Facebook's Fake Cryptocurrency

in #libra2 years ago (edited)

Facebook's Fake Cryptocurrency

This post can also be found on the Blockchain Beginners' Blog

So, have you heard? This company called Facebook, founded by Mark Zuckerberg in 2004,

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which can't seem to protect its users' data and censors users for Orwellian-labeled "Hate speech" without explaining the offending language,

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has now announced they will launch their own cryptocurrency in 2020 to be

"A simple, global currency and financial infrastructure that empowers billions of people,"

according to David Marcus, who heads the project.

This comes just over a year after Facebook blocked all cryptocurrency and blockchain-related advertisements on their platform.

Mark Zuckerberg has met with the Bank of England, the OGs of inflation, to get their opinion and advice on how to create money to "empower billions of people."

The coin will be called the Libra and will essentially be a stablecoin, that is, a digital token fully backed (so they claim) by an underlying asset.

The "news" media trumpets that "fact" but breezes right past the reality that those "assets" are all fiat currencies, just fancy versions of monopoly money, and are themselves worthless.

Facebook is creating the Libra Association, a group of companies each pledging $10 million to both "back the asset" and buy their way in.

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Those in the Libra Association will provide governance of the coin and continue doing what many of them do now, process your transactions and take a cut.

Thankfully, due to bitcoin et al. we have hundreds of alternative ways to transfer value.

Facebook explains that all members of the association will share in the governance of the coin and receive equal voting rights. They hope to have over 500 members, who will also function as validators of the network.

This $10-million-and-you're-in approach is completely the opposite of decentralized cryptocurrencies like bitcoin, where anyone can join, validate, and secure the network.

For those familiar with WeChat wallet, the concept seems similar, a centralized electronic wallet based on a fiat currency.

The project was originally called GlobalCoin, but they dropped that ominous New World Order reference for a less obvious astrotheological theme, the Libra plans to launch sometime in 2020.

Investors and speculators, sorry to disappoint you, but there is little chance to get rich from this project, as they aim to keep their coin on par with a basket of fiat currencies.

Not much speculative value on those wild 0.1% swings.


Is This A Good Coin?

The question on everyone's mind is whether or not it's a "good coin." It's not even really a coin. It's 28 companies running a ledger.

Apart from that, here are three main beefs I have with it:

1. It's just a fiat currency.

What is a fiat currency? That is a currency issued by a government or central bank without any underlying asset or commodity.

That's still a little confusing. Let's get the big picture:

Paper is not a good form of money. It does not meet the five criteria of a good money listed by Aristotle. Those five criteria are:

1. Durable
2. Divisible
3. Consistent
4. Convenient
5. Has value other than its use as money.



Paper fits the first four but does not meet the final criteria, its value apart from its use as money is not very high. There's just so much of it around.

Gold and silver however meet all five criteria. The problem is that gold and silver are cumbersome to carry and invite theft.

Therefore, banks originally stored their customers' gold and silver and issued them paper receipts for that gold, called certificates or bills.

Banks would issue these bills and rather than trade the silver or gold, people would trade the bills or certificates.

When someone wanted their gold back, they would bring the bill to the bank, and just as you need to pay your bill at a restaurant, the bank would then pay its bill and return you the gold or silver.

Their currency was fully backed by an underlying physical asset, in this case, gold and silver.

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Consider these two bank notes, also called a silver certificate and gold certificate from 1899 and 1913, respectively.

The text on the five dollar silver certificate reads: SILVER CERTIFICATE - This certifies that there have been deposited in the Treasury of the UNITED STATES OF AMERICA Five Silver Dollars payable to the bearer on demand.

The 1913 $50 gold certificate ($50 bill) reads: GOLD CERTIFICATE - This certifies that there have been deposited in the Treasury of the UNITED STATES OF AMERICA Fifty Dollars in Gold Coin payable to the bearer on demand.

Compare those to today's "bank notes" which just say "Federal Reserve Note ... UNITED STATES OF AMERICA ... Five Dollars.

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The difference in meaning is quite obvious.

From the 1930s until 1971, the world's governments and central banks slowly transitioned away from this fully-asset-backed currency to a fiat currency, one without any underlying asset backing it.

Now, "money" can be created by the stroke of a pen, or more accurately, by typing it in on a computer. As a result, we've seen the money supplies of the world's nations expand dramatically. In economics, this is known as inflation.

As a result, this inflation has diminished the value of each individual currency unit, be it dollars, pounds, yen, et c. which has resulted in ever increasing prices.

In Latin, fiat means "Let there be." Fiat lux is translated in the Latin Bible as "Let there be light."

Just as in the Bible, God created the cosmos through fiat, central banks create their currency by fiat. The people in these governments and central banks believe they are God.


Libra's Lies

Now that we understand what a fiat currency is, let's look at the veracity of Libra's assertion that

"Unlike the majority of cryptocurrencies, Libra is fully backed by a reserve of real assets."

