
Facebook, Libra, and the Long Game - stanleydrew
https://stratechery.com/2019/facebook-libra-and-the-long-game/
======
gooseus
> The largest leap will come last: Libra as a genuine currency, not simply a
> medium for transaction. This will be function of volume in the previous two
> use cases, and is understandably concerning to governments all over the
> world.

Well that's certainly an understatement.

This is literally the only mention of government through-out the entire
article. The only mention of banks is in the previous paragraph stating there
are no banks in the coalition.

Banks and governments go together like peas and carrots, they also control
pretty much everything and have for hundreds and thousands of years. This
control is derived from a few places, but primarily from a monopoly on the
control of the currency and the monopoly on coercive force.

No government is going to let FB and any coalition do an end run around their
national currency and their banking institutions. They're also not going to
partner with an international consortium to have them replaced with something
they only partially control.

I really don't know why this isn't a larger part of this conversation. I think
people need to be cracking more history books and less William Gibson and Neil
Stephenson novels.

~~~
simias
>I really don't know why this isn't a larger part of this conversation.

That's been the elephant in the room ever since Satoshi published its paper
more than a decade ago. When I discuss with cryptocurrency enthusiasts I often
get the impression that they think that banks are this kind of useless
parasite body that somehow appears like mosquitoes around a pond in summer.
That they only serve to basically operate ATMs, send you your Visa card and
crash the market every other decade or so.

This is of course a gross misunderstanding of what banks are, what they do,
why they do it and where they come from. In particular the idea that "bitcoin
is going to kill banks" (a very common sentiment in my experience in
cryptocurrency circles) is about as meaningful as "this new type of snowboard
is going to kill ski resorts!". No it won't, it might change some things about
how they operate but after the transition period it'll be business as usual.
Cryptocurrencies don't come even close to replacing most of the services
offered by banks. Actually, they don't even come close to replacing most of
the services offered by actual currency.

It's this weird cognitive dissonance that you encounter in conspiracy theory
circles: the banking system is this hellish beast that steals money from the
honest middle-class worker, operated from a global circle of elites acting
from the shadows and that must be destroyed at all cost to save humanity. How
do you do that? By replacing their currency by your own, they'll never see
that coming, those idiots.

~~~
sprafa
This is one of the reasons I dropped out of crypto for years, most of its
supporters were completely delusional and tragically uninformed about actual
banks.

I always considered two datapoints to be fulcral A) ease of use, which Bitcoin
has never had and B) potential to be overtaken by an actual bank and twisted
into whatever purposes it wanted due to the 51% error. That is, how hard would
be it for JPMorgan or Deustche Bank to just buy 51% of Bitcoin and make it do
whatever they wanted? I could never see the potential for either fact to be
avoided, as much as the frothing Bitcoin-enthusiasts would like it to.

~~~
panarky
_> This is one of the reasons I dropped out of crypto for years, most of its
supporters were completely delusional and tragically uninformed about actual
banks._

The reason I stayed in is because Bitcoin solved a seemingly intractable
problem, it works in the real world, and it's survived and even thrived in the
face of fierce attacks for a decade.

Yes, there are many shills who are delusional and ignorant. Yes, speculators
and fraudsters are running wild.

None of that changes the fundamental characteristics that make this a
fascinating and promising technology, network and social movement.

~~~
creato
> and it's survived and even thrived in the face of fierce attacks for a
> decade

What fierce attacks has bitcoin faced?

Sure, lots of people mock and criticize it, but no real action has been taken.
The people criticizing it have just as much influence (or maybe even less)
than the delusional and ignorant true believers.

To me, a fierce attack would be regulatory action taken by various world
governments, but that hasn't happened. To the contrary, even countries that
probably should care (e.g. China, with its capital controls, and bitcoin
mining seemingly used to evade them) appear not to. If anything, that shows
just how insignificant bitcoin is.

