Bitcoin

Facebook's Libra 'Cryptocurrency' Aims to Disrupt Payments. Bitcoin Aims to Disrupt Government Power.

Mark Zuckerberg’s latest venture won't compete with Satoshi Nakamoto’s project for undermining central banking, tyranny, and the financial surveillance state.

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Bitcoin has the capacity to undermine government control of money because you can freely exchange it with anyone in the world, meaning that no government or government-regulated entity has the capacity to interfere with its use. Because its supply is fixed at 21 million units, it also can't be watered down by inflation.

Facebook's new "Libra" coin, which was announced today, is both an interesting project to improve global payments and a useful reminder that Silicon Valley can't ever compete with bitcoin's mission of reclaiming control of money from the state.

The social networking giant is launching Libra in partnership with MasterCard, PayPal, eBay, Uber, Lyft, and several other tech heavyweights. Facebook claims that it has the potential to become the first "internet of money" with the capacity to modernize the way value moves around the world and to help provide financial services to the 1.7 billion adults without banking services. In the tradition of bitcoin's pseudonymous creator Satoshi Nakamoto, the company released a "white paper" this morning that lays out the basic details. Given its dismal record with customer privacy, Facebook has wisely created a new nonprofit entity based in Switzerland to oversee the project.

All the hype should be tempered by the existence of an internet graveyard filled with attempts to bring payments into the online age, which date back to the launch of the web (FirstVirtual, Cybercoin, Millicent, Digicash, Internet Dollar, Pay2See, MicroMint, Cybercent, Flooz, Beenz, CyberCash, BitPass, Peppercoin, etc.). But Libra is a genuinely interesting project because it will bootstrap on a much larger network than the failed ventures that came before it. Facebook's WhatsApp alone has 1.5 billion active users in 180 countries.

Libra is best understood as PayPal 2.0, and yet the white paper invites specious comparisons to bitcoin, noting that "existing blockchain systems have yet to reach mainstream adoption." Bitcoin launched a decade ago, yet its developers are still working out fundamental engineering problems, such as how to scale the technology to service billions of transactions a day. Libra, in contrast, will launch out of the gate with the capacity to "scale to billions of accounts," with "high transaction throughput, low latency, and an efficient, high-capacity storage system."

The difference is that bitcoin is a decentralized technology that nobody controls, which creates enormous engineering challenges in security and scalability that are being solved using complex cryptography. This is a decades-long project. Libra's engineering hurdles are comparatively simple because its a centralized payment system run by a bunch of big companies. The white paper uses bitcoin buzzwords like "blockchain," which should be understood as marketing hype. Libra is fundamentally a top-down system that runs using a database, which will never change.

Why is bitcoin's decentralization worth all that extra time and effort? Because governments can't stop it. So sex workers and porn stars use it when they're denied bank accounts, drug users use it to buy banned substances through an online bazaar, it enables Venezuelans to circumvent capital controls for buying food and medicine from abroad, and Brazilians can use it to get around import taxes that run as high as 60 percent.

Libra, on the other hand, will be controlled by a handful of big companies that will have no choice but to comply with government dictates, and the white paper makes it clear that the nonprofit running the project will collaborate with regulators.

Bitcoin is also resistant to government inflation, with a supply that's capped at 21 million units. Libra will function like a central bank, with its value propped up by a basket of "bank deposits and short-term government securities" held in reserve. In Venezuela, where the government-issued bolivar is losing value at a rate of about 1 million percent per year, users could hypothetically store their money in the Libra. And in the short-term, the Libra will likely be less volatile than bitcoin, which is currently valued at less than half of its December 2017 high. (Though it has also risen 154 percent in dollar terms so far in 2019.)

The problem is that in Venezuela (like in China, Iran, and India), Bitcoin is used despite government opposition. Why would the Maduro regime tolerate a competing currency run by a bunch of U.S. companies? Keeping the Libra out of Venezuela will be much easier than quashing bitcoin, which is designed for the purpose of resisting government censorship.

In short, Facebook's Libra has the potential to disrupt payment processing companies and other financial services. Bitcoin has the potential to disrupt central banking, the surveillance state, and government power around the globe.

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  1. It’s a sign.

    1. Is it the seventh sign?

  2. Libra, on the other hand, will be controlled by a handful of big companies that will have no choice but to comply with government dictates, and the white paper makes it clear that the nonprofit running the project will collaborate with regulators.

    Of course it will. Can you imagine Facebook releasing a product and explicitly refuse to cooperate with regulators?

