These Are The 3 Reasons Why Libra Can Never be Like Bitcoin
Facebook has recently been on the hot search frequently because it created the cryptocurrency, Libra. Due to concerns about data privacy issues and regulatory issues with potentially illegal use of data, the G-7 warned that the project had “serious” legal risks. Facebook was forced to defend the project in the US Congress.
Both Libra and Bitcoin have white papers and are called cryptocurrencies. But apart from that, there is actually a big difference between the two. Let's talk about the main differences between the two.
The biggest difference between Bitcoin and Libra lies in the underlying technology behind these two currencies. When using Bitcoin, the transaction is anonymously recorded on a public ledger called a blockchain. It is essentially a database maintained by a computer network and protects every transaction in a way that can hardly be tampered with.
Libra also uses blockchain or distributed bookkeeping technology. But unlike Bitcoin, the Libra blockchain (at least so far) is a licensed blockchain, which means that only a group of trustworthy people can join and trade. The Libra Association (a Swiss associate that includes Visa and Uber) is involved in this way. Members of each non-profit organization have invested at least $10 million in this project.
Ido Sadeh Man, founder and president of the Saga Foundation, a cryptocurrency company headed by JP Morgan's chairman, Jacob Frenke, said:
"Libra will establish a centralized structure managed by a non-elected 'association', the association 'Composed of large institutions that purchase their voting rights.'
Libra is an experiment in the digital age for the monetary system, so Libra is inevitably used to compare with popular cryptocurrencies such as Bitcoin. However, many experts question whether Libra can be called cryptocurrency.
Unlike Bitcoin's network, anyone with enough hardware and connected to the Internet can access and maintain the Libra network. Peter Van Valkenburgh (Research Director of the Coin Center for the Cryptographic Monetary Policy Think Tank) is mentioned in the latest blog.
The nature of cryptocurrency determines that it does not depend on any trusted intermediary. We believe that Libra is not a cryptocurrency because it uses a licensed ledger and it relies on a trusted The issuer holds, manages and supports this monetary asset.
Use Case Difference
The Bitcoin white paper describes virtual currency as a peer-to-peer payment system, through which people can exchange currency without going through a bank. Today, bitcoin is often seen as an investment. The common proverb "HODL" in the industry refers to long-term purchases and investment in cryptocurrencies. Bitcoin is often referred to as "digital gold."
Libra's primary use is cross-border payments and transfers, which are tied to government legal tenders and other assets, avoiding the value fluctuations that are common in cryptocurrencies such as Bitcoin and Ethereum. Libra is known by many industry insiders as “stabilized coins” and is designed to maintain a stable value.
David Marcus, Facebook executive responsible for the blockchain program, previously said:
Libra coins will be more like a traditional currency than a cryptocurrency.
Charles Hayter, co-founder and CEO of the digital currency comparison platform CryptoCompare, said in an interview with CNBC:
Bitcoin and Facebook's Libra represent different stages of currency development, but in a different way. Bitcoin is not privileged. , decentralized, deflationary and unstable. Libra coins are privileged, centralized, affected by supply and demand and linked to fiat currencies.
Hayter's “supply and demand relationship” means that Facebook and its partner companies can adjust the supply to match the amount of other resources in the reserve, thus changing the demand, thus effectively maintaining price stability.
On the contrary, the supply of Bitcoin is fixed, and its total amount is strictly limited to 21 million. Sadeh Man of the Saga Foundation mentioned: "The supply of Bitcoin is fixed and cannot respond to market demand. However, when Libra's authorized dealers deposit or withdraw money from their reserves, The new Libra currency will be created or destroyed."
When it comes to the regulation of cryptocurrencies, Facebook's Libra has become the focus of attention. Some people worry that regulators may confuse the company's blockchain projects with other digital assets.
Given the differences between digital currencies such as Libra and Bitcoin, regulatory issues are more complicated. Coin Center's Van Valkenburgh said:
Although Bitcoin does not require the involvement of financial intermediaries, the Libra model still relies on the entities that make up the Libra Association. The absence of an intermediary in a system means that there is no intermediary risk, so there is no need to regulate the risks that intermediaries may bring.
As mentioned in the Libra white paper, the Libra Association currently consists of 28 founding members and is expected to increase to 100 members by the first half of 2020. VanValkenburgh said that although there are "miners" in the Bitcoin network that record transactions, it is pointless to regulate "miners" because they are not trusted custodians of user funds. But on the other hand, the exchange of cryptocurrencies and wallets do require supervision.
At Wednesday's hearing, questions were raised about how Libra fits into existing financial regulations. When asked if Libra can be seen as a financial security, Facebook's Marcus's answer is no. He said that Libra should be regarded as a commodity.
US Securities and Exchange Commission Chairman Jay Clayton told CNBC last year that cryptocurrencies like Bitcoin could not be considered securities, and he believed that cryptocurrencies were "substitutes for sovereign currencies (such as the US dollar, euro)."
CryptoCompare's Hayter said that if Facebook and its partners can overcome the regulatory obstacles Libra faces, then this currency will undoubtedly have a huge impact on the global economy, and may even "bite out" Bitcoin. Andy Bryant, chief operating officer of bitcoin trading company BitFlyer Europe, believes that Libra coins may make people understand that in addition to the legal currency like the US dollar, there is a "other way" to store value, if Libra does this. That would be a huge improvement.
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