My vague impression (I don't follow this closely) of US regulators is that
they have given bitcoin reasonable or even slightly favorable treatment.

~~~
CodiePetersen
>>Sure, lots of people mock and criticize it,

Bitcoin and crypto only survive because of trust. There was a time, especially
on Bloomberg, when the news was constantly criticising it and sowing mistrust.
"It's only used by hackers" or "hit men are murdering people for crypto on the
dark web" or "terrorist are funding operations with crypto.". So there have
been countless efforts to break the core of what makes a currency valuable.

Additionally, Bitcoin specifically is illegal in several countries, China
being one of them. The US has also seized several piles of bitcoin and like
they do with other seized assets they put it up for auction. These guys buy
the stuff up cheap and immediately sell it. Now that's not a specific attack
but it is damaging to prices. Lastly exchanges are requiring photo id to buy
things now because of regulation which makes it even harder for people to get
into. I can buy bullets and in some cases guns more easily.

So there is actually plenty, not to mention numerous attacks on the network in
the early days. Who knows who was behind those.

------
boh
Adding the words blockchain and cryptocurrency to this new Facebook initiative
gives it an air of "innovation", the sort that reacts to criticism with "this
is too new and innovative for you to understand", and "stogy governments don't
like to innovate like we do, so they want to stop us with old timey regulation
(and consumer protections)".

Libra is essentially an ETF. It's a vehicle that will take deposits from
customers and invest them in interest-yielding securities and currencies.
Unlike a bank, customers forfeit their right to gain interest from their
deposits and it will instead service operating costs (and any money left over
goes to founder members). Libra is effectively planing to receive deposits,
manage money and process transactions, despite not even attempting to meet
regulatory requirements (though they plan to "shape the regulatory
environment"\--their words). What's so innovative about this venture is its
potential for further data harvesting and potential income streams. Facebook
isn't going to harvest any data produced from this venture--that is unless the
customer willingly gives it to them. Why would a customer willingly provide
this access to Facebook? I think anyone using FB for the past decade can
answer that question--those regular TOS updates are hard to follow.

Libra isn't so much a subversion of the existing order, as it as an act of
financial engineering to service a social media company. What it "could be"
doesn't justify what it already is.

~~~
thatfrenchguy
> Libra is essentially an ETF

But what they invest in will be interesting: what happens when the next
financial crisis comes ? When the dollar plunges ?

~~~
mountainofdeath
These sorts of "currency" are typically invested in short term, low-risk
deposits. Think bank certificates of deposit, US treasuries and the
equivalents in foreign currencies.

~~~
willhslade
The buck still broke in 2008; that's what started the crisis.

------
padobson
I can't help but think that Facebook doomed this "distributed ledger"
possibility by trying to be first to market with a tarnished brand.

The developing world would hugely benefit from a scalable technology that can
efficiently service digital transactions. The piece demonstrates this with how
quickly WeChat Pay and Alipay penetrated China.

I can't imagine the possibility for prosperity when 3 billion consumers enter
the global economy in a matter of years.

Alternative currencies were always going to have to compete (or at least deal
with) with powerful governments, and all the most powerful governments are
most easily manipulated by appealing to a mass audience.

The Facebook brand isn't capable of doing that right now. There's far more
incentive for politicians to talk about breaking Facebook up than to encourage
Facebook to embed itself in the financial lives of their constituents.

If a decision is made to breakup Facebook, spinning off Libra will be right at
the top of the list. I can't see how it survives as a stand-alone technology
without the support of Facebook's network effects.

~~~
camgunz
> The developing world would hugely benefit from a scalable technology that
> can efficiently service digital transactions. The piece demonstrates this
> with how quickly WeChat Pay and Alipay penetrated China.

I hear this a lot in cryptocurrency threads, and I vehemently disagree.
There's no doubt that using "some other currency" (currency or cryptocurrency)
is better than using a corrupt, authoritarian regime's currency. But there's
also no doubt that being able to execute monetary policy is a huge advantage
for any country. Read anything about currency manipulation or currency
markets. Not being able to control the supply of currency your goods (or
others' goods, i.e. petrodollars) are valued in is a huge disadvantage.

It feels like there's a huge political push to try and get the "developing
world" (with all the hand-waving that's been applied to this term) onto
cryptocurrencies, but that permanently puts them at a disadvantage compared to
countries that can manipulate their own currency. I think selling this is
short-term-ism at its worst.

And honestly? It's also vaguely colonial. I would love to hear from people in
these countries what they think about cryptocurrencies, if anything.
Cryptocurrency advocates saying, "we know what's best for you" is super
troubling to me.

~~~
aserafini
Regarding a country’s ability to manipulate their own currency or execute
monetary policy which is mostly in the direction of printing more: the end
game of crypto seems to take this option off the table for all governments in
the long term.

Why? Because assuming all other things being equal (convenience as medium of
exchange etc.), an individual is always going to prefer holding currency that
isn’t subject to inflation.

An individual is never going to generously allow their government to erode X%
of their liquid cash voluntarily.

This future doesn’t require any crypto ‘dictating’ its money supply policy, it
just requires at least one fixed supply crypto to exist in your country that
is as convenient as existing cash / online payment to make governmental
monetary policy useless.

The problem for governments is: the genie is out of the bottle regarding fixed
supply.

Note that I’m not saying it’s good or bad that countries cannot effectively
control money supply anymore but it seems inevitable they can’t in the long
term.

~~~
sprafa
Governments can easily ban and pursue anti-crypto measures to prevent anything
such as money they can't control.

Yannis Varoufakis said it best: the idea of apolitical money is a fiction and
a dream. Money has always been associated to and controlled by governments.
Bitcoin currently is actually heavily manipulated/moved by Tether which is
controlled by Bitfinex.