  3. Bitcoin price is $9048.40 today after being at ~$3,000 December 2018.

    The high was $17,060.55 on December 11, 2017.

      1. You had to be lucky to get that sale price.

        A bunch of people were selling Bitcoin near the high and its not like selling stock. The intermediaries can be slow processing the transactions, so you have to expect fluctuations between your request to sell price and the price that is paid.

        1. There are some interesting technological problems dealing with Bitcoin trading in large volumes:

          His main point, however, was that the regular (ie: on-exchange) bitcoin market is simply not large or liquid enough yet to process large trades. To place a seven-figure dollar trade would shift the price in a direction unfavorable to the trader before the trade is completed, a phenomenon known as slippage.

  4. > a useful reminder that Silicon Valley can’t ever compete with bitcoin’s mission of reclaiming control of money from the state.

    A Silicon Valley company certainly COULD complete with bitcoin if it wanted to. A Silicon valley company certainly COULD adopt the mission of reclaiming control of money from the state.

    Just not Facebook.

    There is a difference. To people outside the valley they think it’s all one homogeneous blob of progressive techies who genuflect at the state. Not true. There are lot that do, but beware of too broad a brush. While there’s not a lot of explicitly libertarian companies here, neither are there any explicitly libertarian companies anywhere else in the country.

    Just not Facebook.

    You see, Facebook got hauled before Congress to account for its misdeeds (ei. being successful), so never again will Facebook act without first seeking permission from its masters. So we will never get anything that challenges the state from them. Ever.

    But Facebook is not Silicon Valley. Hell, it’s not even headquartered in Silicon Valley. Sheesh.

    1. Hell, it’s not even headquartered in Silicon Valley.

      Well, since “Silicon Valley” now includes Oakland. . . .

    2. Bitcoin has the potential to disrupt central banking, the surveillance state, and government power around the globe.

      Bitcoin as the currency or Bitcoin as the concept? Because if it’s the former, I think the answer is not bloody likely.

      1. Sorry, that was not supposed to be a reply to you, BB.

      2. Because if it’s the former, I think the answer is not bloody likely.

        If it’s the latter, does the switch from IHOP to IHOB and back constitute a disruption in global pancake distribution?

    3. “But Facebook is not Silicon Valley. Hell, it’s not even headquartered in Silicon Valley. Sheesh.”

      Last I checked, Menlo Park was still in Silicon Valley.

  5. I hear this cryptocurrency will be compatible with Leos and Geminis.

    1. Only when the moon crosses Mars during its apex in the Leo nebula.

  6. “internet of money”

    Money superhighway? Nah. Series of bank tubes? No. Cybercash? Nope. Money 2.0? Meh. Aha! Internet of money! Yeah! That’s it… internet of money.

  7. Who would be insane enough to hand their wealth to a company that has shown that they will violate contracts as they see fit? To companies that have cut people off from their earned money on the basis of the screams of internet mobs?

    1. Mastercard? Paypal? Ebay? Uber?

      You’re going to have to narrow it down.

      1. I haven’t heard that ebay engages in such things.

        1. eBay gets a pass in the public eye because they deal with actual goods, and common sense dictates that we can’t have terrorists buying uranium over the internet; so reasonable regulations of what can and can’t be sold are required. And, of course, reasonable regulations include banning Confederate Battle Flags because only white supremacists would buy such things and only use them to perpetuate violence.

        2. Also, ebay owns PayPal. So, IMO, Paypal’s corporate ethos is ebay’s corporate ethos.

          1. A garage sale on steroids, and they keep 30 percent?

  8. I’d be curious to read more about China, smartphones and micropayments. They are even ‘paying by face,’ wnatever that means. Seems like China has leapfrogged over the laptop phase, directly into the smartphone, and enjoying the benefits. I saw this with the chinese countryside directly going to cable TV, skipping over the broadcasting stage.

    1. “They are even ‘paying by face’….”

      So now we know why there were so worried about saving face all these years.

  9. Not personally interested, and I think a lot of people will avoid it purely out of distrust for Facebook. However the upshot could be the further mainstreaming of cryptocurrencies in general.

    1. Wait til Amazon launches Amazo-dollars.

  10. Bitcoin has the potential to disrupt central banking, the surveillance state, and government power around the globe.

    No it doesn’t. Or it does, the same way an invisible pink unicorn has the potential to disrupt modern science and the laws of physics throughout the universe.

