
Libra, a Cyberpunk Nightmare in the Midst of Crypto Spring - NKosmatos
https://hackernoon.com/libra-a-cyberpunk-nightmare-in-the-midst-of-crypto-spring-5543b6f6e34b
======
aakilfernandes
Libra isn't a cypherpunk wet dream, but it moves us in that direction and
thats a good thing. This article is written from the perspective that crypto
mass-adoption is right around the corner (i.e. just a few UX tweaks) and that
Libra will displace the crypto-utopia that could-have-been. I couldn't
disagree more.

The lack of adoption is a combo of a 1) network "dead-zone", 2) reversal risk,
and 3) regulatory friction.

FB & Co are uniquely situated to fix these 3 in a way small companies just
can't.

1) Any network is useless unless people you need to use the network are using
it. Cryptos are still in the "dead-zone" where there's not enough people using
it where it has value as a payment platform. By integrating into existing apps
(Venmo, FB Messenger, Paypal) that could change

2) Every fiat transaction has some level of reversal risk. There is
legislation in the US that requires, and companies that implement, reversal of
payments if the payor claims fraud or account takeover. Any company that sits
in between fiat systems and the crypto systems have a huge amount of this risk
cause they can't reverse crypto payments. These companies are uniquely capable
of handling this risk because they already spending resources to figuring out
that you're a real human being and you are who you say you are.

3) Regulatory friction (AML/KYC) is something these companies are uniquely
able to tackle because they have your identity. Furthermore, they have the
legal resources to find out how far they can push the line and lobbying to
keep them from harm when they get too close.

~~~
confounded
In _cypherpunk_ terms, what’s dreamy about a crypto currency with no
anonymity, that shifts power from international democratic governments to
private US corporations?

~~~
wyoh
Because you thunk governements having power over currency is a good thing? At
least with corporations you can choose to deal or not with them, that's the
dream.

~~~
lazulicurio
> At least with corporations you can choose to deal or not with them

That position beaks down when the corporations control the means of
transaction.

It would be a different story if Libra was a bunch of companies making an
arrangement to accept each other's individually-issued cryptocurrencies, but
instead its a cabal issuing one scrip that they all control.

------
gooseus
All the big players in the Association can probably afford this gamble, but if
they don't already have the government and the banks on their side, then this
thing is DoA.

Government only really needs to do a few things to be essential, one of those
things is securing and backing the legal tender, and yes this is also one of
the ways they exert authority. It's also how they maintain legitimacy, this
has been true for thousands of years.

What country is going to give up this power and hand it over to a consortium
of multinational corporations (with 0 banks in it) led by a corporation that
is controlled by a sole person?

If it can't be nationalized then they won't let it be adopted and I'm sure
every country (including the US) has any number of laws that will allow them
to prevent the undermining of their currency.

They let Bitcoin do its thing because it lacked all the things this has, which
let them classify it as something closer to commodity/security, and not a
currency. If this thing isn't that, then I don't see how this is going to be
acceptable without the government demanding a massive hand in how it is run.

------
leshokunin
You know, strategically, when you’re about to get super regulated and the
government is touting antitrust probes: maybe don’t start something that
competes with the Dollar.

~~~
toyg
I thought the same, but then it makes sense if you look at it from the sort of
fuck-you attitude that FB leadership tends to have: "So you want to undermine
us, fine. But what if _we_ undermine _you_ first?"

~~~
olivermarks
My read is that it _IS_ the USD. '...it may actually cement the dollar as the
world currency once and for all. As the Association mops up all the fiat in
the world they’ll likely turn it into dollars on the back end anyway, so Euros
and Yen become Dollars and cents.'

~~~
toyg
But it would still give them leverage, because cutting FB to size would then
hit the USD.

~~~
olivermarks
The USD and petrodollar are under great pressure as reserve curencies at this
point in history, this could be an effort by the globalized elites to create a
new world currency. I suspect this FB initiative will fail but set up a next
generation with similar size and heft

------
ur--whale
Conspicuously missing from the entire libra story is _how_ they are actually
going to manage the peg. How will they handle the custodian counter-party
risk?

What I mean by that is: for libra to actually be a stablecoin, for every libra
unit in circulation, FB and their merry band of friends will need to stash a
frozen combo of {dollar, euro, yen} somewhere.

That "somewhere" is actually not easy at all to design from a financial
infrastructure point of view: any institution (other than central banks) who
will actually store that stash will have to:

    
    
       - be regularly audited by independent auditors
    
       - be risk-free (and there is no such a thing) or the peg will drift.
    

Worse, these custodians of what is already essentially virtual money are going
to be sitting on a huge pile of currency and to guarantee the peg, won't be
allowed to do _anything_ with it.

I give it 6 months before that money is re-invested somewhere through some
smart financial engineering.

