When I read the white-papers yesterday I was rather surprised. I was expecting a completely centralised facebook coin, but what they are creating is in fact at least in some parts decentralised. It is actually much better than I did expect. The whitepaper also captures some parts of crypto ideology and cites ethereum and bitcoin over and over again. They brand themselves as one of us, not as the people that make crypto real and boring.

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The Good

• Libra is pseudonymous and permissionless without requiring any KYC! You can simply generate keypairs and use them.
• Libra is therefore borderless.
• Libra supports smart contracts
• Libra is based on some BFT protocol not too different from ripple. (Yes this is already something good given my expectations :))
• Consequently anyone can build apps ontop of libra without having to register with facebook or the libra consortium.
• Probably huge userbase and will attract many developers and capture a lot of creativity.
• Stablecoin working somewhat similar to tether
• Open source

In summary, I think that libra can be a huge change in the financial world. Realising some parts of the original crypto goals. Banking the unbanked and giving frictionless financial access to the entire world. Furthermore this is not just paypal v2. It is a huge step ahead of that. We can stream money, we can build our own apps. And we do not need any permission to do that. This is actually huge. Not because libra is sooo good, but because libra gives developers the option to reach a potentially huge userbase and show what open finance can do.

The bad

• Libra is a permissioned blockchain where a special consortium decides the consensus
• There are plans to change this in the future with the goal to have 20% open influence in 5 years. Of course this means nothing. I would be very surprised if libra ever becomes truly open. This is against the intention of the consortium members as they would have to give away their power for free.
• The supply of libra is floating. When fiat is deposited new tokens are minted and when fiat is withdrawn it is destroyed. But this interaction is only available to special users (chosen by the consortium). The rest of us have to go through them.
• I as a user can verify that the chain is legit, but there are two things I cannot verify. First, i cannot know it some transactions are being censored, or in retrospect changed (it would be word against word without any POW). Second, there is no way to verify the supply. Then what is my ability to verify actually worth? In contrast to bitcoin where I can verify everything.
• Libra is in reversible. All it takes is a majority (66%) of validators agreeing. There is no POW to stop it. Think of big hacks, I am certain they will first freeze the funds with 33% minority, then start discussing for weeks and finally revert the transaction with 66%.
• Libra is still based on fiat. You are still subject to arbitrary national monetary policies.
• Libra claims to be more efficient, but it is not. It is very much comparable to ripple. The advanced transaction throughput is not reached by technological innovation but by centralisation.

So of course, libra is not as decentralised as bitcoin or ethereum. It has some aspects of decentralisation, but thats it. You as a user and not in full control.

The ugly

First there is the 'official' calibra wallet. This is a centralised KYC AML piece of shit that sadly most people will use. Ans this means that you give your entire financial data to the world and have very questionable privacy implications. But this is very much a problem of the ecosystem and not the chain itself which I discuss here.

• The Libra Investment token. Early selected entities can buy this token which initially (and probably eternally) is a governance token. And the assets they hold to back the value of libra are paying interests. But these interests go to the selected group of holders of the Libra Investment Token. If this is successful we are now installing the next financial elite.
• The consortium will inevitably do financial politics. They can choose how much to mint or burn. They can choose which assets are in the basket with massive incentives for corruption. This is especially bad for smaller countries. While all big guys will have their currency in the libra basket, smaller ones may be left out and will have their currency devalued. In a future of big adoption, libra decides which fiats are valuable and which ones are not.
• Libra is confiscateable. The funds are held in different countries and are still looked up in the old financial system. They can be frozen or seized. In case of financial crisis, the reserves may be taped into.
• What happens in a case of fork? Clearly the people in charge of the backing funds decide what is the 'true' fork. This disrupts the consensus between validators. The validators that have physical control of the funds can break consensus by forking away.
• Finally, given that libra is connected to known companies and fixed validators, can these really escape government influence. What if the government gives them a blacklist to censor? Only 33% are needed to freeze funds.
  What if they tell them to only allow kyc accounts? What if they censor some smart contracts? Reverse transactions they do not like? I am very sceptical that the validators can really escape the grip of centralised governments. And we already see politics getting involved: link

The verdict

I do think that libra has the potential to shake the financial world and make it better in many ways. But I do not think that is is a direct competition to bitcoin. Many problems remain and these will lead to something that is not fundamentally better than our current financial system. Libra is a huge risk to the old financial system and it will be interesting to see how the fight will play out.

For bitcoin there are two possibilities. Maybe libra with all its flaws is enough for most people. But more likely i think libra is showing the possibilites of crypto and will introduce many more people to the concepts. Since most of the concepts are similar I think this can be a huge onboarding for bitcoin.

Let's see if we can build some true cypherpunk stuff on top of libra. And if that will survive or be censored.