    You can’t issue credit and preserve absolute anonymity/secrecy, nor can you have a centralized standard of value or medium without some sort of underlying centrally regulated network and, ultimately, either it’s a vehicle for people to centralize power and influence or no one uses it.

  11. re: “You can’t issue credit and preserve absolute anonymity/secrecy”

    That is not necessarily true (depending on how strict your definition of “absolute” is). Note first that bitcoin does not claim to provide absolute anonymity – they can support pseudonymity, the right to create a use a new identity with some degree of separation from your conventional identity. Could a sufficiently motivated surveillance state penetrate that separation? Probably. But bitcoin introduces friction into that exercise, making it more difficult, more expensive and less likely that the state will do so in any given situation. Perfection in secrecy is not necessary to disrupt the surveillance state.

    re: “nor can you have a centralized standard of value or medium without some sort of underlying centrally regulated network”

    History would tend to disagree with you. Human cultures had many standards of value and mediums of exchange before the creation of all those centrally regulated networks. They were not as efficient but they were not necessary.

    Nor is it proven that a decentralized standard of value can not be developed. Money is ultimately just stored work. We individuals can use it for lots of things without necessarily using it to “centralize power and influence”.

    1. That is not necessarily true (depending on how strict your definition of “absolute” is).

      Perfection in secrecy is not necessary to disrupt the surveillance state.

      You completely ignore half of my assertion (and a good chunk of the fundamentals of crypto). Bitcoin represents current value but credit isn’t current value, it’s perceived future value. Perfection in secrecy is not required but the more involved and protracted the interactions the more necessary it becomes. A one off anonymous transaction is pretty simple to pull off even without bitcoin, but a protracted network of transactions or economy such that you could upset the status quo? Bitcoin isn’t even instrumental in collapsing 3rd world dictatorship like Venezuela.

      History would tend to disagree with you. Human cultures had many standards of value and mediums of exchange before the creation of all those centrally regulated networks.

      You mean the many and diverse standards that we progressively abandoned in favor of more rigorous and centralized ones?

      Nor is it proven that a decentralized standard of value can not be developed.

      It’s not proven that invisible pink unicorns don’t exist either. That doesn’t mean ‘invisible pink’ and ‘decentralized standard’ aren’t oxymorons.

      Money is ultimately just stored work.

      No, it’s not. Stored work already has a unit: joules. Money is, in part, how you attempt to decentralize that standard.

      1. Well said about money. People forget that centralized banking, like capitalism, is the result of liberalization and freedom. You wouldn’t call capitalism anti-freedom for consolidating power, but for some reason Libertarians often apply a double standard to banks.

        Money used to be controlled by monarchs who would use different standards, issue coin to their convenience, wage war to acquire bullion, etc. Now we have a somewhat independent institution, which is about as democratically accountable as it should be, that focuses on maintaining standards for trade. Even QE doesn’t really make its way into the actual currency being exchanged. You can be 100% certain that a dollar today will still be worth a dollar tomorrow. The fluctuations are as small as they can be and trade is more efficient than ever before since we ditched Bretton Woods and moved to fiat.

        1. Money used to be actual physical metal you could test for purity.

        2. Well somebody drank the koolaid…

          Fiat currencies are bullshit. Central banks are bullshit. I get the appeal of them… But IMO the farthest it should ever go is the system of less than 100% backing with convertibility that we had. Pure fiat is a horrible system. It always leads to total loss of value eventually. The USD will be no different. Just look at the irresponsible spending our government has been able to do now that we have a totally fiat system.

          It will not last.

  12. It sounds like a currency much like games use. Atoms if you play Fallout 76. How many Libras can I buy for $10?

  13. Given that FB likes to censor, and ban, those with whom they politically disagree not to mention Paypal and MasterCard’s corporate censorship of accounts why would anyone trust them? If you happen to be someone, or buy something, with which they politically disagree are they going to decline payment, decline a deposit, or freeze your account? And this is just another way for the thuggish Zuckerberg to track your movements and monetize your life for his profit.

  14. i sure as hell ain’t giving Fuckerberg my financial info. quit using FakeBook about 6 months ago. life just keeps getting better.

  15. “Bitcoin has the capacity to undermine government control of money because you can freely exchange it with anyone in the world, meaning that no government or government-regulated entity has the capacity to interfere with its use. Because its supply is fixed at 21 million units, it also can’t be watered down by inflation.”