~~~
aserafini
I agree governments will try to ban fixed supply currencies but I don't
believe they will succeed.

China still can't stop its citizens accessing the open internet on VPN. North
Korea still can't stop its citizens smuggling wikipedia into the country on
USB sticks. Governments won't be able to stop citizens storing their wealth in
fixed supply currencies.

> Bitcoin currently is actually heavily manipulated/moved by Tether

[citation needed]

~~~
sprafa
It was an article on hacker news. I cba to find it but will link if I do. Of
course it’s important to provide sources.

------
warp_factor
I'm crossing my fingers that this pseudo crypto money never takes off. Having
Facebook control this would be so terrible and the proof that we didn't learn
anything over the last couple months. Don't fool yourself even though they
released a white paper and some pseudo decentralized schemes this is no
different than a casino chip.

Unfortunately I feel like it might pick up and become a thing.

~~~
scarface74
The article specifically says that FB does not have a controlling interest or
the ability to decide who joins the consortium.

~~~
warp_factor
That's the way they marketed it. They know they had to do this little
concession in order to get Libra to pick up so that people would repeat
tirelessly that it's not controller by Facebook and therefore it's good.

But it's controlled by Facebook and friends and the influence they would get
over any decision is absolutely huge

~~~
scarface74
Do you have any citations that contradict the article?

 _The Validators Who, then, are the validators? Well, Facebook is one, but
only one: currently there are 28 “Founding Members”, including merchants,
venture capitalists, and payment networks, that meet two of the following
three criteria:

More than $1 billion USD in market value or more than $500 million USD in
customer cash flow Reach more than 20 million people a year Recognition as a
top-100 industry leader by a third-party association such as Fortune or S&P
These “Founding Members” are required to make a minimum investment of $10
million and provide computing power to the network. In addition, there are
separate requirements for non-profit organizations and academic institutions
that rely on a mixture of budget, track record, and rankings; a minimum
investment may not be necessary. Libra intends to have 100 Founding Members by
the time it launches next year._

~~~
warp_factor
They are the ones selecting the "members" and they will have a huge influence
on any updates or any controversial topic or potential fork.

Don't fool yourself, this whole thing has been carefully orchestrated to look
like if it was an open community but it is very tightly controlled by Facebook
and friends.

I will not touch this with a 100 foot pole.

~~~
scarface74
Again, that’s not what the article says. They have clear list for what the
membership requirements are and all of those requirements are administered by
a third party.

------
CrankyBear
"Which, by extension, means that Facebook will not control Libra."

And, if you believe that, I have a fine bridge in New York I'll sell you for a
few Bitcoin.

~~~
bhupy
What's the counterargument to this?

~~~
simias
The incentives don't seem to align in that direction. What would be the point
for Facebook to create a promote such a currency if they can't control it at
some level?

I fully expect that even _if_ the core of the cryptocurrency _might_ actually
be decentralized and not directly controlled by Facebook (and I don't believe
that either, for the record) the practical implementation of this will give
Facebook more than enough weight to shut anybody down if they so desire. A bit
like how email is supposed to be decentralized but if these days gmail decides
it doesn't want to play with you you're effectively screwed.

Facebook (and other tech giants) have absolutely nothing to gain from
decentralization and privacy when their entire trillion dollar business model
relies on siphoning as much data as possible. Anybody thinking that Facebook
is somehow going to usher the golden age of cryptolibertarianism and the
decentralization of money is frankly shortsighted. Then again,
shortsightedness is a common symptom of libertarianism (or is it the other way
around?).

~~~
bhupy
But given the system laid out in the white paper, what specifically gives
Facebook the ability to exert this kind of control, even in the long run?

I think we all agree that Facebook is incentivized to behave in certain ways,
but if self-limitation is baked into the system, how does that matter?

This is a genuine question for which I would love an answer.

~~~
carleverett
The white paper explicitly gives the Libra Association (i.e. Facebook and its
partner validators) governance control over the cryptocurrency.

Here's an easy scenario to imagine that shows how incentives would get
misaligned: Facebook and the other validating nodes of Libra are financially
compensated by interest from the collateral for Libra tokens. If Libra is
successful in its mission, it will become a global currency that's stronger
than the assets that underly its collateral.

When this happens, suddenly Libra being a collateralized stablecoin stops
making sense. Kind of like when the US Dollar no longer needed to be backed by
gold since it was a strong enough currency/unit of financial measurement on
its own. The US then got rid of the gold standard and has since saved itself
untold money in custodial expenses they would have been paying to hold all
that gold.