~~~
zeroxfe
> Conspicuously missing from the entire libra story

All of this is answered in the Libra whitepaper.

> is how they are actually going to manage the peg. How will they handle the
> custodian counter-party risk?

"The assets in the Libra Reserve will be held by a geographically distributed
network of custodians with investment-grade credit rating to provide both
security and decentralization of the assets."

> be regularly audited by independent auditors

Pretty much any custodian with investment-grade credit ratings will be audited
and heavily regulated.

> Worse, these custodians of what is already essentially virtual money are
> going to be sitting on a huge pile of currency and to guarantee the peg,
> won't be allowed to do anything with it.

The funds are not held in currency -- the funds are invested in "a collection
of low-volatility assets, such as bank deposits and short-term government
securities in currencies from stable and reputable central banks."

> be risk-free (and there is no such a thing) or the peg will drift.

Also answered: "as the value of the underlying assets moves, the value of one
Libra in any local currency may fluctuate. However, the reserve assets are
being chosen to minimize volatility, so holders of Libra can trust the
currency’s ability to preserve value over time."

~~~
panarky
_> funds are invested in "a collection of low-volatility assets, such as bank
deposits and short-term government securities in currencies from stable and
reputable central banks."_

They're underestimating how difficult it will be to avoid losing money.

 _Bank deposits_ So what if Facebook and their partners don't park their
reserves in mortgages and derivatives if their banking intermediaries do?
Banks routinely go insolvent in recessions and financial crises.

 _Short-term government securities_ Which are currently paying negative
interest rates in "stable" and "reputable" nations like Germany and Japan.

A "negative interest rate" means you buy a government obligation for $1000,
and a year later you get back $997.

Can Libra reserves earn a high enough return to (a) fund their admin and
security apparatus, (b) cover insolvent partners and institutions, and (c)
cover fraud and abuse?

It's clear from the whitepaper that there is no upside to holding this
currency, but it's not at all clear that it won't "break the buck" and
actually lose money.

Sooner or later, FB partners will go to a fractional reserve model and
effectively convert this "cryptocurrency" into a vehicle for inflating the
money supply to a multiple of actual reserves by issuing debt.

My bet is this will happen sooner rather than later, because there's zero
profit in sitting on giant pile of short-term cash.

------
gpm
Something I haven't seen mentioned anywhere yet is the amount of power
controlling the reserve will grant the libra association. They are free to
move the reserve around between "low risk" investments. If the reserve grows
to a large size that will mean they can prop up a (small) countries currency
(and thus economy) by using the reserve to buy some of it, or it can crash a
(small) countries currency that it is currently invested in by divesting.

Small countries might have to start thinking much more carefully about
regulating the companies controlling this if it succeeds.

~~~
notahacker
Capital flight is already a thing. But large scale speculation on the
economies of random small foreign countries isn't a "low risk" investment and
the Libra Association has literally no incentive to move the backing of assets
away from bonds denominated in currencies its user base wish to convert to.

~~~
gpm
> Capital flight is already a thing.

Sure, but if this succeeds they will have order of magnitudes more capital to
do it with than is already a thing.

> large scale speculation on the economies of random small foreign countries
> isn't a "low risk" investment

They are the ones who get to define the term "low risk", as part of a basket
of many such economies it deserves the term as well.

> the Libra Association has literally no incentive to move the backing of
> assets away from bonds denominated in currencies its user base wish to
> convert to.

Of course it does, and not just in terms of exerting political pressure (which
is an incentive which is literally the purpose of this conversation) but in
terms of maintaining a safe basket of goods with as high interest rates as
possible.

~~~
notahacker
I don't think Libra is going to end up with orders of magnitude more capital
than the rest of the world's investors, most of whom are much more risk
tolerant, and they're obviously going to define the term "low risk" as "let's
make an easy profit by backing our US Libra-holders' accounts with US
Treasuries instead of cash" and not "let's corner the market for Rwandan
government securities to try exert political pressure on them"

------
electrotype
I wonder: why does everybody say it's a "Facebook currency", a Facebook
project, if there are +/\- 30 corporations in the association?

Does Facebook have more decision power than Visa, MasterCard or any other
participating corporation?

Or is Facebook simply the main vector Libra will be promoted with?

