The new Facebook cryptocurrency

Here is a thread on the new project from those running it, here is the White Paper (which I have yet to read).  Here is an FTAlphaville analysis of how it may not use a blockchain after all.  Note this:

Another important aspect of the Libra Blockchain is Move, its new programming language. This programming language will, says Facebook, allow users to define their own smart contracts in the future. Smart contracts are agreements written in code whose clauses are automatically enforced when a set of pre-determined criteria is met.

Any comments from the experts in the MR reading audience?  By the way, if you haven’t been paying attention the Facebook share price is up 44.2% this year.  Alphabet is up 4.7%.

Here is a further FTAlphaville analysis: “Managing a pegged monetary reserve system isn’t all that easy.”

Here is a Hacker News thread.

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I am not an expert, but the Hacker News threads look interesting.

I wonder, if we were told "Facebook introduces a payment system," would we treat that with more or less suspicion?

It looks like a validated payment system, riding above existing protocols, which means the crypto aspect may be engineering trivia.

The amazing thing is this buy-in:

"Payments: @Mastercard, @PayPal, PayU, @Stripe, @Visa
Tech & Marketplaces: @BookingHoldings, @eBay, @Farfetch, @Lyft, @Spotify, @Uber"

Everybody gets a cut? Certainly those "Payments" players don't expect to lose money on this deal.

FB was asking each of those companies to put in 10 million to the Libra "reserve" (which FB says will be invested in low-risk assets and the investors will get no return from.)

Given the sum involved, this may just be a downpayment on goodwill with Zuckerberg + hedge against this being actually successful, not an actual expression of belief in the concept.

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They've done their best to erode your personal privacy; now it's time to trust them with your money.

This will be the most data intrusive financial system ever conceived. FB isn't doing this for seigniorage. They're after the data, including the ability to sell it to any government.

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Only 1000 payment transactions per second Alipay: 250,000 transactions per second.

That's why I got out of owning Bitcoin in around 2015, still kicking myself a bit for my bad timing. I figured no future for BTC due to the low transaction volume it can support. Blockchains are big and time consuming to verify. Therefore I bet FB does the smart thing and avoids validating the blockchain locally but instead simply does a centralized "spoke and wheel" type verification the same as Visa, Mastercard and all other non-blockchain companies do.

As for the Move programming language, it's some form of dumbed down object-oriented programming language.

As for managing a pegged monetary system is not easy, that's the conventional wisdom but I've heard that even today, the monetary systems are de facto pegged to the dollar or to the euro. What happens if people lose faith in the dollar or euro? That would be an awesome Paul Erdman (no relation to Kevin Erdmann) type financial thriller.

The most important thing about a programming language isn't how it looks but what it does. Move uses linear logic, is limited in functionality, and is strict about safety which are all excellent properties for programming smart contracts. You want something that makes it hard to make mistakes especially when money and more importantly your credibility is on the line. You could think of Move as object-oriented but it is clear from the paper that it is module oriented the way the ML family of languages do it.

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Given the whole 'validator' business, this is less a cryptocurrency and more a bank, with some kind of programmable contract capability that is hard to evaluate just yet, barring the whole "smart contracts are not a very smart idea". You are also missing many of the bank's properties that makes them safe in practice, while keeping most of a cryptocurrencies' disadvantages for the user.

So we have an American WePay. Why would banking regulators be OK with this?

That's right Bob, US banking regulators would not be OK with this, as they hate upsetting the status quo. Hence the crackdown on Mike Milken, on Uber, on any moves to liberalize occupational licenses (like for barbers), on allowing non-lawyers to practice law (except in limited cases in some small situations), on allowing more doctors into the USA (nowadays they're fairly good all over the world, for most routine stuff), etc etc etc.

Bonus trivia: people always complain about Japanese law and say that police suspects are convicted in Japan 99% of the time, once arrested (look at poor Carlos Ghosn, getting the "Conrad Black" treatment now). However, as Conrad Black points out in his book "Principle", if you include US 'plea bargains' as 'guilty pleas' (not quite the same thing but close) the USA 'convicts' 95% of the people that are charged. 99% is not much different from 95%. Plea bargains, says Black, are the reason US courtrooms are so empty: nobody goes to trial except in the most extreme examples, e.g. a capital case where you take your chances before a sympathetic jury using a court-appointed attorney, or if the defendant is rich and can afford an expensive trial. You are not guaranteed a 'day in court' in the USA anymore. Those "college admission scandal" parents were railroaded into plea bargains under heavy threats of lifetime imprisonment for something that arguably is not even a crime but a civil forfeiture proceeding; it's possible that some of the parents, especially the foreign ones, didn't even think that what they did was such a big deal (bribery is common overseas, it's like an expedite request in the West, people I know do it all the time).

