, Todd Nowacki, Oleksandr Orlov, Dmitri Perelman, Alistair Pott, Brett Proctor, Shaz Qadeer, Dario Rain, Bryan Russi, Stephane Schwab, Alberto Sezer, Herman Sonnino, Lei Venter, Nils Wei, Brandon Wernerfelt, Qinfan Williams, Xifan Wu, Tim Yan, Runtian Zakian, Zhou

Academic



Documentaries, videos and podcasts

Title
Date
Link

Facebook की Libra Cryptocurrency क्या है? Bitcoin vs Libra which one is better? Current Affairs 2019

June 23, 2019

Facebook's David Marcus testifies before Senate on Libra cryptocurrency - 07/16/2019

July 16, 2019

Facebook's Global Coin Cryptocurrency

May 16, 2019

Facebook's New Libra Cryptocurrency to Have Over 100 Launch Partners

June 18, 2019

Libra, Facebook's new cryptocurrency, explained

June 18, 2019

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