Social media giant Facebook is getting into the digital currency business. The company has announced plans to introduce a cryptocurrency called Libra to the marketplace, just as soon as it gets approval. The driving force behind Libra is to make online payments and transactions easier, especially for people without traditional bank accounts or credit cards.
What Is a Cryptocurrency?
Before you can consider clicking Like on Libra, it’s important to know what a cryptocurrency is. You can’t physically trade cryptocurrency because there are no tangible dollars and coins.
Libra is a digitally signed computer code. It aims to be like Bitcoin, the most well-known digital currency on the market. But, Facebook is taking a slightly different approach.
“Libra is a stablecoin backed by corporations and based on US dollars,” Logan Golema, chief technology officer for Hercules SEZC tells Parentology.
Those corporations Golema is referring to include PayPal, MasterCard and Visa.
How Does a Cryptocurrency Work?
When people buy cryptocurrency, like Libra, they’ll be able to store it in a virtual wallet. When they need to send money or buy something, they spend their Libra currency just as they would their normal cash. Facebook is hoping to keep Libra’s value consistent by tying it to established currencies.
“They’re legitimizing cryptocurrency to billions of people and making it mainstream,” Golema says.
Golema tells Parentology that with such a large user base, it makes sense for Facebook to move into the cryptocurrency space. He doesn’t believe, though, that Libra can ever replace existing cryptocurrencies like Bitcoin or Ethereum.
Facebook’s Hurdles with Libra
The Libra blockchain will provide a tamper-proof record of the transaction on the network, but that may not be enough for people to put their trust in it.
It’s no secret Facebook has been battling privacy issues, which could make some people skeptical of joining the Libra bus.
The head of the House Financial Services Committee has asked Facebook to suspend plans for Libra until there’s time to study it more closely. As of this writing, hearings are scheduled for July in both the House and Senate to further discuss Libra. US lawmakers want to know what kind of impact Libra will have on US currency, among other things.
In a statement to AP News, Facebook said, “We look forward to responding to lawmakers’ questions as this process moves forward.”
What’s Next for Facebook Libra
Golema believes Facebook will be successful in getting people to accept Libra. “Let’s not forget a lot of people have already signed over their privacy for accessibility and convenience.”
Lyft, Uber and Spotify have already signed on with Libra. They’ll likely accept Libra once it launches. Facebook hopes to debut Libra sometime next year.