24 ms·

Facebook, Libra, and the Long Game

314 points by stanleydrew 7y ago

PaulHoule 7y ago
I too dismissed Libra out of hand, but the coalition that Facebook is building is interesting. People say that "Fintech threatens the banks" but almost all Fintech companies partner with the banks in one way or another. Look at the companies involved with Libra and see that none of them are banks. Libra will still have a lot of money on deposit with the banks, but it might be the first Fintech that will really bypass them.
- lostmsu 7y ago
  Are they beating PayPal by the length of that list?
  - Procrastes 7y ago
    I really think their play with Libra is to become a new M-PESA rather than a Paypal. They've got a good shot at doing it. Still makes no sense to me for it to be a cryptocurrency though?
  - nabla9 7y ago
    PayPal is in that list.
    - lostmsu 7y ago
      Does that mean I can pay with Facebook currency on any website, that accepts PayPal?
- drcode 7y ago
  Where is the Visa press release? Where is the Uber CEO interview on Libra? The Libra membership list is kind of meaningless, given that none of the partners seem to have any interest of promoting the project... mainly Zuck just asked these companies "Hey, you want to be on a list for a tech project for some free PR?" and until we hear more from the partners there's no reason to take this list seriously.
  - cameronbrown 7y ago
    It's likely going to be more stringent than that. I doubt Visa/MasterCard would allow their logo next to Libra without knowing what they're signing up for.
    - drcode 7y ago
      I'm sure Zuck & Visa signed an agreement that says "We agree to talk about some tech ideas and do some exploration under the name 'Libra' with no commitment from either party long term for anything." The talk about having to pay 10 million dollars is a red herring, I guarantee you Visa hasn't paid FB anything so far.
  - pavlov 7y ago
    It's not entirely free: those companies are paying $10M to run a Libra node. That's still pocket change as a hedge in case it actually takes off. So maybe they're happy to shut up for now, let Zuck take the regulatory flack, and if it seems like Libra will take off on FB's efforts, they're positioned to benefit from adoption.
    - drcode 7y ago
      > those companies are paying $10M to run a Libra node Please show me a citation of where is says concretely that Visa/Uber/etc have handed $10M to this project. The Libra project so far is just wishful thinking about things that maybe, might possibly happen sometime.
      - deleted 7y ago
        [deleted]
      - pavlov 7y ago
        What kind of proof do you expect? Even if I somehow had the wire transfer receipt in hand, Facebook could simply be giving Visa and Uber a $10M rebate on their advertisement bill in return. This is not a material sum for these companies when it comes to such a major partnership. However, since these rules are supposed to apply to everyone who wants a seat at the Libra Association, I do assume that Uber and Visa are paying the fee.
- salawat 7y ago
  That's not going to happen. As soon as it does, we'll be seeing a crackdown on a wider swathe than just banks. What scares the bejesus out of me is what happens when tooling to link up personal data from data aggregators plus sufficient tooling around blockchain analysis is built such that a realtime tracking system of financial to other activity becomes possible. A full public record of all financial transactions is a hell of a surveillance tool, and with enough ancillary data, transactions are trivially deanonymized (assuming Libra is structured in a pro-anonymity way, which it won't be, because otherwise, banks won't have a thing to do with it.
  - vocatus_gate 7y ago
    Monero for the win....the only truly fully anonymous cryptocurrency. Even if it never takes off, the existence of privacy-oriented coins like it can help influence public awareness of the importance of financial and personal privacy.
socialist_coder 7y ago
A huge amount of person-to-person sales take place through FB marketplace. If FB can drive some % of those people to use Libra that will be a good start to adoption.
CrankyBear 7y ago
"Which, by extension, means that Facebook will not control Libra." And, if you believe that, I have a fine bridge in New York I'll sell you for a few Bitcoin.
- bhupy 7y ago
  What's the counterargument to this?
