Overcoming Bitcoin: Does Facebook Cryptocurrency Have the Potential to Be a Global Payment Means?

Mark Zuckerberg is known for his boundless ambition. The Facebook CEO decided to turn his eyes to something even bigger: reshape the global financial system. The Facebook Libra project is moving in this direction, and is already supported by companies such as Visa, MasterCard, PayPal, Uber and Lyft, as well as several venture capital companies and non-profit organizations. The problem is that the future of the unprecedented cryptocurrency service is still unclear.

Facebook is months away - at least - from actually launching a network. The documents released in June left several questions unanswered as to the actual operation of the service. In particular, how the platform will handle the long list of legal and regulatory requirements that apply to payment networks.

Financial transaction services from rivals like Apple and Google essentially offer an enhanced user interface for conventional credit card networks. Facebook, on the other hand, aims to use blockchain technology to build a new payment network from scratch, complete with its own currency. However, some details of this idea may not be pleasing some.

"Serious Concerns"

Since its inauguration, Libra has not been welcomed by many lawmakers. On Wednesday, Federal Reserve Chairman Jerome Powell expressed skepticism about Facebook's plans for cryptocurrency. "I don't think the project can go any further ... without much satisfaction with the way the company handled money laundering, with all that," he said in a speech to the House Financial Services Commission. He added that the bill raises "serious concerns" for regulators.

According to the New York Times, even some of Facebook's official partners are indifferent to the project. They are expected to contribute $ 10 million each to help fund the launch of the network. But Times journalist Nathanial Popper reported in late June that "no money has changed hands so far," and noted that some of the companies have avoided making strong public statements in support of the project.

This reflects significant uncertainty about how Libra will actually work - and whether it is possible to launch such a network within the bounds of the law. Facebook is trying to build a payment system that combines the best features of both blockchain and conventional networks. But the result may end up being just a contradictory mess that leaves almost everyone dissatisfied.

Pound will be optimized for performance

In the bitcoin network, thousands of computers called full nodes work together to maintain a shared record of bitcoin transactions. Bitcoin's shared ledger is organized into a block sequence - hence the term blockchain. Nodes use a computationally expensive technique called "proofing" to decide who will add the next block in the chain. Each block contains a list of new transactions that become part of bitcoin's official transaction history.

At a high level, the Libra network is designed to work the same way. A group of computers distributed over the Internet will keep a shared record of Libra transactions. To make a Pound payment, you will send a cryptographically signed transaction to one of the network nodes (computers that keep track of transactions) so that it can be incorporated into the shared ledger.

The most fundamental difference: the bitcoin network is fully open, while Libra is not. Anyone with significant computing power can participate in the bitcoin process to verify bitcoin transactions, a process known as mining because participants earn newly created bitcoins. By contrast, participation in the Libra transaction clearing process will be limited to a few dozen pre-approved organizations, which are members of the Libra Association.

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