The Association would never do this for the Libra however since it is
literally how they are funding their own operation. Even if it's in the best
interest of all Libra users, the centralized governance association with all
of the authority to make this improvement would choose not to because it's not
in their best interest to do so.

There's no leap of imagination there - it's just how power and incentives
work.

~~~
bhupy
Seems to be an excellent breakdown of how the _Libra Association_ (of which
Facebook is an equal among many) would control Libra, but not Facebook alone.

I think the strongest argument towards the latter is the long-run aggregation
theory one re: Calibra owning the most Libra _users_ , and not having to own
the underlying Libra system itself.

~~~
carleverett
Correct, my issues with Libra's centralization has to do with the Association,
not Facebook alone. I see what you're saying though where Calibra could itself
be used used as leverage by Facebook.

------
reddygaru
I have a totally out of the box thought here.

I think Libra is a distraction from Facebook for people to forget Cambridge
Analytica etc. FB may have unleashed this as a weapon for people to rally up
or againast and Fb doesn't care if it succeeds or fails because it is a new
category and doesn't affect it's bottomline.

~~~
buboard
facebook.com's s bottom line is in exponential decay since a few years. They
are trying to find a future here.

------
ghayes
My primary concern is that with a set of 20 or 100 validators, you can’t call
it a decentralized platform (it’s a blockchain run exclusively by a
centralized consortium). The article discusses the fact they intend to to
decentralize it in 5 years, but that would be the equivalent of a dictator
stepping down and promoting democracy which... doesn’t always come to pass.

~~~
sigmar
I've been wondering about this too. I don't see how the incentives are setup
that the Association would want to move towards an entirely permissionless
network. Especially if Libra gets heavily adopted at 100 nodes (as they don't
need to improve trust at that point and letting more companies into the
association will decrease transaction throughput).

~~~
nybble41
There are also some technical barriers on the path to a permissionless
network. The consensus algorithm Libra is using currently requires full
connectivity between validators and is only robust so long as 2/3 of the
validators can be trusted. Much has been made of the risk of a "51% attack"
against Bitcoin, but one need only control 1/3 of the validator _nodes_ to
disrupt Libra, which is a far lower threshold than 51% of _computation
capacity_. Your standard botnet isn't much of a threat to Bitcoin since the
participating devices aren't optimized for mining, but Libra would be an
entirely different matter.

~~~
woah
The 1/3rd / 2/3rd pattern in a lot of blockchain BFT protocols is really
elegant. If 1/3 of the voting power of a chain wants it to stop, then it
probably shouldn't be running. It takes 2/3rds of the voting power for the
validators to actually steal anyone's money or alter history.

Your botnet example is a non-sequiter. Since power in BFT protocols does not
stem from the wasting of electricity, botnets have nothing to do with any
possible attacks on a BFT system.

~~~
nybble41
On the contrary, botnets are far more of a problem in systems designed to make
it cheap to run a validator node. This creates an obvious opportunity for a
Sybil attack: spawn a few thousand nodes on other people's insecure IoT
devices and you immediately control far more than the requisite 1/3 or 2/3 of
the network. It's a lot harder to control 51% of the hash rate for a PoW
design like Bitcoin which effectively requires specialized hardware to mine
competitively.

I'm assuming they implement countermeasures against simply running a bunch of
VMs or containers masquerading as a large number of independent nodes, for
example by looking for multiple connections from the same IP addresses or
subnet. Otherwise botnets would indeed be unnecessary to carry out the
attack—anyone could do it from home with a modest PC.

------
jeremyjh
This article seems to be making the claim that the Libra blockchain will not
be viewable by anyone other the validators. This is counterintuitive - even if
only validators can confirm new blocks I expected the chain would be public,
there would be explorers, etc. Does anyone know if this question has been
answered somewhere definitively?

~~~
lucasverra
[https://librabrowser.io/stats](https://librabrowser.io/stats) already exists
for the testnet with real time stats

------
socialist_coder
A huge amount of person-to-person sales take place through FB marketplace. If
FB can drive some % of those people to use Libra that will be a good start to
adoption.

------
vmurthy
I am someone you might consider early adopter. I enjoying tinkering with the
latest gadget, getting that fancy domain name with an extension like .ooo (
yeah! not kidding :-D ) but .. when it comes to FB, I don't mind being a
luddite. Add to that, the country I live in currently (India) has a ban on
cryptocurrencies and we have tons of alternatives like Paytm[0] and UPI
(Inter-bank transfers in an instant)[1]. So, Mr Zuckerberg et al, thank you
but no thank you.

To me , the most interesting part is towards the end of the article (emphasis
mine) > This applies even more to the Calibra wallet: Facebook _promises not
to mix transaction data with profile data_ , but that entails, well, trust ...