Sounds great! What, pray tell, may those "real assets" be?

"A basket of bank deposits and short-term government securities will be held in the Libra Reserve for every Libra that is created..."

Fiat currencies are now "real assets?" But a fiat currency, by definition, is not backed by any underlying asset.

So Libra coins are "fully backed" by "real assets" that, by definition, are not backed by any underlying asset?

Maybe I'm missing something, but I thought that 0+0 = 0, not 1.

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As we will see, this is not the first time the Libra white paper lies.


Now that we see FacebookCoin is misrepresenting its value, here are two other reasons why it is inferior to other cryptocurrencies such as bitcoin.

Unlike bitcoin, Libra will be both permissioned and centralized.


Let's begin with a definition:

Permissioned means the network owner decides who can and can't join the network. For example, Libra's wallet provider Calibra will require users to upload a government-issued ID.

Permissionless means anyone can join the network. To join the bitcoin or Ethereum network, you merely set up a wallet.

Now let's define centralized and decentralized. Since they're such buzzwords, it's important to know we're discussing the same thing.

A centralized network is one in which all users connect to a central server, which then shares information. Centralized networks contain a single point of failure.

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Photo credit to Mark Passio and What on Earth is Happening

Just about all of our current networks use this model: Websites, banks, et c.

A decentralized network contains no single point of failure. Computers in this network work together to dynamically and directly share information.

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Libra Coin will begin as a centralized and permissioned network, the central node being the Libra Association. Their white paper pays lip service to the merit of decentralization, writing:

An important objective of the Libra Association is to move toward increasing decentralization over time. This decentralization ensures that there are low barriers to entry for both building on and using the network and improves the Libra ecosystem’s resilience over the long term. As discussed above, the association will develop a path toward permissionless governance and consensus on the Libra network. The association’s objective will be to start this transition within five years, and in so doing will gradually reduce the reliance on the Founding Members.

Such slippery language sounds great to one untrained in its devices. Let's take it line by line:

Move toward increasing decentralization over time...

Means that it currently is not decentralized.

This decentralization ensures that there are low barriers to entry...

Low barriers are nice, but no barriers are better. Bitcoin and other real cryptocurrencies have no barriers. Barriers are only beneficial to those profiting from them.

The association will develop a path toward permissionless governance...

That means, right now the coin is permissioned and even the path toward permissionelss governance itself doesn't yet exist. Otherwise, there would be no need to develop it.

The association's objective will be to start this transition within five years...

Five years to just begin the transition? In the rapid world of technology, five years might as well be five hundred.

In five years, the technological landscape will look vastly different than today. In five years, Libra will likely put out a press release stating the need to "study the feasibility of navigating the complex challenges found in today's intricately convoluted regulatory landscape."

And in so doing will gradually reduce the reliance on the Founding Members...

Wow, what a promise. In half a decade, the original members' outsized influence maybe will start to gradually diminish.

Do you know how much influence the "founding members" of bitcoin have right now? None. That is because bitcoin was and is a decentralized cryptocurrency from Day 1.

Anyone has been able to join and use the bitcoin network whenever they like. No need for $10 million or a government-issued ID.

By the way, why are the words "Founding Members" capitalized? These guys' egos really are out of control.

Mark Zuckerberg is lying when he said, "It's decentralized - meaning it's run by many different organizations instead of just one..."

There may be many different organizations, but they all fall under the Libra Association, making the coin 100% centralized and permissioned.

Finally, one more thing.

The Libra Association claims it will be open source and allow for independent developers to build on their blockchain. They will likely spearhead development to begin with. For example, they have created the Calibra wallet app, which will hold your Libra tokens.

This is the wallet that will require a government-issued ID to track you verify your identity.

Calibra-Know-Your-Customer.png

The Calibra app will also store your private keys. These private keys are the most important thing in a cryptocurrency wallet. They give control over the funds within.

Among bitcoin users, there is a common phrase: Not your coins, not your crypto.

Calibra holding the private keys means the Libra coins contained are theirs, not yours.

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Now that we've examined a few more of Libra's deceptive claims, let's get to the question on many investors' minds:

Will Libra be successful?

It depends how you define "successful." If you mean whether many people will use the coin at first, your guess is as good as mine.

Facebook's popularity peaked a few years back and it has been losing members and support in the last few years.

Many young people don't use it, saying "Facebook is for old people."

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Even if Libra becomes popular, it's important to remember the words of Mark Twain who wrote "Whenever you find yourself on the side of the majority, it is time to pause and reflect."

These masses of people have a tendency to get themselves into one disaster after another, either buying internet stocks in 2000, real estate at the height of the bubble in 2007, or placing their trust in fiat currencies, which historically have all returned to their intrinsic value of 0.

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Hyperflationary collapses in Germany, Venezuela, and Zimbabwe

I wish it were different, and I am working hard to help people understand these concepts and create a different outcome, so please share this article with as many people as you can, but that's the type of track record "the herd" carries.