  - simias 7y ago
    The incentives don't seem to align in that direction. What would be the point for Facebook to create a promote such a currency if they can't control it at some level? I fully expect that even if the core of the cryptocurrency might actually be decentralized and not directly controlled by Facebook (and I don't believe that either, for the record) the practical implementation of this will give Facebook more than enough weight to shut anybody down if they so desire. A bit like how email is supposed to be decentralized but if these days gmail decides it doesn't want to play with you you're effectively screwed. Facebook (and other tech giants) have absolutely nothing to gain from decentralization and privacy when their entire trillion dollar business model relies on siphoning as much data as possible. Anybody thinking that Facebook is somehow going to usher the golden age of cryptolibertarianism and the decentralization of money is frankly shortsighted. Then again, shortsightedness is a common symptom of libertarianism (or is it the other way around?).
    - bhupy 7y ago
      But given the system laid out in the white paper, what specifically gives Facebook the ability to exert this kind of control, even in the long run? I think we all agree that Facebook is incentivized to behave in certain ways, but if self-limitation is baked into the system, how does that matter? This is a genuine question for which I would love an answer.
      - archenary 7y ago
        The author explained this (quoted below). Even though FB doesn't control Libra (protocol), they do own Calibra (digital wallet). If Libra takes off, Calibra stands a good chance of becoming the default way of transacting in Libra. FB then becomes the de facto leader and holds outsized influence over the direction of the project/industry, much like Gmail/email, Chrome/web and Google/web search. > And this is when this bet would pay off for Facebook (and the second point I missed in my earlier analysis): the implication that digital currencies will do for money what the Internet did for information is that the very long-term trend will be towards centralization around Aggregators. When there is no friction, control shifts from gatekeepers controlling supply to Aggregators controlling demand. To that end, by pioneering Libra, building what will almost certainly be the first wallet for the currency, and bringing to bear its unmatched network for facilitating payments, Facebook is betting it will offer the best experience for digital currency flows, giving it power not by controlling Libra but rather by controlling the most users of Libra.
padobson 7y ago
I can't help but think that Facebook doomed this "distributed ledger" possibility by trying to be first to market with a tarnished brand. The developing world would hugely benefit from a scalable technology that can efficiently service digital transactions. The piece demonstrates this with how quickly WeChat Pay and Alipay penetrated China. I can't imagine the possibility for prosperity when 3 billion consumers enter the global economy in a matter of years. Alternative currencies were always going to have to compete (or at least deal with) with powerful governments, and all the most powerful governments are most easily manipulated by appealing to a mass audience. The Facebook brand isn't capable of doing that right now. There's far more incentive for politicians to talk about breaking Facebook up than to encourage Facebook to embed itself in the financial lives of their constituents. If a decision is made to breakup Facebook, spinning off Libra will be right at the top of the list. I can't see how it survives as a stand-alone technology without the support of Facebook's network effects.
- cflewis 7y ago
  I was thinking the same thing. Either the product managers or the PR people are tone deaf (or why not both?). I once saw a PR person talk about how you had to earn your way to allow yourself to be part of certain larger societal conversations. Start at grass roots, earn trust there, step up to communities, earn trust there, step up to local governments etc etc. Being big doesn't earn you anything out the gate. I liked this idea. However charitably you think about Facebook, I don't think you could possibly surmise that Facebook has earned its way to the conversation of its stated aims of helping people who can't get credit cards use digital currency. I think Libra would have been marketed much better if it had been a separate company with FB taking a 51% controlling stake, and these other validators making up the rest.
  - drcode 7y ago
    I think the real PR disaster will come when FB tries to "square the circle" and explains exactly how they are gonna keep people's Libra transactions fully isolated through the Colibra foundation while simultaneously allowing every FB app to have a built-in Libra wallet... I can't wait to hear the mental gymnastics that will be required to continue to uphold that claim.
cschneid 7y ago
Something I haven't seen yet: If my computer has a bit of malware land on it, do I lose my entire wallet worth of Libra irrevocably? If so, this seems pretty questionable as a mass-market money...
- anchpop 7y ago
  Maybe we can store libra in some sort of institution that would provide some guarantees, like returning your libra if they get stolen. They could make money by investing the libra they hold and keeping the interest.
  - the_duke 7y ago
    Yes, that is a novel and brilliant idea. Since this is something similar to a old school money lenders table over which exchanges took place, we shall adopt the Old Italian word for table, banca, and call it a "bank"!