JP law = US law = CHN law = unfair, that's why CHN and the USA have the highest prison populations in the world.

Its hard for the US, especially Trump, to criticize Hong Kong's Lamb given efforts to force Canada to send Chinese business persons to the US for trial on things few nations consider crimes, not Iran for detaining people without trial given Trump promising to fill up gitmo where not a single person detained has been given a trial ever, over 15 years of holding persons under worse legal conditions than most "civil rights violators".

Until Facebook accepts payments from customers only in its currency and its board and top management accepts only this currency for all compensation, its likewise arguing "one standard for me, a different opposite standard for thee".

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Running a "currency," crypto or otherwise, is a lot more complicated than harvesting and selling a billion people's personal info.

I've been charged. Seen the corrupt police report making me look like a violent criminal when I was no such. Sure I broke a rule, but I was never going to hurt anyone or run. Based on the police report, you would have thought I punched the officer in the face and ran away from the scene. Police need to be reigned in.

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Looks like Libra has the potential to give Facebook huge profits from seigniorage. Kind of reminds me how GM was at times making more money from the GMAC loans than from selling cars.

They say they will back Libra with a basket of currencies, so seigniorage may go to Central Banks. What FB gets is the world's most powerful tool for tracking financial payments. Data.

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You don't need an expert on technologies to guess that a massive project with a large number of big companies associated to it is doomed to fail.

Until Facebook first pays its managers and board in its currency, and accepts only its crypto currency in payment from advertisers, then moving on to paying all workers and vendors only in its currency, will I believe FB is committed to its crypto cuurrency.

We know every other currency in the world, with rare exceptions, ppays the government leaders in the currency and accepts payments in its currency, as a symbol of the currency value.

When a government pays others with a currency that it won't accept for all tax payments nor its leaders refuse to accept as payment, then the currency is worthless. See Venezuela.

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"Libra’s mission is to enable a simple global currency and
financial infrastructure that empowers billions of people."

So, they want to become a globally traded supplier of currency? What's the purpose? Tax avoidance? Surcharges as revenue? Banking fees? A vast company store?

The white paper mentions 1.7 billion people who don't have access to traditional banking services. But those are the very poor who's average income is less than $1500 per year. So assuming a best case scenario, you might capture 1% of that. That's only $25 billion if you can maintain a monopoly.

However, maybe the plan is to develop loyal customers who, as the world gets richer, will continue to be a source of rising revenue for decades.

I think the most interesting aspect is that you don't need a digital currency to do most of what the white paper indicates is the goal. You certainly don't need a new currency to bring low cost online banking to the world. You only need a new currency to ensure lock in and avoid interference by local governments. That interference would include taxation, fees and bribes.

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Goals:

1. Further Monopoly power.
2. Immense data over financial transactions.

That data is worth mint to corporations and governments alike.

This may help Bitcoin gain acceptance.

While some of the effects may be Orwellian, Libra could jump start economic activity in poor nation's and put pressure on weak currency regimes.

"1. Further Monopoly power."

Yes, lock in could be a powerful effect. Facebook is not technically a monopoly but certainly it has a dominant market position with respect to social media.

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Sorry wait... " That's only $25 billion if you can maintain a monopoly."

Who are you that 25 billion is nothing to bat an eye at, and are you hiring?

https://martechtoday.com/despite-ongoing-criticism-facebook-generates-16-6-billion-in-ad-revenue-during-q4-up-30-yoy-230261

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"Another important aspect of the Libra Blockchain is Move, its new programming language. This programming language will, says Facebook, allow users to define their own smart contracts in the future."

The average individual is always complaining about how they missed the small print in the contracts of the credit card, mobile phone plan, car loan, etc. Do we expect the people that do not even read 10 page contracts, suddenly write contracts? With code?

