
Nipping Libra in the Bud - robin_reala
https://mondaynote.com/nipping-libra-in-the-bud-595cea72c6a4
======
carlosdp
Idk why this article is so high up here, it's not very good.

\- The article implies Facebook "already made money off Libra", that's false.
That $270M goes to the non-profit Libra Association in Switzerland, of which
Facebook is 1 of 28 current members. They don't "get" that money, it's there
to fund the Association's maintenance costs.

\- Facebook built this, yes, but they do _not_ have full control. In both
governance and validation, they have 1 vote of 28 (currently, the number is
supposed to go to 100 by launch). Will Facebook have the largest deployed
Libra wallet? Yes, at least initially. Can anybody make a Libra wallet? Yes.

This isn't a data play, it's very clearly a play at getting a bunch of people
in developing markets that can only pay with cash right now the ability to pay
online. That's a HUGE opportunity all on its own, they don't need our data to
make this worth it if it works.

How can they sell ads to people in emerging markets, Facebook's fastest
growing userbase, if none of these people can buy the things they are
advertising?

Facebook doesn't need an ulterior motive to make a buttload of money off of
this, if it works. I don't know why "experts" are looking for one.

Edit: I originally said the initial $10M buy-in per member goes to the Libra
Reserve, but that was in error. It goes to the Association to fund the non-
profit itself. The Reserve will be funded by the initial on-ramp of users.

~~~
drcode
> Facebook built this, yes, but they do not have full control

Well, the Libra documents are vague about timelines and how/if they plan to
move to a "permissionless" system- Instead of saying "they do not have full
control" you should qualify it to say that "their marketing materials claim
that even if it launches with full FB control initially, they state that they
hope to eventually transition to lower amounts of control."

~~~
carlosdp
No, they _do not have full control from the start_. Even in the current
permissioned model.

The 28 (will be 100) member companies do (or rather a majority vote of them
do). But Facebook itself _will not_ have full control, from the start.

This is really important and something the media keeps getting wrong. Facebook
isn't dumb, they know no one will trust something they control right now, so
they made it so they aren't the ones in control.

They likely _will_ be the biggest wallet app though, which is significant. But
they still can't single-handedly change the rules of Libra, they need a
majority of the Libra Association members to do that.

~~~
tehjoker
"But if you invest a lot of money, you can designate universities or
nonprofits to vote for you on this council. So, in effect, the more money you
invest, even though you may not have direct power over how the association
functions, you can still have enormous influence on the voting blocs of what
would in essence be a new international currency. I’m wondering what—"

[https://www.democracynow.org/2019/6/19/big_techs_war_for_you...](https://www.democracynow.org/2019/6/19/big_techs_war_for_your_wallet)

~~~
carlosdp
Sure, look, I'm not saying the Libra plan is perfect and unable to be
corrupted, I'm just saying most of the "critical analysis" I've seen thus far
doesn't go this deep into how Libra could actually go wrong.

They just say "Facebook controls this and they just want your data" and either
conclude that it's stupid and will fail or it's evil and must be stopped, with
no other reasoning.

~~~
tehjoker
I don't think that you need an in depth analysis to understand that Facebook
and a consortium of powerful private interests are looking to wrest further
control of the world financial system from local control. Corporations are the
opposite of democracies, so allowing a group of unaccountable players looking
after only their own interests to control the world money system would be a
disaster. To the extent the economy is already set up this way, it is already
a disaster.

~~~
carlosdp
By that logic, it's already a disaster, so this doesn't really change things?
All it does is allow more people to engage in payments online. Even in that
view, it seems like a potential net benefit to the world economy, maybe.

------
idlewords
A lot of discussions I've seen of Libra treat it as 12-dimensional chess where
one of the players is a malign entity called "Facebook", looking to maximize
revenue, or power, or in some other way malevolently patting a white cat in
its lap. I have a different theory to suggest.

What if Zuckerberg is simply a very idealistic person who happens to have full
voting control of one of the largest corporations in the world, and insists on
pushing it to idiosyncratic ends? This is a guy who a couple of years ago
decided that "we will cure all disease" was a non-ridiculous goal to put his
and his wife's name on.

A lot of the complexity around Libra can be explained as Zuckerberg pushing
for unfettered access to the financial system for everyone, and the many smart
legal and technical minds at Facebook trying to protect the company from the
regulatory and criminal nightmare such a system would pose in practice.

I may be wrong in this analysis, but in general I think we spend too little
time analyzing what vapid thought may have come into Zuckerberg's head this
time around, when it is a perfectly sufficient explanation of Facebook's
behavior. In this model, the complexity and subtlety of the strategy come from
people around the Great Leader trying to mitigate his vision, or adapt it to
their own bureaucratic or ideological ends.

~~~
jjeaff
Besides a few public comments here and there, what evidence do you see that
Zuckerberg is altruistic in any way whatsoever? I've seen quite a bit of
evidence and stories that he cares little for anything but total world
domination. Not so much on the other side.

I like to give people the benefit of the doubt too. But his main mantra since
forever has been that he wants to connect the world. But if that was really
his goal, then facebook wouldn't be such a closed, proprietary system.