  - skohan 7y ago
    Might not be enough: what if this institution fails? It would be even better if governments could ensure deposits in such an entity (up to $100k worth or so might be sufficient) to stabilize the Libre economy in the worst-case scenario.
- Pamar 7y ago
  It's a bit early to tell but... do you lose access to FB, whatsapp or whatever when your computer/smartphone gets infected? Or are you talking about malware designed to transfer money from your account to someone else's? Is this a problem for Paypal?
  - cschneid 7y ago
    Paypal can reverse transactions, can Libra? Or is it like bitcoin, where I must protect my private key by any and all means, and then if it's lost, sucks to be me? And yeah, I mean "lose all your money due to a 0 day in your browser".
warp_factor 7y ago
I'm crossing my fingers that this pseudo crypto money never takes off. Having Facebook control this would be so terrible and the proof that we didn't learn anything over the last couple months. Don't fool yourself even though they released a white paper and some pseudo decentralized schemes this is no different than a casino chip. Unfortunately I feel like it might pick up and become a thing.
- scarface74 7y ago
  The article specifically says that FB does not have a controlling interest or the ability to decide who joins the consortium.
  - warp_factor 7y ago
    That's the way they marketed it. They know they had to do this little concession in order to get Libra to pick up so that people would repeat tirelessly that it's not controller by Facebook and therefore it's good. But it's controlled by Facebook and friends and the influence they would get over any decision is absolutely huge
    - scarface74 7y ago
      Do you have any citations that contradict the article? The Validators Who, then, are the validators? Well, Facebook is one, but only one: currently there are 28 “Founding Members”, including merchants, venture capitalists, and payment networks, that meet two of the following three criteria: More than $1 billion USD in market value or more than $500 million USD in customer cash flow Reach more than 20 million people a year Recognition as a top-100 industry leader by a third-party association such as Fortune or S&P These “Founding Members” are required to make a minimum investment of $10 million and provide computing power to the network. In addition, there are separate requirements for non-profit organizations and academic institutions that rely on a mixture of budget, track record, and rankings; a minimum investment may not be necessary. Libra intends to have 100 Founding Members by the time it launches next year.
Zoo3y 7y ago
The missing information here is how much of this currency will belong to facebook, and to each constituent. No matter how many orgs are added to the coalition, if facebook owns 50% of the coin then it's all a sham.
- conanbatt 7y ago
  Why? Its a convertible coin. It doesn't matter.
- nabla9 7y ago
  Owning coins does not provide excessive value or control for the owners, because it's basically just money market fund attached to the payment system. FB probably wants to tap into user payment records and that's why they push this.
bndw 7y ago
What about privacy? Most of these Internet giants make money hoarding user data; will Libra open up a new dataset to collect and monetize for these companies? Will Libra transaction data be more thorough than what they're currently able to get from 3rd parties?
- drcode 7y ago
  No worries, they're just gonna take a pic of your government ID and fingerprints for KYC requirements which are securely isolated in a vault in Switzerland where they will remain 100% safe, except in that rare instance where you need to buy a cup of coffee, and they therefore need to inspect all your records to make sure you're not funding terrorism. /s
  - MBCook 7y ago
    From the various articles I’ve seen it looks like they don’t think they need to follow KYC because it’s not ‘real’ money. I’m sure the government will have something to say about that.
    - drcode 7y ago
      Yeah, that's really what this is all about- Zuck probably keeps asking stuff "can't we just have a payment button right here in an FB baby shower announcement?" and his legal departments says "you can't do that for lots of regulatory reasons, including KYC" and so Libra was born.
    - jacques_chester 7y ago
      New York State already requires KYC for crypto transactions. And since a certain amount of banking takes place hereabouts, that law has wider influence than New York.
- scarface74 7y ago
  And how is this is different from the credit card companies? They’ve been selling transaction data forever.
rookonaut 7y ago
Could the problem with the damaged brand be a reason why Apple is so keen on becoming a "privacy-as-a-service"-company?