Would Libra still be a project if Facebook was (hypothetically) shut down?

~~~
zeroxfe
> why does everybody say it's a "Facebook currency", a Facebook project, if
> there are +/\- 30 corporations in the association?

Because FB launched it, and currently appears to have the most control over
the project. At the same time, people don't actually take the time to
understand the governance model.

> Does Facebook have more decision power than Visa, MasterCard or any other
> participating corporation?

No. They get a seat in the governance organization, which they hope will be
about 100 organizations at launch (so they get ~1% of the vote.)

> Or is Facebook simply the main vector Libra will be promoted with?

For now, looks like it.

> Would Libra still be a project if Facebook was (hypothetically) shut down?

Yes, it would. Again FB will have just 1% of the control at launch.

~~~
microwavecamera
> Yes, it would. Again FB will have just 1% of the control at launch.

But wouldn't FB be running/in control of the most of the infrastructure behind
Libra? The stability of the currency would be dependent on FB providing the
core services behind Libra. Having "just 1% of the control" doesn't matter if
FB can just shut it down and/or destabilize it's value at will. It's FB
actually intends for it to be an open cryptocurrency then why make a new one
when we already have several options available other than being able to exert
control over it?

------
ncmncm
The origin of physical currency -- coins -- happened 2000 years after money
was invented. Coins were invented as a way to provision armies.

It worked like this: soldiers were paid in coins. Taxes were required to be
paid only with the new coins. The only way to get the coins, to pay your taxes
with, was to sell supplies to soldiers who had coins. Armies supplied, check.

Facebook has an opportunity to force its coin into use by a similar stratagem:
offer advertisers a discount (at first!) if paid in Libra. Advertisers can
only get Libra from Facebook account holders. Advertisers have to sell at a
discount, for Libra, to get enough Libra, but they get it back in the
advertising discount. If buyers want these discounts, they need to get Libra
from Facebook.

Soon, Facebook controls the economy of the world.

It was recently explained to me that Facebook only wishes they could be as
evil as Google, but they were way behind. (Google passed Microsoft sometime
back.) This could leapfrog Facebook far beyond Google's dreams.

Are we in for Dystopia? I can't see how not, unless they fuck up so it's both
too hard to use and too easy to get ripped off.

------
thrwo12313
Re: India

The connections to Aadhar is far more interesting than is mentioned in the
article. There is a revolving door between USAID's 'Catalyst' promoting
cashless transactions, Aadhar and the people who benefited from
demonetization. The Indian state has also been extremely antagonistic to
Bitcoin and other such 'anarchist' platforms.

[https://www.globalresearch.ca/a-well-kept-open-secret-
washin...](https://www.globalresearch.ca/a-well-kept-open-secret-washington-
is-behind-indias-brutal-demonetization-project-2/5566167)

The state apparatus often grumbles about 'terrorism' and how internet has made
things difficult for them. Infact, the minister incharge of IT was quoted as
saying in 2011 that internet access needs to be moderated with IDs (guess
which one). It's almost certain that such legislation will be authorized in
the coming decade - perhaps sooner if the "i-patriot" act which is in the
waiting (in the US) passes earlier.

It may very well be that the retainers of the East India company (aka deep
state) are planning on selling the nation for a few pieces of silver again -
which would explain why policies remain uniformly the same with every
dispensation. Would not be the first time, and should not be surprising.
However, since history education follows the colonial model of cryptic self-
justification, it should not surprise anyone that clear foreign geopolitical
moves (India has close to half a trillion of IMF/WB loans) are now seen as
'nationalistic'.

It'll be very interesting to see how this proceeds in India - given its
hostile stance on Bitcoin. I'm betting the state will welcome it with open
arms and will probably proceed to tie it to UPI. In fact this could take a big
share of the foreign remittance market, and could rope in Indian banks in to
influence the state. I imagine people like Nandan Nilekani, who illegally
pushed the 'Big Brother' project, will play crucial roles here.

~~~
nnnmnten
GlobalResearch.ca is a conspiracy website run by a pro-Russian 9/11 truther.

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

------
Bombthecat
It is really strange to see the world move into the direction of shadowrun...

------
verdverm
Pretty good concessions from a crypto enthusiast, one of the better or fun
libra articles I've read

------
bmdavi3
Sure it'll be nice to make easy money off the interest on deposits. And it'll
be nice to make money on the analytics that can be run on all the worlds'
transactions. Great.

But the biggest pay off is that once consumers buy into Libra as a thing on
its own, the policy can be changed to no longer link it to any basket of
currencies, and it can then be issued without that annoying and expensive
currency-buying-thing. Just pure profit.

What am I missing?