"Move takes insights from security incidents that have happened with smart contracts to date and creates a language that makes it inherently easier to write code that fulfills the author’s intent, thereby lessening the risk of unintended bugs or security incidents."

Somehow, code is clearer than written contracts in the people's native language. I code during 10-15% of my billable hours and I'd never say code is clearer than written English, Spanish, French or German. Math/Algebra yes, but code?

In the context of contracts, smart or otherwise, yes code is more clear than natural language. Code is executable and thus to find out what it means, you just execute it. A contract written in natural language is ambiguous and subject to interpretation.

Now maybe you can write a smart contract that is hard to read and one with unintended (or intended and evil) consequences, but the result of any individual application of the smart contract is unambiguous. This is very different than a contract written in natural language.

"Code is executable and thus to find out what it means, you just execute it. "

I don't think this is true. Code is clearly conditional. One example is to have code that charges x% interest before a certain date but 2x% after that date.

Would the type of person who didn't read the fine print and notice a doubling of interest rate upon a certain date be able to determine the code had such a condition in it?

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> In the context of contracts, smart or otherwise, yes code is more clear
> than natural language. Code is executable and thus to find out what it
> means, you just execute it.

Ever seen anything more complicated than a "Hello World!"? It's hard to figure out if a program even stops.

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It's so simple, you just execute the code and you get the outcome. What fraction of the global population you think is available to write an execute code?

Also, a lot of times it is more useful to threaten to execute a contract clause than actually executing it. I had problems with a subcontractor last year because he did not met a deadline. The contract stated that I could assign the task to someone else if he failed to deliver. The client got nervous and gave a new 3 week deadline. I could fire the subcontractor but I'd never find someone willing to do the job for the original budget in 3 weeks. My best option was to threaten my subcontractor...and it worked. Executing the would have caused me greater troubles. Being subject to interpretation is a FEATURE, not a bug =)

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How do they actually maintain a reserve fraction? Or do they? If the coin goes up in value does the reserve fraction decrease or do they automatically sell coin to buy reserves?

The reserve fraction may be just a way to induce early adoption by making the currency more trustable rather than to actually function if the currency scales.

In any case, Money and banks run on trust. Facebook is an untrusted brand. Their competitors are going to hammer them on this. If google were doing this, I’d be more optimistic, but FB does not have the brand equity to pull this off.

Probably it is mainly intended to facilitate micropayments which have the potential to enliven all kinds of missing markets. Then you make money from the services you empowered. I know that this is the exact opposite of what I wrote a few minutes ago about seigniorage but the intervening posts caused me to change my mind.

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Check out the podcast What Bitcoin Did interview with Caitlin Long. I wish I had time to summarize her thoughts, but I am in nearly total alignment with her viewpoints.

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In other words: the advent of however fashionable a cryptocurrency itself does little or nothing to abate the Ebola epidemic underway in east central Africa.

Speaking of American philanthropy in action: since the Bill and Melinda Gates Foundation could do NOTHING to combat epidemic outbreaks of measles across the US or Europe, no one should expect other tech philanthropists to combat so lethal a contagious disease as Ebola.

--and because access to commercial air travel has been deemed a human right, we should expect no airport quarantines or travel restrictions for the region (those porous borders: what can you do!).

Contemporary regard for democratization and egalitarianism thus seem to require that Ebola be shared with the global community. How can our tech philanthropists ASSIST with the spread of Ebola, in which case?

Hey, we can close the borders every time you freak out.

My concerns hardly matter, but surely any motivated tech philanthropist who "really" cares can help export measles to east central Africa in the interim with all the philanthropic zeal he or she can muster (the rate of mortality from measles being so much lower than that from Ebola).

In Chrome, hit F12 to open dev tools, then go to Application > Clear Storage and click on Clear Site data. Your limit will reset.

Nice.

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No Chrome, which sounds somehow safe.

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Is it a good or bad sign that I had read all and almost only the sources TC linked to on this?

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We have a better example to talk about, JPM has JPM coin that works inside the company trading system. It is all about lowering the cost of swapping between the various monetary ledger systems.,

The entire purpose of JPM coin (like XRP coin) is to save in Swift (CB payments system) delays for multiple automatic trades, like portfolio adjustment. If the stability of JPM over short intervals is small relative to Swift costs, then keep all the trades in JPM coins and use the internal JPM ledger. Do not convert back to dollars (or other currencies) until you're software is done adjusting your portfolio..