- MBCook 7y ago
  I think Apple is doing that because they’re out of growth otherwise. They’ve sold most all the iPads and iPhones and Macs they can. The numbers may go up but nothing like when the iPhone was still growing. Services is the only part of the business that may have more than small growth levels left in it.
- scarface74 7y ago
  On one hand it is mostly bull. Apple has the benefit of having a “strategy credit” since selling user data is not part of its business model. But on the other hand, I can’t help but think that a gay CEO who grew up in Alabama really cares about privacy.
- superkuh 7y ago
  No. Apple cares about privacy and security because it wants to become a bank and payment processor. It had/has so much liquid capital it just makes sense. They've been moving that way ever since 2013 or so. All the concentration on security is so that their phones can be payment terminals and Apple can seek rent.
shipof123 7y ago
What would the advantage be in using Libra over a online wallet(PayPal, etc). It doesn’t have the anonymous nature of Cryptocurrency or its volatility. It’s backed by a currency, and they will still charge a fee, so why use it? EDIT: I realize that some people might not be able to get bank accounts, and know that makes more sense, but what other reasons are there?
chanwitkepha 7y ago
But what about Privacy and Security which we should concern.
quattrofan 7y ago
And no mention of Lightning Network...
- rolltiide 7y ago
  Why would this article mention that?
  - langitbiru 7y ago
    Probably because the author mentioned that Bitcoin is not efficient (7 tx per second). But Lightning Network can make Bitcoin more efficient. I haven't looked into Lightning Network thouroughly so I can not make any comment whether it is up to its words.
    - bduerst 7y ago
      They didn't mention it because Lightning network is only brought up and pushed by people who have a stake in it. It only scales with transactions, not users, and is still pinned to Bitcoin.
- ilaksh 7y ago
  They also didn't mention Ethereum 2.0's scaling abilities or any of the other cryptocurrency scaling techniques that are already available.
gooseus 7y ago
> The largest leap will come last: Libra as a genuine currency, not simply a medium for transaction. This will be function of volume in the previous two use cases, and is understandably concerning to governments all over the world. Well that's certainly an understatement. This is literally the only mention of government through-out the entire article. The only mention of banks is in the previous paragraph stating there are no banks in the coalition. Banks and governments go together like peas and carrots, they also control pretty much everything and have for hundreds and thousands of years. This control is derived from a few places, but primarily from a monopoly on the control of the currency and the monopoly on coercive force. No government is going to let FB and any coalition do an end run around their national currency and their banking institutions. They're also not going to partner with an international consortium to have them replaced with something they only partially control. I really don't know why this isn't a larger part of this conversation. I think people need to be cracking more history books and less William Gibson and Neil Stephenson novels.
- soulofmischief 7y ago
  Do you worry any Libra-centric regulations will have negative impact towards true libre currencies like Bitcoin Cash?
- buboard 7y ago
  Banking has existed for a few centuries, and state controlled money is something recent too, it used to be that multiple sources minted coins. And bitcoin which has existed for 10 years and is far more threatening to governments has not been extinguished.
  - nine_k 7y ago
    Gold coins can be minted at multiple places, or admitted foreign, because their value is gold by weight. Mass fiat money are no more than 2 centuries old, in most places less than 60 years (see Bretton-Woods). They have to be tightly controled by state.
    - 7y ago
cconroy 7y ago
Pink plane reasoning like this makes you dismiss bitcoin as not scalable. The blue idea is to scale off chain with smart contracts whether centralized or not. Compare cos fighting this to those not like cash app which are building on top of bitcoin.
reddygaru 7y ago
I have a totally out of the box thought here. I think Libra is a distraction from Facebook for people to forget Cambridge Analytica etc. FB may have unleashed this as a weapon for people to rally up or againast and Fb doesn't care if it succeeds or fails because it is a new category and doesn't affect it's bottomline.
- buboard 7y ago
  facebook.com's s bottom line is in exponential decay since a few years. They are trying to find a future here.
jeremyjh 7y ago
This article seems to be making the claim that the Libra blockchain will not be viewable by anyone other the validators. This is counterintuitive - even if only validators can confirm new blocks I expected the chain would be public, there would be explorers, etc. Does anyone know if this question has been answered somewhere definitively?