~~~
i_am_nomad
You’re missing the part where Treasury agents swarm the Libra offices and
arrest everyone for various flimsy charges. If there is one single thing that
enrages the government more than anything else, it is denying it revenue.

~~~
buboard
libra is in switzerland

------
foobarbecue
"Most talked about in history"? Needs citation... And the hyperbole is
constant through the midpoint of the article, where I stopped reading.

~~~
StaticRedux
It's a hackernoon opinion blog post, not the New York Times. And you don't
need a citation for something that is clearly meant to be hyperbole.

[Citation needed] has gone from a notation about checking facts to a trendy
response whenever someone doesn't like something they read in a blog post or
comment.

~~~
devin
I don’t think that hyperbole, “clearly” intentional or not, should be given a
free pass by readers simply because it’s an opinion piece.

I also found the tone of the article a bit off, and it has nothing to do with
whether I agree or disagree with any of it.

------
jshaqaw
"Of course, those big company Association members, like Visa and Mastercard,
all paid $10 million dollars for the privilege of functioning as validators on
the network. Why would they do that? Because they’re going to make a lot of
money." \--- Long ago I was a management consultant for Amex advising on
micropayments (this was decades ago). The consultants answer is always to make
a bunch of small bets in a maybe emerging space to preserve optionality. It
looks good on a presentation, makes the board reasonably content that they
have a future looking strategy, leads to fun follow up work identifying bets
which are financially irrelevant to the company if they go to zero, etc...

This isn't some grand strategy of Visa and Mastercard. $10MM to those
companies is a write-off FOMO punt. If they had put in 20x that amount I would
be paying more attention.

------
jayd16
Can someone explain what this provides to users over, say, a credit or debit
card?

You don't have the rebellious notions of sticking it to traditional banks, not
do you have (completely imagined) anonymity crypto fans have gravitated to.
You don't have any of the intangibles crypto fans like.

It just seems like Facebook wants a central bank. Who's asking for that?

~~~
gst
Direct peer-to-peer payments: Those are currently a nightmare when you
regularly travel. US: Venmo, Europe: SEPA, China: Wechat, etc. If Facebook
manages to sign up enough stakeholders from different countries (that provide
gateways between Libra and traditional bank accounts in their respective
countries) Libra would provide a viable global alternative to the currently
very fragmented market.

~~~
hrktb
Can’t that be done through easily through Paypal ? (or Western Union, I just
never tried)

~~~
gst
PayPal is not available in a lot of countries (Turkey would be one example).
Western Union might work, but the fees are high and there's much more
friction. In case you're based in the United States: Would you use Western
Union over Venmo / Square Cash. If you're based in Europe: Would you use
Western Union over SEPA? Libra has the potential to provide a low friction
environment (like Venmo) supported by local companies that's available
globally.

And while Libra definitely isn't perfect I think the set of trade-offs they
chose are pretty reasonable. Another advantage over Venmo, Western Union, etc.
is that the Libra will be run by a multiple independent companies, instead of
locking you into a single company which is the case with the currently
existing solutions (with the exception of SEPA).

~~~
palunon
> If you're based in Europe: Would you use Western Union over SEPA ?

At least in France, people actually use apps like Venmo for person to person
transfers (or cash, or cheques, but they're on their way out).

We mostly use SEPA for either automatic bill payment authorization, or big
transfers. No one will start a bank transfer and ask for their friends IBAN to
pay back two beers.

------
buboard
> By pegging it to a flurry of other currencies they’ve started the planet
> down the path of ditching the dollar as the default world currency.

That's probably false. FB's coin will be at the mercy of the Fed and ECB, and
most likely will be an equal or worse choice than any of the fiat currencies
in the basket , considering central banks move in concert these days. It
doesn't seem FB will pose any real threat to central banking unless they unpeg
their currency.

~~~
elif
>FB's coin will be at the mercy of the Fed and ECB

Only if the currency flows out of traditional Fiat and into Libra don't
substantially affect currency prices or the effect is more or less universal.

For instance, if the euro loses 10% value in a given period of time while 3
other equally weighted currencies are relatively stable, libra would lose
~2.5% value in that time. Given the low risk this seems like an obvious hedge
if you are heavy in euro, and momentum could easily snowball.

~~~
buboard
it could also work the other way, e.g. that the basket loses more than the USD
. I dont think overall there is any benefit , but maybe there is overall
reduced volatility or risk. I don't know if the central limit causes a
reduction or increase of risk here. It seems like the index fund of
currencies.

------
bcp2384
When people say _Cyberpunk_ w.r.t crypto, do they actually mean _Cypherpunk_?
Or can someone explain what the difference is?

