In 2020, there’s going to be a new cryptocurrency available called Libra. The main backer of this currency’s adoption is Facebook. They will not be alone in backing the Libra Association, however. It will also be backed by Silicon Valley companies and others across the country. Below are some top facts consumers should understand about the new cryptocurrency that is coming.
What Is Cryptocurrency?
There are many variations of virtual currencies called cryptocurrencies. The most popular one is the Bitcoin. Every virtual currency is based on the blockchain concept which is a computer file distributed that can only be read by people across many computers. There was no single entity that has control over the file because it is encoded with information that cannot be changed unless a specific user enters a key that accurately corresponds to a “block” in the chain they are wanting to update.
Blockchains are popular because they are public and highly secure. Cryptocurrencies are virtual currencies that use mathematical blockchains to track values and exchanges instead of central banks.
What Is Facebook’s Libra?
Facebook announced the addition of its cryptocurrency in June 2019. The Libra Association is a Swiss group that will govern the cryptocurrency. The group is made up of 28 companies, including MasterCard, Facebook, PayPal, Uber, Lyft and Spotify. Before Libra is released, the group wants to bring in more than 100 companies to have on board.
How Will Libra Work?
Libra will be essentially running on a blockchain. However, it is important to understand that it will be diverging from traditional blockchains in two separate ways.
1. The traditional blockchains will be decentralized because Libras nodes (independent computers used to verify and process blockchains) are going to be run on the servers of the Libra Association’s current company members.
2. Libra will be designed to be a “stablecoin.” The value of the units of Libra in circulation is going to be tied to specific assets formed from various currencies that will be stored by the Libra Association itself. This is done to help minimize the common volatility issues of cryptocurrency.
How The World Is Reacting To Libra
As the announcement of Libra has circulated, it is being faced with much criticism from world leaders around the globe. Policymakers and regulators from around the world have concerns that Libra’s impact will be significant on financial stability in the market. These newly voiced concerns have caused some of the original Libra supporting companies to back out before it is even launched.