- lucasverra 7y ago
  https://librabrowser.io/stats https://librabrowser.io/stats already exists for the testnet with real time stats
Chris_Chambers 7y ago
The Jews gained a monopoly over your currency in 1913. Zuckerberg is a Jew. If the government will not nationalize and seize total control of the privately-owned Federal Reserve then they certainly won’t stop this either.
lanrh1836 7y ago
I haven’t found many “takes” on Libra talk about Calibra, which is FB’s Libra wallet and, if this thing takes off, would likely by default be the top wallet for Libra transactions. Calibra would require full identity verification e.g. submitting SSN and a copy of your picture ID. Getting that info is way beyond what FB has about you now.
olivermarks 7y ago
Disappointed Ben didn't add a paragraph or two about privacy concerns. The MC, Visa will float on top of libra unencumbered by bank fees, but our relationship with credit card firms and our privacy is regulated in the western world. The Calibra wallet logic is going to need greater privacy protections for the user or we will have a situation worse than the current platform monopolies, with only pea shooters like the EFF working for users https://www.eff.org/issues/privacy https://www.eff.org/issues/privacy We need new law like the US section 230 for personal rights and privacy as well as free speech https://www.eff.org/issues/cda230 https://www.eff.org/issues/cda230
jmull 7y ago
Pretty interesting. It's good to see a deeper analysis of this. This part though: > ...while its members — who again, are the validators — do control the Libra protocol, Facebook does not control the validators. Which, by extension, means that Facebook will not control Libra. That's true, but from my point of view, that distinction isn't too important. In either case, there are a relatively very small number of individuals who control Libra in an opaque way. By spreading the control out a little, I think it reduces short-sighted and single-perspective thinking, which is good, but it's still going to be run in a self-interested way for the handful of companies that control it and the executives that control those companies.
filereaper 7y ago
Tangential, but has Facebook done anything to reduce the power-consumption in Libra? I'm not enthused about supporting anything that worsens the global climate crisis and its irresponsible of large companies to support cryptocurrencies with its terrible power usage right now.
- unknownsavage 7y ago
  It doesn't use mining, so requires negligible power to run.
- ilaksh 7y ago
  Its not a real cryptocurrency. It doesn't need to be robust or use a lot of power.
ghayes 7y ago
My primary concern is that with a set of 20 or 100 validators, you can’t call it a decentralized platform (it’s a blockchain run exclusively by a centralized consortium). The article discusses the fact they intend to to decentralize it in 5 years, but that would be the equivalent of a dictator stepping down and promoting democracy which... doesn’t always come to pass.
- sigmar 7y ago
  I've been wondering about this too. I don't see how the incentives are setup that the Association would want to move towards an entirely permissionless network. Especially if Libra gets heavily adopted at 100 nodes (as they don't need to improve trust at that point and letting more companies into the association will decrease transaction throughput).
  - nybble41 7y ago
    There are also some technical barriers on the path to a permissionless network. The consensus algorithm Libra is using currently requires full connectivity between validators and is only robust so long as 2/3 of the validators can be trusted. Much has been made of the risk of a "51% attack" against Bitcoin, but one need only control 1/3 of the validator nodes to disrupt Libra, which is a far lower threshold than 51% of computation capacity. Your standard botnet isn't much of a threat to Bitcoin since the participating devices aren't optimized for mining, but Libra would be an entirely different matter.
    - woah 7y ago
      The 1/3rd / 2/3rd pattern in a lot of blockchain BFT protocols is really elegant. If 1/3 of the voting power of a chain wants it to stop, then it probably shouldn't be running. It takes 2/3rds of the voting power for the validators to actually steal anyone's money or alter history. Your botnet example is a non-sequiter. Since power in BFT protocols does not stem from the wasting of electricity, botnets have nothing to do with any possible attacks on a BFT system.