~~~
arkades
In this case, I think the concern goes:

FB exerts increasing control over, and insight into, financial transactions.
Alongside excessive insight into most other aspects of personal lives. The
result becomes the sort of MegaCorp that cyberpunk novels are built off of.
Except, you know... I don't think William Gibson ever expected the future
megacorp to have sprung up from an undergrad pivoting his Hot or Not rip-off.

~~~
mxuribe
...Or, maybe William Gibson DID, but he hasn't published the prequel novel
yet!! ;-)

------
drtillberg
Facebook is simply making another private scrip. They're turning IMF SDRs into
a private currency. Prior to this crop of entrepreneurs, when I read about
scrip it seemed always to be in connection with alleged violation of law, I
think legal tender laws. But, who knows, this may turn out swell.

------
hkt
Libra shows what crypto and in particular blockchain is really for: allowing
global megacorporations to start their assault on the nation state. It's
pretty critical we undo this, while the nation state still has its monopoly on
the legitimate use of force.

~~~
atemerev
Why do we need nation states?

~~~
p_l
Nation in nation state is pretty recent addition and already dying off
(fortunately), but the state owing allegiance to its citizens (ever imperfect)
is better than slide back to feudal-authoritarian corporation that is in no
way on the hook for anything towards the common man.

~~~
wyoh
At least you can choose the corporation you want to deal with, unlike the
nation state you live in.

~~~
Terretta
Just like choosing your cable company... or wait, that’s chosen for you based
on where you live. Hmm.

~~~
antidesitter
> chosen for you based on where you live

That’s right. By the government [0][1].

[0] [https://www.wired.com/2013/07/we-need-to-stop-focusing-on-
ju...](https://www.wired.com/2013/07/we-need-to-stop-focusing-on-just-cable-
companies-and-blame-local-government-for-dismal-broadband-competition/)

[1] [http://blogs.reuters.com/jackshafer/2014/02/19/whos-
afraid-o...](http://blogs.reuters.com/jackshafer/2014/02/19/whos-afraid-of-
comcast/)

------
redthrow
At the end of the article the author is somewhat hopeful that some floss
alternative will catch on, eventually.

What happened to MobileCoin that Moxie was advising? When will it be
integrated to Signal?

~~~
baby
A cryptocurrency on top of SGX right?

------
jillesvangurp
Where to begin. This article is full of big words and drama. I've been reading
through the whitepapers and discussions and there seem to be an awful lot of
people reading all sorts of things in this stuff. What worries me is that it
mostly is people responding to interpretations rather than the raw facts. Big
dramatic outcomes make for awesome blog articles. But that doesn't mean it's
the only outcome; or even the likely outcome.

I try to look at this a bit more rationally. Given that blockchains have grown
economically in the last few years for reasons that you may or may not agree
with philosophically, morally, etc., it is not surprising that existing
entities with economic wealth are looking to get in on the action. From this
point of view, what Libra is doing is entirely unsurprising.

From a technical point of view, what Facebook is doing with Libra is cherry
picking what seems to work in the market. Consensus models seem to work for
the likes of Ripple, Stellar and a few others. There are a lot of people who
object against this model for all sorts of reasons. But it undeniably works
and scales quite well. A system this ambitious needs to scale. It's not
optional.

I don't really see how Libra could have picked anything else given the current
state of the art. Mining seems a dead end in terms of scalability and off by
orders of magnitude from where it needs to be. There are lots of technical
issues and even when it works, things like 50% attacks, insane energy
consumption, etc. make this a non starter. Ethereum has been trying to switch
to proof of stake for some time now and the are also trying to introduce
sharding. Maybe this is fixable, but the reality is that they are nowhere
close to shipping something that scales by the time Libra intends to open for
business.

So, when Facebook decided to do this, building their own platform was a
foregone conclusion because what's out there just isn't anywhere near good
enough and basing it on consensus algorithms was the only logical choice
technically.

The only relevant question is, why is it just Facebook doing this and how long
is it going to take for the rest of the world to react? I'm talking about the
likes of Google, Apple, banks, the oil industry, anyone with economic
resources basically. They'll all want in on the action and not all of them are
going to be inventing their own blockchain like platform (using the term
loosely here). I doubt they are going to have Facebook have all the fun.

The follow up debate about the legalities and regulations is also going to be
interesting. My guess is governments will react slowly and by the time they
start making bigger decisions, it will be too late. Once you have a few "too
big to fail" type companies doing stuff like this, they are not just going to
pull the plug.

So, I expect things will heat up shortly. I think this is a good thing. We
need competition of ideas and approaches. If what Libra is doing bothers you,
stop whining and do something better. Now is a good time to get started with
that.

