Facebookland: Why Libra is not a cryptocurrency

in #libra2 years ago

Back in 2009, Facebook announced "Facebook Credits", a payment method for application developers who use the Facebook ecosystem; this meant that all people who wanted to use social games based on Facebook's authentication, Facebook's advertising, and other potential services, would have to purchase Facebook's digital currency, which had a fixed exchange rate of 1USD per 10 credits. Facebook credits were eventually ditched as the antisocial network was not, then, ready for a payment method that is based on its internal systems. A decade later, the antisocial network announced its new payment method, Libra. I shall avoid naming Libra as a "currency" or "cryptocurrency", as I do not believe it to be one, however, this post is to meant to analyze what I believe is happening.


Facebook's Libra is a digital asset, the claim is that in order to reduce its volatility, it shall have a reserve system, just like a "stable coin"; as defined in the WhitePaper, "Instead of backing Libra with gold, though, it will be backed by a collection of low-volatility assets, such as bank deposits and short-term government securities in currencies from stable and reputable central banks".

The first difference between Libra and decentralized cryptocurrencies, therefore, is that whilst cryptocurrencies are backed by the trust they generate from their respective economy (therefore deriving new value into the world), Libra does not have any intrinsic value and it relies on the backed assets. What are the backed assets? currently, the claim is that it will be a collection of low-volatility assets, "such as" bank deposits. In legalese, "such as" is not an exclusive list and there is no warranty that Libra shall not be backed by the low-volatility shares in the companies who back the Libra platform; meaning, Libra might just be a way for corporations to raise additional capital.

However, this is not the greatest issue here. There are two issues that need to be addressed. The first is why.


There are different ways to define that nation state's sovereignty; however, the common ones are usually: (i) language; (ii) history; (iii) territory and; (in my opinion); (iv) currency. A common group using the same language, that has the same history and resides in a common territory and using the same currency is sovereign. The issuance of coins is the way that debt may be settled, and that's how the government could collect taxes. This is important because a monetary system is comprised of these issues.

So, now let's get to the tough part. Taxes and sovereignty. Facebook and its other friends to the Libra project are already highly criticized for choosing their tax heavens to incorporate at, and avoid taxes. What will happen if Facebook declares itself as an independent state? It will need a a territory (which is easy to buy, with their money) and will need a language (this is figured out already!) but it may have its own currency to rule the economy. It will have sufficient dependents on its ecosystem that if any other state will refuse to recognize Facebook as a sovereign state, Facebook may just block trade, by inserting tariffs in the same way that the Trump taxes Mexico as a part of a trade war.

Now, let's assume that the financial relations between Facebookland and Latvia are as follows: Latvia imports advertising and social network goods and services worth 1B$ a year, and Facebookland puts a tax on anyone doing business with Latvia via the Libra, as a part of the protocol. In such case, the Facebook user lobby of Latvia will interfere and make Latvia acknowledge and recognize Facebookland as a sovereign state.

Why would Facebook declare Facebookland? Because Facebookland has no taxes for Facebook , and it may offer citizens of Facebookland lower tax rates if they "move" to Facebookland. How will they move? either by buying any of the stupid non-states of Liberland or Bit Tawil or by just purchasing territory from another country with good weather and no people living there; places like Australia, Canada or just enough acres in Russia. There is sufficient space that Facebook's billions could purchase to gain sovereignty.

Then, Facebookland may tax its own inhabitants using the Libra system.

Now, the harder part: Why is this not a cryptocurrency or a bitcoin issue.

If you read the whole technical paper; explaining the governing bodies you see that Libra is not ruled by the community. Libra is owned by the corporations. While in the classic nation-state the central bank issues the notes and therefore may control the monetary system, bitcoin came where distrust in the traditional banking system came; it did not ask to convey the ruling parties from states to for-profit corporations, but to make it democratic: one person, one cpu, one vote.

The Libra is not meant to be decentralized. It has ruling bodies that some of them have a bad history of blocking active users. PayPal, for example, froze Wikileaks' account; so did MasterCard and VISA. This seems more like the old-world telecom companies going against the internet.

Requiring an endowment of millions of dollars to run a node, also allowing the block of specific users or performing reversible actions, is bad practice.

Not only that, but the Libra blockchain is not a blockchain. It f*cking doesn't have blocks: "Unlike previous blockchains, which view the blockchain as a collection of blocks of transactions, the Libra Blockchain is a single data structure that records the history of transactions and states over time". It records historical transactions over time, but not in a block format.

The whole issue of the blockchain was to sign blocks every several minutes in order to verify that not changes may be backdated; (see the Bitcoin WhitePaper ]).

So no blockchain, no distributed technology, this explains why trust is not the issue in the zuckcoin; it needs assets to back it because it will never run on trust.