We all know how the promises turn out [2][3]

[0][https://paytm.com/](https://paytm.com/)

[1]
[https://en.wikipedia.org/wiki/Unified_Payments_Interface](https://en.wikipedia.org/wiki/Unified_Payments_Interface)

[2][https://www.theinquirer.net/inquirer/news/3032946/whatsapp-a...](https://www.theinquirer.net/inquirer/news/3032946/whatsapp-
and-facebook-are-sharing-user-data-after-all-and-its-legal)

[3][https://www.forbes.com/sites/lensherman/2018/05/23/zuckerber...](https://www.forbes.com/sites/lensherman/2018/05/23/zuckerbergs-
broken-promises-show-facebook-is-not-your-friend/#359b79477b0a)

------
AlphaWeaver
This article captures one of the biggest problems I've seen in the discussion
about Libra, which is that everyone has been writing it off as a currency that
Facebook can control. In reality, Facebook's control is limited to being equal
to the other members of the Association. Facebook controls the Calibra wallet,
_not_ the currency as a whole.

The thing that really drove this point home for me was when I browsed to both
websites. Browsing to the Calibra wallet website, the entire site broke
because I have blackholed all Facebook and tracking domains through NextDNS.
When I browsed to the Libra website to view the whitepaper, everything worked
just fine. This is a great demonstration of who is in control of what.

That being said, I think this article also outlines the clear incentives as to
why Facebook would like to promote Libra in the first place, which is the data
they have the potential to gather through the Calibra wallet.

------
olivermarks
Disappointed Ben didn't add a paragraph or two about privacy concerns. The MC,
Visa will float on top of libra unencumbered by bank fees, but our
relationship with credit card firms and our privacy is regulated in the
western world. The Calibra wallet logic is going to need greater privacy
protections for the user or we will have a situation worse than the current
platform monopolies, with only pea shooters like the EFF working for users
[https://www.eff.org/issues/privacy](https://www.eff.org/issues/privacy) We
need new law like the US section 230 for personal rights and privacy as well
as free speech
[https://www.eff.org/issues/cda230](https://www.eff.org/issues/cda230)

------
bndw
What about privacy? Most of these Internet giants make money hoarding user
data; will Libra open up a new dataset to collect and monetize for these
companies? Will Libra transaction data be more thorough than what they're
currently able to get from 3rd parties?

~~~
drcode
No worries, they're just gonna take a pic of your government ID and
fingerprints for KYC requirements which are securely isolated in a vault in
Switzerland where they will remain 100% safe, except in that rare instance
where you need to buy a cup of coffee, and they therefore need to inspect all
your records to make sure you're not funding terrorism. /s

~~~
MBCook
From the various articles I’ve seen it looks like they don’t think they need
to follow KYC because it’s not ‘real’ money.

I’m sure the government will have something to say about that.

~~~
drcode
Yeah, that's really what this is all about- Zuck probably keeps asking stuff
"can't we just have a payment button right here in an FB baby shower
announcement?" and his legal departments says "you can't do that for lots of
regulatory reasons, including KYC" and so Libra was born.

------
jmull
Pretty interesting. It's good to see a deeper analysis of this.

This part though:

> ...while its members — who again, are the validators — do control the Libra
> protocol, Facebook does not control the validators. Which, by extension,
> means that Facebook will not control Libra.

That's true, but from my point of view, that distinction isn't too important.

In either case, there are a relatively very small number of individuals who
control Libra in an opaque way.

By spreading the control out a little, I think it reduces short-sighted and
single-perspective thinking, which is good, but it's still going to be run in
a self-interested way for the handful of companies that control it and the
executives that control those companies.

------
apo
> In practice, it is much more complicated: while a limited set of
> “validators” — aka miners — share a history of transactions in (individual)
> blocks that are chained together (i.e. a blockchain), what Libra actually
> exposes is the current state of the ledger. In practice this means that
> adding new transactions can be much quicker and more efficient — more akin
> to adding a line to a spreadsheet than rebuilding the entire spreadsheet
> from scratch.

The author seems to be referring to the two different accounting models in
crupyotcurrency: the coin model and the account model.

The coin (aka UTXO) model mimics physical cash. A transaction changes
ownership of a digital token, leaving a chain of ownership in its wake. This
is the model used by Bitcoin.

The account model credits and debits specific amounts from an account. This is
the model used by Ethereum.

The author seems to imply that the speed of a network depends on which
accounting model is being used.

It doesn't. In both cases, signatures must be validated, and this is the most
costly computation. In neither case is the entire chain of transactions
reloaded to verify a single payment. Instead, the most recent state is
extended.

Transaction volume is largely a function of how open the network is and how
trusted the parties are that write blocks. The more open the network to
membership by arbitrary players, the slower it will be. The less trust in
those writing blocks, the slower it will be.

Bitcoin users value censorship resistance and insist on validating their own
blocks (or at least they should). The network is configured make this possible
by, for example, setting a block size limit among other features.

Libra will need none of this. Validators will be implicitly trusted. What they
say goes. A certain minimum hardware spec can be set and enforced, ensuring
fast payment processing, at the expense of censorship resistance and openness.

------
lanrh1836
I haven’t found many “takes” on Libra talk about Calibra, which is FB’s Libra
wallet and, if this thing takes off, would likely by default be the top wallet
for Libra transactions.

Calibra would require full identity verification e.g. submitting SSN and a
copy of your picture ID. Getting that info is way beyond what FB has about you
now.

------
miguelmota
Do companies that bought in to join the Libra alliances for 10 million each
mean that they'll receive all transaction history and purchasing patterns of
everyone on the Libra network as well as receive a share of the fees in the
future? Sounds like a bargain if that's the case