    Blatantly false. If governments want to, they can simply ban crypto and prosecute anyone who transacts with it. Second, the notion that bitcoin is free from inflation is absurd. Inflation means an increase in prices. Nothing is free from inflation (or deflation). All prices change. Bitcoin is highly speculative and has changed by thousands of percents over the years. It’s highly volatile.

    People use crypto as an exchange currency. You exchange into crypto, buy something, and exchange back. You’re exchanging relatively quickly so you don’t have to worry as much about volatility. Volatility is still a risk because there have been substantial fluctuations that occur within a single day. The primary advantage of crypto is privacy. No records of purchase, perfect for those concerned about data sharing, data collection for viral/stealth marketing, etc.

  16. ultimately neither of which will happen

  17. “Because its supply [of Bitcoin] is fixed at 21 million units, it also can’t be watered down by inflation.”

    No, it can only be watered down by 21 million other crypto-currencies.

  18. Can anyone tell me what is the difference between Facebook and Bitcoin?
    https://www.netclipart.com/isee/ixxoR_best-bitcoin-wallet-gif-bitcoin-png/
    Why the US Congress has called for a moratorium on its research and its supervision.

  19. Facebook main motive is earn money…

  20. Another example of using technology to solve a problem that nobody has. I’ll pass.

  21. As I have said on other threads in the past, I don’t consider crypto a good replacement for real currencies… BUT I think there is theoretically an AWESOME transaction system to be had there, that might take on a few pseudo currency traits.

    A decentralized system designed well could be an awesome ultra low fee payment processor. The problem with all types of crypto I know of is that nobody who designed one knew shit about monetary theory or the things that make a good medium of exchange.

    It needs to be able to scale almost infinitely to keep up with demand, but this scaling needs to be predictable and essentially based on usage and the number of transactions… This would keep it price stable. It would also keep the value from becoming something impossibly stupid. Humans like small, simple numbers. 50, or 1 or .5. people get. .0043 BTC doesn’t work in peoples heads. It sounds dumb, but it’s true.

    So keeping the value stable, and in a range that is people brain friendly are key things that have been missed every time I know of. Additionally, the creation of new coins for the people doing mining going on forever is the perfect way to keep transaction costs effectively zero.

    It’s too bad nobody smart has created a crypto that became a super common payment system, as there are cool aspects to it all.

  22. […] Brad Sherman (D-Calif.) harrumphed recently in response to Facebook’s announcement of the Libra payment system. Libra actually doesn’t seem to lend itself to such uses, but Sherman covered himself by […]

  23. […] Brad Sherman (D-Calif.) harrumphed recently in response to Facebook’s announcement of the Libra payment system. Libra actually doesn’t seem to lend itself to such uses, but Sherman covered himself by […]

  24. […] Brad Sherman (D-Calif.) harrumphed recently in response to Facebook’s announcement of the Libra payment system. Libra actually doesn’t seem to lend itself to such uses, but Sherman covered himself by […]

  25. […] Brad Sherman (D-Calif.) harrumphed recently in response to Facebook’s announcement of the Libra payment system. Libra actually doesn’t seem to lend itself to such uses, but Sherman covered himself by […]

  26. […] Facebook has created a financial service powered by a cryptocurrency called Libra. Facebook partnered with companies such as Mastercard and Uber for the project in hopes of officially launching next year. Anyone who wants to acquire Libra tokens will need to go through the tech company’s new subsidiary, Calibra. Users will have to show a form of government identification in order to receive the tokens. “Your financial data will never be used to target ads on Facebook,” Calibra Vice President of Product Kevin Weil said. In response to the announcement, U.S. Rep. Maxine Waters, D-Calif., called on Facebook to “agree to a moratorium” on the project until Congress and regulators have a chance to examine the situation given concerns about Facebook’s recent activity. Fortune also reports on the potential privacy implications of Facebook’s Libra project. [New York Times | Techcrunch: Facebook announces Libra cryptocurrency: All you need to know | Facebook Libra is ‘most invasive and dangerous form of surveillance ever designed’, critics say | Facebook’s Libra ‘Cryptocurrency’ Aims to Disrupt Payments. Bitcoin Aims to Disrupt Government…] […]

  27. […] Marcus is a Facebook executive who was grilled in two congressional hearings this week about a new digital currency project called “Libra,” which the social media giant is billing as a less volatile version of […]

  28. […] Marcus is a Facebook executive who was grilled in two congressional hearings this week about a new digital currency project called “Libra,” which the social media giant is billing as a less volatile version of […]

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