Even if it becomes popular, I still will not use it, for the reasons mentioned above: It's based in worthless fiat currency, is permissioned and centralized.

There are already cryptocurrency projects aiming to help the unbanked, which are much further along than Libra, coins such as Stellar Lumens and OmiseGo. If that appeals to you, I urge you to look into those two projects.

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Additionally, these two do not come with the negative baggage that Facebook and the other members of the Libra Association bring.


Is This Good For Crypto?

Marketers say any publicity is good publicity. In my opinion, the more people are exposed to cryptocurrency, the better.

Just like using email, once people begin using cryptocurrency, they become familiar and comfortable with it.

Once that happens, they will naturally migrate to superior products. In the world of cryptocurrency, that means looking for coins that are permissionless and decentralized as well as a coin wherein you control your private keys.

Barack Obama said bitcoin is like having a Swiss bank account in your pocket.

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​Yep. That's the goal. To inspire people to step into their power and take back their freedom.

We will see if that happens, or if humanity chooses to remain enslaved.

For most people, that's what it is: A choice.

There are rules and regulations out there, backed up by government force and the guns of order followers, but most of the controls are soft ones.

Learned helplessness (mind control) is far more potent than all the regulations in the world.

This Tarot card is an apt description. The two figures can be free of the beast at any time. They choose to remain there and look disparagingly at anyone who suggests they leave.

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Don't be like them

Be not beholden to what other people want from you. Take back control over your own life.

That is the function of true cryptocurrencies and something Libra - though wrapped in flowery language and chock full of buzzwords - is not.

That is why I will not be using it and recommending that others avoid it as well.

Let's take off our chains.


By the way, if you're not yet into cryptocurrency or understand blockchain, what are you waiting for?

I'm here to help. Either through one on one personalized consultations or through my book The Bitcoin Startup Guide.

有办法

Michael McGillicuddy
Arizona, United States

One last thing, that name... Libra.

What does it mean? So far there has not been an official explanation for why that name was chosen.

Libra is one of the twelve signs of the zodiac, the balancing scales, historically occurring just after the autumnal equinox.

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It is amazing to see how many large organizations use zodiacal symbolism in their logos:

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What is interesting is Libra's position in the Zodiacal wheel. Historically in Libra, the sun would pass over from the "season of life" (spring and summer) to the "season of death" (autumn and winter).

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Photo credit to Mark Passio and What on Earth is Happening

The sun - light of the world - would be "weighed on the scales and found wanting."

In Libra, it begins its strength and power in late September and October, then is stung by the Scorpion in November and is fatally pierced by the archer (Sagittarius) where it reaches its lowest point and "dies" on December 20/21.

Libra is the point of the year where this process begins.

Could they be saying that Bitcoin, whose logo looks like an orange sun will begin to lose its strength in Libra, whose zodiacal sign imitates a sunset?

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Libra Zodiac Sign.png



We shall see.


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Dear @michaelmcawesome

Welcome back buddy. Didn't see you in almost 3 weeks already.

Facebook's Fake Cryptocurrency

Discussions regarding Libra and Facebook are very intense lately and I personally don't know yet what to think about it.

I'm mostly interested how FED and other central banks will react if they will realize that Libra is a threat for current financial system.

Personally I will not put my trust in Facebook and I don't think I will ever use Libra. However I will surely pay attention to this project as it may turn our financial world up-side-down....

Important question I would like to ask you, and hopefully you would share your own opinion:

  • many people out there seem to see Libra as a threat to current monetary system. I'm one of those. However I've learned that global economy is build on debt. And all debts are in FIAT currency. So does it really matter if people use Libra to pay for their "groceries" and shop online? They still need to pay all their debts and mortgages for next 20-30 years in their local fiat currency.

For that reason alone I cannot see monetary system being changed much. Neither by libra or bitcoin or any other crypto. Debts, goverment expenses, trade oil - all of it will still require $$$.

What do you think? Upvote on the way.

Yours,
Piotr

Hi @piotr, thanks for the question and the comment!:

For your question, I see the Facebook people and the Federal Reserve people as members of the same club. Though there may be some infighting (who knows how staged or fake it is), the result will likely be the same.

What is interesting is that the dollar is dying now, in front of our eyes. Companies are making their own . Whether this is a planned diversion or spontaneous action, I don't know, but it's finally coming true.

Dear @michaelmcawesome

Intersting times ahead.

Thank you for your kind and prompt reply. Appreciate it.

ps.
Since you're so responsive, I thought that perhaps I could share with you my latest publication and ask about your own opinion on discussed subject:
"DID OUR WORLD LEADERS JUST PUSH GLOBAL RECESSION AWAY from our doorsteps?"
https://www.steemit.com/economy/@crypto.piotr/did-our-world-leaders-just-push-global-recession-away-from-our-doorsteps

I would appreciate it greately.

Yours
Piotr