~~~
buboard
the blockchain only contains wallet addresses, not info about who is buying
what. only sites having access to the checkout can know that.

------
figlicious
Thing with libra is that its not a cryptocurrency nor does it move the
distributed agenda forward. It moves transactions from happening off-the
platform to being on it.

FB is in it for themselves. The consortium of third party players is for
shielding themselves from anti-trust concerns

------
coralreef
_" while its members — who again, are the validators — do control the Libra
protocol, Facebook does not control the validators. Which, by extension, means
that Facebook will not control Libra."_

Within the designed protocols, yes, Facebook gets one vote equal to the the
single vote of any other node.

Outside the system lens, Facebook brings this product to potentially 2.38
billion users. That dwarfs the value that any other validator can bring.

If Facebook becomes unhappy with what the consortium is doing, it can simply
say "Hey, we're gonna stop using Libra, and start a new fork." So while they
may not control other validator members, they can certainly strong arm them
into falling in line.

------
creeble
Forgive my stupidity, but I don't understand this statement by Ben
(Stratechery):

"In practice, it is much more complicated: while a limited set of “validators”
— aka miners — share a history of transactions in (individual) blocks that are
chained together (i.e. a blockchain), what Libra actually exposes is the
current state of the ledger. In practice this means that adding new
transactions can be much quicker and more efficient — more akin to adding a
line to a spreadsheet than rebuilding the entire spreadsheet from scratch."

How is this different than Bitcoin, and why does it require a different level
of trust?

You are still trusting the validators (miners) either way, correct? And how is
it more efficient?

~~~
snarf21
Libra intends to use Proof of Stake. This means that the initial members will
"stake" some amount of Libra and now all transactions can only be validated by
them. You as an individual can't validate any new transaction. The assumption
is that because the PoS validator has a huge stake in this currency, they will
behave rationally or otherwise they would devalue their own stake. The trust
here is completely centralized and is a rich get richer model. If FB or PayPal
or a member doesn't want to add your transaction, they can completely block
you. They control what is true.

Bitcoin uses Proof of Work. Consensus is decentralized. Anyone can do some
"work" (hashing in this case). If they find the magic number to get the right
hash, they get rewarded by the Bitcoin protocol itself. This is also the only
way _new_ Bitcoins are created. It is only when one of these magic numbers
gets found that transactions get added to the Bitcoin ledger (every 10
minutes). The rule is that the longest ledger chain wins so everyone is
running in parallel. You don't need to own any Bitcoin to do mining to get
"free" Bitcoin. The trust is decentralized (in terms of control) and no one
can prevent anyone else from validating Bitcoin transactions as long as you
follow the same rules as everyone else.

~~~
creeble
Probably too late to keep this discussion going, but...

I understand Proof of Stake vs. Proof of Work. But what Ben says about only
"publishing the current state of the ledger" doesn't seem to relate to whether
PoS is used. It's certainly not inherent to PoS that the entire blockchain
isn't published.

Maybe he's just confused about how PoS works (but I somehow doubt that). I
understand how PoS makes things more efficient by entrusting a single
validator (or any small subset of validators) rather than having essentially a
contest, and I understand why this is also inherently less trustworthy than
PoW.

But Ben never mentions Proof of Stake anywhere in his explanation, just that
the blockchain's "current state" is the only thing "exposed".