narrator 7y ago
What is the benefit of Libra exactly? Why not just set it up like WeChatPay or Paypal as a centralized database? I guess like gambling chips or video arcade tokens, the lack of belief that it's real money might confuse some people into spending it more freely. Another thing is is that they can take all the money that's paid into Libra and run a hedge fund with the reserves because they can write their terms and conditions so they can do whatever the heck they want with the "reserves" and not tell anyone what they're doing. Another benefit is that they can facilitate illegal commerce on facebook by letting people conduct cross border transactions outside of AML/KYC land that a PayPal like system would require. They can also tie identities to coin transactions to analyze transactions for further ad targeting. Did I miss anything?
jshowa3 7y ago
Here is the important thing to understand about the Libra Association: while its members — who again, are the validators — do control the Libra protocol, Facebook does not control the validators. Which, by extension, means that Facebook will not control Libra. But Facebook does control Libra just by virtue of providing infrastructure. They're also part of the consortium. So again, why is the author trying to make it seem like Facebook has no control?
- bongobongo 7y ago
  It's a kind of mind-trick that only occurs in articles and white papers about cryptocurrencies and blockchain technologies. I've noticed that they often end up proposing a distributed private shared database controlled by a corporate cartel and call it "freedom."
boh 7y ago
Adding the words blockchain and cryptocurrency to this new Facebook initiative gives it an air of "innovation", the sort that reacts to criticism with "this is too new and innovative for you to understand", and "stogy governments don't like to innovate like we do, so they want to stop us with old timey regulation (and consumer protections)". Libra is essentially an ETF. It's a vehicle that will take deposits from customers and invest them in interest-yielding securities and currencies. Unlike a bank, customers forfeit their right to gain interest from their deposits and it will instead service operating costs (and any money left over goes to founder members). Libra is effectively planing to receive deposits, manage money and process transactions, despite not even attempting to meet regulatory requirements (though they plan to "shape the regulatory environment"--their words). What's so innovative about this venture is its potential for further data harvesting and potential income streams. Facebook isn't going to harvest any data produced from this venture--that is unless the customer willingly gives it to them. Why would a customer willingly provide this access to Facebook? I think anyone using FB for the past decade can answer that question--those regular TOS updates are hard to follow. Libra isn't so much a subversion of the existing order, as it as an act of financial engineering to service a social media company. What it "could be" doesn't justify what it already is.
- thatfrenchguy 7y ago
  > Libra is essentially an ETF But what they invest in will be interesting: what happens when the next financial crisis comes ? When the dollar plunges ?
  - 2a96eb7d685a49c 7y ago
    Part of the solution is that it is a basket of currencies rather than just the dollar.
  - mountainofdeath 7y ago
    These sorts of "currency" are typically invested in short term, low-risk deposits. Think bank certificates of deposit, US treasuries and the equivalents in foreign currencies.
AlphaWeaver 7y ago
This article captures one of the biggest problems I've seen in the discussion about Libra, which is that everyone has been writing it off as a currency that Facebook can control. In reality, Facebook's control is limited to being equal to the other members of the Association. Facebook controls the Calibra wallet, _not_ the currency as a whole. The thing that really drove this point home for me was when I browsed to both websites. Browsing to the Calibra wallet website, the entire site broke because I have blackholed all Facebook and tracking domains through NextDNS. When I browsed to the Libra website to view the whitepaper, everything worked just fine. This is a great demonstration of who is in control of what. That being said, I think this article also outlines the clear incentives as to why Facebook would like to promote Libra in the first place, which is the data they have the potential to gather through the Calibra wallet.
jbverschoor 7y ago
I dunno.. it’s nice and all that these companies support it. But they are exactly the kinds of companies that don’t have the best customer service.
miguelmota 7y ago
Do companies that bought in to join the Libra alliances for 10 million each mean that they'll receive all transaction history and purchasing patterns of everyone on the Libra network as well as receive a share of the fees in the future? Sounds like a bargain if that's the case
- buboard 7y ago
  the blockchain only contains wallet addresses, not info about who is buying what. only sites having access to the checkout can know that.
yabadabadoodoo 7y ago
When Zuck met Erik (Prince)
bluetwo 7y ago
Sounds like a great new way for Russian to buy ads on the sly to interfere with our next elections. Other than that, I can't think of a use case.