~~~
dymk
> what evidence do you see that Zuckerberg is altruistic in any way whatsoever

[https://chanzuckerberg.com/](https://chanzuckerberg.com/)

~~~
jjeaff
A non-profit can certainly show altruism. It can also be a vehicle for legal
tax evasion, PR, and power. Why create a new foundation when there are
certainly existing and efficient organizations that could deploy your money
better?

~~~
veratwiger
Ah, but CZI is not a non-profit, it's an LLC, making it an even more efficient
vehicle for legal tax evasion, PR, and power. It also allows Mark and
Priscilla to make funding decisions affecting entire communities on a whim,
without the involvement of cumbersome board members.

------
seibelj
Cryptocurrency and blockchain technology have opened up permissionless
innovation in an industry that has been so choked by regulation that
previously only the largest, most well-connected players could get in the
door: finance.

You can, right this second, create a smart contract that allows extremely
sophisticated financial instruments and attract real users. The initial shoots
of innovation are already happening, such as MakerDao's Collatorized Debt
Positions (CDPs)[0] and Compound Finance for money market crypto
instruments.[1]

Regulators and governments can stick their fingers in their ears, outlaw the
technology, and drive everything offshore or underground. The point is that
these technologies are permissionless and unstoppable. As long as the internet
exists, you can't eliminate such technology and behavior.

Rather than knee-jerk outlaw progress in the industry by projects such as
Libra, governments need to let the industry mature and eventually pass laws
that protect consumers without stifling innovation. HN users especially need
to embrace their so-called "hacker" roots and stop lobbying for the state to
crush such innovative technology in its infancy.

Seriously - the outrage to blockchain and crypto on HN is entirely absurd.
This is cool, interesting technology and entrepreneurs should be analyzing it
for its disruptive potential rather than whining that there aren't enough
licenses and bureaucrats involved.

[0] [https://makerdao.com/en/](https://makerdao.com/en/)

[1] [https://compound.finance/](https://compound.finance/)

~~~
khawkins
This isn't progress, it's tossing out centuries of financial regulations,
monetary theory, and power structures to give a consortium of businesses more
power than nations. They're trying to set up what is effectively a global,
private central bank and replace the currencies of the world.

If Libra actually does become the dominant world currency, a handful of
individuals beholden to only to corporations and not to any nation can make
decisions which affect all of humanity. They can cause hyperinflation spikes
or prolong depressions with credit crunches. They can unilaterally cripple the
finances of critics by removing their ability to process the currency and
create an atmosphere where people are fearful of speaking out. They'll be able
to control the actions of countries by making their entire economy dependent
on processing the currency.

Their actions could send all of humanity into desperate destabilization, and
by the time you realize there's a problem it's too late. You can't undo, with
regulation or anything, power of this scale.

Also, the technology isn't permissionless, it's permissioned.[0]

[0] [https://libra.org/en-US/white-paper/#introducing-
libra](https://libra.org/en-US/white-paper/#introducing-libra)

~~~
seibelj
> This isn't progress, it's tossing out centuries of financial regulations,
> monetary theory, and power structures

That is my definition of progress. I want experimentation, not being
handcuffed to centuries of theory which can never be proven. Economics is not
scientific, and I don't like the system we currently have. We need more
private innovation and less state influence.

~~~
ktosobcy
Yeah... let's silly silicon valley be even more disruptive... thanks to
beloved FB we have lost privacy, airbnb ef-uped a lot of cities and uber and
other gig-economies are chipping in to the downfall of society. thanks...

------
bo1024
Is this article correct in its claims that Facebook is in control of Libra
and, more specifically, that Facebook makes money from the initial
registration fees and will be able to directly make money in the future from
e.g. transaction fees?

~~~
drcode
FB has written marketing materials saying that they would like to have less
control over Libra, but it's very vague around timelines. Clearly, their
incentives are to maintain as much control as possible while making generous
statements about how they hope to have less control in the future, to derail
as many regulatory attempts as possible.

~~~
theorangejuice
What is vague is when and how Libra will become permissionless. It is very
clear right now why Facebook don't have control over Libra more than any other
association member.

------
crispyporkbites
Facebook (or a consortium of companies, whatever this is) controlling a
significant global currency feels like a dystopian nightmare. It's one of very
few things that genuinely worry me.

~~~
djohnston
really? libra is the thing that keeps you up at night?

~~~
save_ferris
Not OP but sure. Having both a vast trove of data on user behavior, emotions,
and financial background coupled with its own financial system is deeply
concerning.

~~~
bpfrh
I don't really understand that point.

If facebook wants to control users and their financial data, wouldn't it be
easier to simply make a fintech?

I mean, sure libra gives them more data, but the same could easily be reached
if facebook founds a fintech?

With the current libra afaik they only have 1 seat out of 28 so less control
than with a fintech.

With libra you could at least control more than with a fintech.