I'm juse trying to understand what he's getting at there.

~~~
snarf21
Gotcha, I assumed that it was a little handwavy on the details to be more
accessible to a wider audience. It is very possible that they don't let others
download the complete ledger and only let you ask for a certain private key's
current balance. I agree that this is even more concerning (if true) than
regular PoS. I also didn't read the proposal deep enough to know if you can
register to be a node that sees all proposed transactions even though you
can't actually validate them. If there is on way for external monitoring or
audit, this truly is not blockchain even in name only. Then it is simply a
replicated database with restricted access.

------
cschneid
Something I haven't seen yet: If my computer has a bit of malware land on it,
do I lose my entire wallet worth of Libra irrevocably? If so, this seems
pretty questionable as a mass-market money...

~~~
anchpop
Maybe we can store libra in some sort of institution that would provide some
guarantees, like returning your libra if they get stolen. They could make
money by investing the libra they hold and keeping the interest.

~~~
the_duke
Yes, that is a novel and brilliant idea.

Since this is something similar to a old school money lenders table over which
exchanges took place, we shall adopt the Old Italian word for table, banca,
and call it a "bank"!

------
vinay_ys
A brand new highly technical protocol with a brand new language has been
announced along with open-source codebase and I am yet to come across a
meaningful critique or review of the tech side of Libra. Politics aside, just
the tech is quite interesting.

I think it is silly that they think this will become big among the unbanked
(in countries like India) when they can do only 1000 transactions per second.
Nuts! Don't you think so?

------
chanwitkepha
But what about Privacy and Security which we should concern.

------
jbverschoor
I dunno.. it’s nice and all that these companies support it. But they are
exactly the kinds of companies that don’t have the best customer service.

------
jshowa3
_Here is the important thing to understand about the Libra Association: while
its members — who again, are the validators — do control the Libra protocol,
Facebook does not control the validators. Which, by extension, means that
Facebook will not control Libra._

But Facebook does control Libra just by virtue of providing infrastructure.
They're also part of the consortium. So again, why is the author trying to
make it seem like Facebook has no control?

~~~
bongobongo
It's a kind of mind-trick that only occurs in articles and white papers about
cryptocurrencies and blockchain technologies. I've noticed that they often end
up proposing a distributed private shared database controlled by a corporate
cartel and call it "freedom."

------
PaulHoule
I too dismissed Libra out of hand, but the coalition that Facebook is building
is interesting.

People say that "Fintech threatens the banks" but almost all Fintech companies
partner with the banks in one way or another.

Look at the companies involved with Libra and see that none of them are banks.

Libra will still have a lot of money on deposit with the banks, but it might
be the first Fintech that will really bypass them.

~~~
drcode
Where is the Visa press release? Where is the Uber CEO interview on Libra?

The Libra membership list is kind of meaningless, given that none of the
partners seem to have any interest of promoting the project... mainly Zuck
just asked these companies "Hey, you want to be on a list for a tech project
for some free PR?" and until we hear more from the partners there's no reason
to take this list seriously.

~~~
pavlov
It's not entirely free: those companies are paying $10M to run a Libra node.
That's still pocket change as a hedge in case it actually takes off.

So maybe they're happy to shut up for now, let Zuck take the regulatory flack,
and if it seems like Libra will take off on FB's efforts, they're positioned
to benefit from adoption.

~~~
drcode
> those companies are paying $10M to run a Libra node

Please show me a citation of where is says concretely that Visa/Uber/etc have
handed $10M to this project. The Libra project so far is just wishful thinking
about things that maybe, might possibly happen sometime.

~~~
pavlov
What kind of proof do you expect? Even if I somehow had the wire transfer
receipt in hand, Facebook could simply be giving Visa and Uber a $10M rebate
on their advertisement bill in return. This is not a material sum for these
companies when it comes to such a major partnership.

However, since these rules are supposed to apply to everyone who wants a seat
at the Libra Association, I do assume that Uber and Visa are paying the fee.