JPM is performing the intrinsic service of keeping your ledger entry in the JPM consensus network. A convenience, and an enabling technology for shadow banking networks. But its real utility depends on automatic trading into and out of the system, the ability to automatically jump back into dollars at the current market price without human intervention, leave the private liquidity net in an instant.

Facebook does not have the same problem, yet. It does not have a set of investors attempting automatic portfolio adjustment in run time, yet. XRP did not have those applications, it is running around finding them. JPM has them, already, it has hundreds of thousand of customers who want automatic portfolio adjustment without having to pay some bozo human a 2% fee.

But even JPM's liquidity network will ultimately run with on any currency once the various currencies see the advantage of making their ledgers cross-portable. A steady 'escrow routing' system for swapping between ledgers is what the market misses, and the specialize trading coins are getting around the incompatibility.

If all the ledgers adopted to a single router interface (like a TCP/IP for describing transactions) for ledger swapping, then everyone is already on a shadow banking network because there is a systematic method to validate a transfer between two dis-similar ledgers as needed.

Today specialized liquidity networks, with their cois, needed because we are slightly in the pre-TCP/IP stage with multiple transaction formats. This is going to change, Apple will force the issue, make us all adaopt a common format for trading request, making inter ledger swapping simple, putting us all in a shadow banking environment with auto trading. Get get one cisco, and all the specialized ledger coins go away, the world ruled by personal contracts.

Anyway, the key technology missing is the escrow router. It is a general purpose machine that allows one to watch for a ledger entry by a stranger counterparty. If the ledger entry does not appear within a contracted timeout, the party at risk can cancel the contract for a fee.

This little trick means that any contract can raise the cost of 'skipping out on a payment' higher than the cost of contract reversal. Most scofflaws get caught, and there are surplus miner funds to track down the ones who got away. Each ledger system has to support the recall within timeout procedure, it is a mathematically proven necessity for ledger side chains and ledger swapping..
Timeout was put into the original bicoin spec and remains there. All ledger system, Swift, Bitcoin, XRP, jpm net, all of them have to have the timeout mechanism for swapping into and out of their ledger systems. Swift and blockchain are not going away, not is PPM network, and they all have valid , but different ledger systems.

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The irony: FB, which is expert at tracking (that's why its stock price is way up) is offering a currency, cryptocurrency, that is used to avoid tracking, and FB, which has no credibility, is offering a currency, cryptocurrency, that depends on credibility. FB has more chutzpah than Donald Trump!

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In my humble opinion: this is an interesting turn of events for the global financial system. The cryptocurrency market is a confused (and confusing) little ecosystem that has been growing rapidly since 2008 when the bitcoin white paper was released. What we are seeing now is well capitalised companies coming in to steal the thunder. Bitcoin has many favourable features as sound money and on a long enough time frame its success can’t be ruled out completely, but the reality is that it’s adoption (especially with its volatility) just won’t be anywhere near as quick as this. We’re talking about a coalition of companies that have a proven track record of taking many different types of technology to the masses. Zooming out, I think it will be interesting to see how this changes the competitive landscape for global payments and banking generally. Banks aren’t used to new competitors joining their industry, it’s bad news for them, regardless of how well Facebook wants to sugar coat their ‘non-competitive’ stance. The tiny crypto market as it stands today wasn’t competition for banks, facebooks Currency looks like it might be.

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Very interesting and I think overall it is a positive direction for the space.

Pros:

Stable (in goal at least)
Commons Pools
Backed by assets.
National lite.

Cons,
Much more fiscal than supply chain / skill chain oriented.
Doesn't offer much in way of tech.
National lite (not far enough)
--

Small take away, this is a big change to the space. Crpyto now hows to compete with FAANGS entering.

--

Big take away. We are not in a "trade war" with the USA and China. The USA and China, Facebook, Google, Huawei , bitcoin and etheruem are all in an Economic Systems war.

IMO Facebook entering is it starting to get interesting. It goes into full once Amazon enters. Amazon is still positioned the best for a crypto play because they have the market for it.

"Amazon is still positioned the best for a crypto play because they have the market for it."

Amazon would seem a more logical choice to successfully develop this kind of market.

