This week – Facebook is expected to release its own cryptocurrency – Libra.
The cryptocurrency has the financial backing of many big names. Reports have shown that Facebook has received backing from companies such as Visa, Mastercard, PayPal and Uber.
First, what is cryptocurrency?
Cryptocurrency works similar to other electric form of payments like a credit or debit card, however instead of the government issuing the currency and keeping the ledger – an algorithm is kept. Unlike other forms of payments It is transferred between peer to peer – since there is no centralized bank.
Transactions are recorded on a digital public ledger – blockchain – information is encrypted using cryptography – thus the name crypto. There are different types of cryptocurrency, more known are bitcoin. Bitcoin is the first digital currency.
Pros and cons of cryptocurrency
It allows users to purchase items with no need for a bank or third party, thus reducing transaction fees – which is an advantage. The disadvantage of cryptocurrency is the constant price fluctuations and the lack of merchants who accept it. However, many large companies have started to accept bitcoin – such as Overstock, Microsoft, and more.
What is Libra? How does it differ from bitcoin?
Libra – the new digital currency offered by Facebook – would be different than the well know cryptocurrency – Bitcoin. Reports indicate libra will have low fees, transfer times and less price fluctuations (since the currency will be backed by more stable assets).
It will also change the way of paying as we now know it. This is because Facebook will incorporate the currency into its platforms – Instagram and Messenger to allow for payments and exchange of cash. Thus bringing its cryptocurrency exposure to a approximately 2.7 billion users monthly.
How Facebook plans to use it?
Facebook expects not only to use within its platform, but also as an option to pay its employees. Employees will be able to choose between the currency and cash when receiving their paycheck!