------
Zoo3y
The missing information here is how much of this currency will belong to
facebook, and to each constituent. No matter how many orgs are added to the
coalition, if facebook owns 50% of the coin then it's all a sham.

~~~
conanbatt
Why? Its a convertible coin. It doesn't matter.

------
ptah
one more step towards the irrelevance of democracy and towards increasing
corporate control and influence

------
bluetwo
Sounds like a great new way for Russian to buy ads on the sly to interfere
with our next elections.

Other than that, I can't think of a use case.

------
jillesvangurp
Technically what Ethereum, Bitcoin and Libra are doing are each variations of
Byzantine Fault Tolerance based consensus. The key difference is that the
former two are permission less and the latter is permissive. Permission less
in this case means that anyone can start a validator node and verify
transactions this typically involves either proof of work or stake. Permissive
means that only some validators are able to do that and that the consensus is
based on verified identity: each validator has a known identity and only
explicitly trusts certain other well known validators.

As the article nodes, it would be a mistake to assume that that is only
Facebook. What Libra does is actually similar to Stellar and Ripple, which are
also based on permissive BFTs.

Since I've used Stellar, I know a bit more about how that is structured. In
short, in Stellar, anyone can start a validator and start validating
transactions. This is commonly done by people with a need to validate
transactions for scaling reasons. Every validator is configured with a list of
other validators that they trust and a consensus quorum that needs to be
reached between those for a transaction to be acceptable.

The flip side is that for your transactions to be acceptable to others, they'd
have to trust you. In practice these sort of bi-directional trust relations
only happen on a need to have basis; for example because you and your business
relations are swapping the same tokens with each other and have a business
need to trust each other's work. The extended network of mutually trusting
validators that trust each other directly or indirectly is the basis for the
consensus. After some incidents with the Stellar network halting its
consensus, Stellar is actually moving to reduce the reliance of the network on
their own validators. The recent outage in May was actually root caused by
several non SDF owned validators going down. This sounds bad but it is
actually a safety feature: stellar will prefer partition tolerance and
consistency over availability. Ethereum and Bitcoin have had issues with
favoring availability over consistency. If you are running a bank, that is
kind of a big deal.

Libra is launching with a quite broad consortium that each will run
validators. I imagine that like in Stellar, each of those validators will
eventually be able to start trusting other validators at their own discretion.
I'm assuming that that is what Facebook means when they say they will
eventually open up.

It seems like initially this will be tied to deals with Calibra, which is a
subsidiary of Facebook and which is responsible for hosting the reserve that
backs the Libra, and other stable coins that will be running on the network. A
key difference with Stellar, which is run and controlled by a foundation
representing its members, Calibra is instead a commercial entity owned by
Facebook. Presumably the consortium members have some kind of contractual
agreement with Calibra about this. In other words, Facebook as a owner of
Calibra is a bit more special than everyone else. I imagine they also hold
patents, trademarks, etc. as well. To be clear, the software itself is Apache
licensed.

Like many, I wrote up my own thoughts on Libra and wrote a lengthty article.
You may find it here: [https://dev.to/jillesvangurp/libra-blockchains-and-the-
meani...](https://dev.to/jillesvangurp/libra-blockchains-and-the-meaning-of-
it-all-1clc)

In short, what they are doing makes sense practically, technically, and
legally. People are obviously talking a lot about legislation currently and
Facebook's motivations. My impression is that governments are mostly still
applying and interpreting existing laws when it comes to blockchains and are
actually quite slow in responding in a coherent and timely fashion with new
laws. My guess is that Facebook and others are counting on this and are
looking to create a financial reality where shutting this down becomes
economically more difficult. In short, once they are moving lots of money
around, shutting them down becomes impractical.

------
quattrofan
And no mention of Lightning Network...

~~~
rolltiide
Why would this article mention that?

~~~
langitbiru
Probably because the author mentioned that Bitcoin is not efficient (7 tx per
second). But Lightning Network can make Bitcoin more efficient. I haven't
looked into Lightning Network thouroughly so I can not make any comment
whether it is up to its words.

~~~
bduerst
They didn't mention it because Lightning network is only brought up and pushed
by people who have a stake in it. It only scales with transactions, not users,
and is still pinned to Bitcoin.

------
rookonaut
Could the problem with the damaged brand be a reason why Apple is so keen on
becoming a "privacy-as-a-service"-company?

~~~
scarface74
On one hand it is mostly bull. Apple has the benefit of having a “strategy
credit” since selling user data is not part of its business model.

But on the other hand, I can’t help but think that a gay CEO who grew up in
Alabama _really_ cares about privacy.

------
filereaper
Tangential, but has Facebook done anything to reduce the power-consumption in
Libra?

I'm not enthused about supporting anything that worsens the global climate
crisis and its irresponsible of large companies to support cryptocurrencies
with its terrible power usage right now.

~~~
unknownsavage
It doesn't use mining, so requires negligible power to run.

------
narrator
What is the benefit of Libra exactly? Why not just set it up like WeChatPay or
Paypal as a centralized database?

I guess like gambling chips or video arcade tokens, the lack of belief that
it's real money might confuse some people into spending it more freely.

Another thing is is that they can take all the money that's paid into Libra
and run a hedge fund with the reserves because they can write their terms and
conditions so they can do whatever the heck they want with the "reserves" and
not tell anyone what they're doing.

Another benefit is that they can facilitate illegal commerce on facebook by
letting people conduct cross border transactions outside of AML/KYC land that
a PayPal like system would require.

They can also tie identities to coin transactions to analyze transactions for
further ad targeting.

Did I miss anything?

------
cconroy
Pink plane reasoning like this makes you dismiss bitcoin as not scalable. The
blue idea is to scale off chain with smart contracts whether centralized or
not.

Compare cos fighting this to those not like cash app which are building on top
of bitcoin.