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Libra is not a cryptocurrency. Libra is bloated version of Venmo.

To give more details- there's no blockchain, there's no mining, there's really nothing except people sending money back and forth with one level of abstraction. So FB keeps a database of your payments and it's secured with some cryptography. Big deal, that's just implementation details. I'm sure every ledger in every bank has security as well. And is a lot faster when they use traditional database methods as well.
That FB publishes the ledger is still not a big deal - they control the ledger because only FB or their partners will verify transactions. Since we must trust FB+partners to verify transactions, why not just trust them to say if someone has enough to pay you for something? Again, what's the benefit as far as trustless exchanges over Venmo or Paypal?

Bitcoin has a ledger that nobody owns. The verification of the transactions is shared by the public, so nobody can (permanently) shut anyone else out. That is why Bitcoin is what it is.

The programmability - really, beyond cryptokitties, what's the use case? Have they solved anything major that Ethereum hasn't solved yet?

Well, the program-ability is the future. That the the big race to make a world computer. We have one in real time over Ethereum's smart contracts. A world computer-- not owned by anyone-- But a real world computer as a public platform is massive game changer.

But yes-- this is not that. And yes, I agree with your assessment: Bloated version of Venmo.

If you want an in-depth view:
https://www.linkedin.com/pulse/bitcoin-con-new-hayek-vs-keynes-fiat-bullion-jordan-service/

Block chain-- ALL OF THE HYPE-- is from it's promise as a world computing platform, which give you a free TX platform by default.

That's why it is exciting. FB doesn't have the supply chain or skill chain requirements to make some really good.

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A B,

Frony page NY Times story says Libra used a blockchain. Why is it different from XRP or Etherium? The latter can do contracts, supposedly a big plus for Libra.

I stand corrected on the 'no blockchain.' It changes nothing else in my writeup. As they are the only ones who can *write* to the blockchain, you still must trust Facebook or their partners to validate your transactions. Which means it's just a ledger held by a bank. Except slower.

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I agree that it sits somewhere between fiat and a true cryptocurrency. I believe this is Zuckerberg's attempt at an AliPay/WePay clone. Who said China doesn't innovate?

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Everything the VC investors talk about with regard to blockchain/cryptocurrency is that it's in the extreme early days similar to the internet in the early 90's. The value of a new currency that is tied to a platform is that suddenly all users have some stake in the success of the network as opposed to the winner take all economics of a web platform. Perhaps FB is trying to do an end around here and get ahead of that possibility.

One of the criticisms of FB and calls for its breakup comes from the fact that even though it's free, since they're profiting off your data you should really be getting paid. I would think a sensible way of doing that for FB would be to pay users in this cryptocurrency which would tie you even more to their platform over time especially if the currency went up in value as you start actually spending the currency on things on the platform and perhaps someday off of it.

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up 44% is really playing deceptively with the x axis

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It's a bunch of former PayPal-ers creating ZuckBucks: a land-grab to get all commerce to run on their rails. All the companies who bought in are scared of Facebook taking the cake without leaving any crumbs.

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I don't see the advantage of Libra from the perspective of people who live their lives in the first world and are well-served by traditional financial institutions. I do see value for remittances and for people living in societies with unstable currencies and a dearth of financial services available to them. However, in the places where something like this is most needed, it will probably be banned by the government. I'm not sure how they intend to work around that problem. It's one thing for decentralized cryptocurrencies to be "banned" by governments. There is no way to enforce it. However, Libra has a governing body full of companies that have a lot to lose and maintain an obvious physical presence in the world.

Also, very few people have discussed the interesting decision to base the value of Libra off a basket of assets rather than the USD. Because of this decision, the exchange rate of Libra will necessarily float against the USD. That means that users of Libra in the US will almost certainly be expected to comply with the IRS' 2014 guidance on "virtual currencies". That guidance is draconian and all but eliminates any possibility of viable use for everyday payments. This IRS guidance has been a stake in the heart of all cryptocurrencies in the US and users' desire to actually use them *as currency*. Facebook et al. will have to lobby Congress and/or the IRS to change the guidelines/law if they hope to be successful in the US. Either that, or they must by cynically uncaring about the tax compliance issues that will be faced by all of their US users. I'm not really sure where they fall on this.

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