Facebook is launching Libra, a new cryptocurrency. As they summarize this new venture:
Libra’s mission is to enable a simple global currency and financial infrastructure that empowers billions of people.https://libra.org/en-US/white-paper/
Libra will join BitCoin and Ethereum as a new digital currency. There are a few major differences from these older siblings. From a technical perspective, one key difference is that Libra rests on a “private” blockchain instead of a “public” one.
This means it sidesteps the disastrous “proof-of-work” validation model of Bitcoin and Ethereum that spawned the catastrophic “mining” operations we’ve all read about, as well as astonishing transaction costs. Instead, Libra will use “proof-of-stake” validation which places more responsibility for authentication in the hands of 100 key stakeholders.
Financially, Libra will be pegged to a “basket” of national currencies — the Dollar, the Euro, the Yen, and so on. This is another key difference from the topsy-turvy world of Bitcoin.
But what good is Libra? Who needs it? How will it empower billions of people?
27 partners have joined Facebook in developing Libra. Among them are a few major nonprofits — Mercy Corps, Kiva, and Women’s World Banking. These groups see cryptocurrency as a way to help the vast unbanked populations of the world–Facebook users in developing economies.
In theory, a cryptocurrency could indeed have the potential to dramatically elevate global populations living outside developed financial infrastructures. It could cut financial transaction costs; it could give access to credit. It could increase stability in crisis and conflict situations. It could give identity to millions of the invisible.
The big question is how Libra would empower Facebook’s notorious surveillance engine. Facebook, after all, is a founder, inventor, and principal beneficiary of the new economic model based on amassing personal data, also known as “the Surveillance Economy.” Libra would tie in the ultimate social network — money.
Facebook plans to operate the digital wallet used to hold Libra: its wallet is called Calibra. Calibra will be integrated directly into Facebook itself as well as Messenger and WhatsApp.
What a compelling package for any national government — complete financial records as well as deep personal profiles of every citizen, updated in real time.
Governments have a strongly vested interest in the economic activities of their constituents — indeed, capturing tax revenues from an unbanked population is a major issue. There will necessarily be negotiated arrangements with the governments of populations using Libra, or whatever surrogate eventually provides that combination of services. But the proposition will be compelling.
And so Libra is an interesting play. Americans have been extremely casual in allowing Facebook and Google to set up deep surveillance operations — in exchange for the thrill of publishing cat pictures, amazing salads, and selfies. Libra, however, seems to have sparked something — if not an awakening, at least a snuffle to interrupt our gentle snoring. The FTC is possibly taking a peek at monopolistic practices. Americans now seem to view Facebook with some suspicion, in between cat pictures.
Europe has been far more awake to the mass invasion of privacy, especially the Germans who can still remember the reach of the STAZI. Germany even outlawed and told parents to destroy the “Baby Cala” dolls that were recording their children at play and sharing voice samples with the CIA.
But the over-arching reality we face is that there is a very real hunger for personal data — a truly voracious appetite, an insatiable need, not only among governments, but among private and non-profit agencies as well. Personal data has become the world’s most valuable commodity. Given this reality, it’s probably not a question of “whether” there will be an integrated cryptocurrency that tracks every financial transaction, but more a question of “who,” “when,” and “how.”
In this overall context, Facebook’s move is strategic. They have 2.4 billion users, most of whom are outside the U.S. and Europe.
And their move has struck like a clap of thunder. Facebook’s Libra has suddenly gotten everyone thinking about a global cryptocurrency. Of course, now all are dog-piling Facebook, trying to choke off Libra while desperately assessing their own capacity to catch up or make a play.
But this is not a game for individual nations, or private banks. At the national level, the exceptions would be the U.S. and China.
Given Huawei’s established reach and rapidly expanding footprint in the developing world, coupled with state-engineered software and surveillance expertise, China would be a natural competitor to provide a global currency, along with supporting surveillance capabilities.
But if we view money as a form of “social networking,” which it is, then the U.S. dollar is the closest thing we have to a global currency. Should it go crypto?
Sadly, the U.S. government is in full withdrawal mode — scorning diplomacy, abandoning embassies, dropping alliances, gutting aid programs, and breaking agreements at a frenzied pace. Developing nations in Africa and Latin America will not soon forget President Trump tweeting them off as “shithole countries.” Obviously, this is not an effective way to build the confidence and consensus required to advance an effective global financial solution.
The beneficiary is Facebook — their move with Libra is strategic and timely. Obviously, it’s a move that accrues to their own economic interests as a private company, as well as their imperial aspirations. But incongruously, it may also play a role in keeping the West relevant in a rapidly shifting landscape.
As the U.S. continues texting-while-driving the world’s greatest economy, Facebook is in some ironic sense stepping into the breach with Libra.
Shaping the limits of surveillance in a digital age is a challenge we all must face, and we cannot assume a one-size-fits-all solution. As much as some of us may detest the invasions of privacy so eagerly engineered by Facebook (and Google, etc.), and as we may detest their shrill and transparent enthusiasm for “empowering billions”, there is another specter of surveillance in our world that is far more chilling — far more chilling.
For all their faults, Facebook Libra is at least helping the free world maintain a seat at the table.
I know, it’s not much of a silver lining.