------
buboard
But if Libra is so well-founded, what if, in the face of regulation, facebook
decides to leave the project? And what if the project is cancelled altogether?
It will be an admission of defeat and bowing down to the banks, and there are
thousands of cryptocurrencies that could take its place.

------
lowdose
The ZuckBuck has the potential to achieve massive adoption thanks to the
hundredth monkey effect. It would be awesome if somebody like Brian Acton
would tweet the #ZuckBuck hashtag. This is an awesome opportunity to brand
this ridiculous proposal with possibly sticking language network effects.

[https://en.m.wikipedia.org/wiki/Hundredth_monkey_effect](https://en.m.wikipedia.org/wiki/Hundredth_monkey_effect)

------
dep_b
The World does need a easy to use system to do cross-border payments. US
clients often say “can’t we use PayPal?” while it’s often a major pain in the
ass for the receiver outside of the US perhaps Europe. Bank transfers are
somehow very hard for a lot of people. So yes, I do see something that can
give me money in my bank / hand easily across borders succeed. Jay because the
alternatives suck.

------
lhl
As a long-time follower of digital currencies, while I have some skepticism
about Libra (and see plenty of opportunities for competition), it's hard to
take an editorial like this seriously when it's making such terrible
arguments.

The piece starts by claiming that Facebook is profiting from Libra by
collecting one-time fees from participants, and that this would somehow be
motivation to launch the endeavor. This is so wholly wrong that my head spins
a bit at this - the Libra Association members pay in $10M (which gives them a
single vote, and "Libra Investment Tokens"), and the cash goes to support 1:1
backing into the Libra Reserve - while there may be a float, the return is
basically de minimas since it's basically going into short term treasuries and
the like. Considering these funds are controlled by the association (a Geneva
non-profit) and that all members have equal voting right, I don't see how
there's any way that Facebook Inc (or any individual member) could actually
make a "cool billion dollars" in any way from this. Either this argument was
made from not taking a few minutes to make a cursory read any of the website
announcements or white papers, or is, I don't know, pure imagination?

The second argument is less bewildering, but shows even less understanding of
what kind of play Libra is. It imagines that somehow FB will benefit (as a
1/100th investor in the LA) from transaction fees! If the goal were to
maximize tx fees from a payment system within FB properties, they'd have been
much better off launching a first party payment system (the same is true if
the only goal was for collection of transaction data, btw). Sure FB wants to
make money from Libra, but it'll be by creating exactly what it says on a tin
- an open access, low friction, cross-border, transactional digital currency.
FB benefits from opening up huge markets in (especially) its EM marketplace,
which has been largely underserved by er _everyone_ , and by creating new
markets (microtransactions, small international transfers) that have been
simply impossible without a true "internet" currency.

Of course there won't be any privacy, but this IMO is driven as much by
KYC/AML/global money flow of sovereign interests, as much as for consumer data
mining purposes. We know how to make private cryptocurrencies, but it'd simply
be DOA if that were what were proposed to any regulatory authority around the
world.

IMO FB has pushed the conversation forward in a good way and I'd say that it's
up to everyone else (whether its competing national or corporate consortiums,
or open-source/independent cryptocurrency projects) to step up and offer some
better alternative.

For those arguing that this should simply be stopped (or for the status quo of
how money and banking currently work globally, which I personally think is
much worse than what Libra promises), well, I guess at the very least, argue
better.

------
ilaksh
This is sort of the first level reaction. If you can understand what Libra and
cryptocurrency really are, you may be able to get to another level.

The next level of grasping this is to realize that real scalable
cryptocurrency is the actual threat to the establishment. And secondly to
realize that Libra is the polar opposite of real cryptocurrency.

Cryptocurrency that scales is digital cash. It is controlled entirely by
citizens. It is difficult to track. Difficult to tax. Nearly impossible for
governments to disable access for person's or countries. It is difficult for
centralized companies to profit from it. And it provides a direct competition
to all fiat currencies.

Libra on the other hand is none of those things. It is totally centralized,
completely dependant on fiat currencies. Controlled by one company who will
give backdoors to governments. Visa, MasterCard, and PayPal (all sponsors of
Libra) will be able to continue to take a cut of all digital transactions. The
Libra group will profit from interest on your assets and happily freeze them
if the government sneezes in your direction.

So my main concern is that the government may realize this and do a 180. And
that Libra could block adoption of real cryptocurrencies that are making big
pushes for scalability.

~~~
cycrutchfield
>Cryptocurrency that scales is digital cash. It is controlled entirely by
citizens. It is difficult to track. Difficult to tax. Nearly impossible for
governments to disable access for person's or countries.

Why do I get the feeling like you are describing these as positive attributes?
Last time I checked, unfettered money laundering, tax evasion, and buying
illegal shit like hitman contracts isn’t exactly a good thing.

>It is difficult for centralized companies to profit from it.

Oh, you mean like premining or ICOs?

~~~
lightgreen
> buying illegal shit like hitman contracts

I’m pretty sure all of dark web hitman contracts are scam. There’s no evidence
to believe otherwise.