figlicious 7y ago
Thing with libra is that its not a cryptocurrency nor does it move the distributed agenda forward. It moves transactions from happening off-the platform to being on it. FB is in it for themselves. The consortium of third party players is for shielding themselves from anti-trust concerns
hidayatshah 7y ago
Log game
creeble 7y ago
Forgive my stupidity, but I don't understand this statement by Ben (Stratechery): "In practice, it is much more complicated: while a limited set of “validators” — aka miners — share a history of transactions in (individual) blocks that are chained together (i.e. a blockchain), what Libra actually exposes is the current state of the ledger. In practice this means that adding new transactions can be much quicker and more efficient — more akin to adding a line to a spreadsheet than rebuilding the entire spreadsheet from scratch." How is this different than Bitcoin, and why does it require a different level of trust? You are still trusting the validators (miners) either way, correct? And how is it more efficient?
- snarf21 7y ago
  Libra intends to use Proof of Stake. This means that the initial members will "stake" some amount of Libra and now all transactions can only be validated by them. You as an individual can't validate any new transaction. The assumption is that because the PoS validator has a huge stake in this currency, they will behave rationally or otherwise they would devalue their own stake. The trust here is completely centralized and is a rich get richer model. If FB or PayPal or a member doesn't want to add your transaction, they can completely block you. They control what is true. Bitcoin uses Proof of Work. Consensus is decentralized. Anyone can do some "work" (hashing in this case). If they find the magic number to get the right hash, they get rewarded by the Bitcoin protocol itself. This is also the only way new Bitcoins are created. It is only when one of these magic numbers gets found that transactions get added to the Bitcoin ledger (every 10 minutes). The rule is that the longest ledger chain wins so everyone is running in parallel. You don't need to own any Bitcoin to do mining to get "free" Bitcoin. The trust is decentralized (in terms of control) and no one can prevent anyone else from validating Bitcoin transactions as long as you follow the same rules as everyone else.
  - creeble 7y ago
    Probably too late to keep this discussion going, but... I understand Proof of Stake vs. Proof of Work. But what Ben says about only "publishing the current state of the ledger" doesn't seem to relate to whether PoS is used. It's certainly not inherent to PoS that the entire blockchain isn't published. Maybe he's just confused about how PoS works (but I somehow doubt that). I understand how PoS makes things more efficient by entrusting a single validator (or any small subset of validators) rather than having essentially a contest, and I understand why this is also inherently less trustworthy than PoW. But Ben never mentions Proof of Stake anywhere in his explanation, just that the blockchain's "current state" is the only thing "exposed". I'm juse trying to understand what he's getting at there.
apo 7y ago
> In practice, it is much more complicated: while a limited set of “validators” — aka miners — share a history of transactions in (individual) blocks that are chained together (i.e. a blockchain), what Libra actually exposes is the current state of the ledger. In practice this means that adding new transactions can be much quicker and more efficient — more akin to adding a line to a spreadsheet than rebuilding the entire spreadsheet from scratch. The author seems to be referring to the two different accounting models in crupyotcurrency: the coin model and the account model. The coin (aka UTXO) model mimics physical cash. A transaction changes ownership of a digital token, leaving a chain of ownership in its wake. This is the model used by Bitcoin. The account model credits and debits specific amounts from an account. This is the model used by Ethereum. The author seems to imply that the speed of a network depends on which accounting model is being used. It doesn't. In both cases, signatures must be validated, and this is the most costly computation. In neither case is the entire chain of transactions reloaded to verify a single payment. Instead, the most recent state is extended. Transaction volume is largely a function of how open the network is and how trusted the parties are that write blocks. The more open the network to membership by arbitrary players, the slower it will be. The less trust in those writing blocks, the slower it will be. Bitcoin users value censorship resistance and insist on validating their own blocks (or at least they should). The network is configured make this possible by, for example, setting a block size limit among other features. Libra will need none of this. Validators will be implicitly trusted. What they say goes. A certain minimum hardware spec can be set and enforced, ensuring fast payment processing, at the expense of censorship resistance and openness.
jillesvangurp 7y ago
Technically what Ethereum, Bitcoin and Libra are doing are each variations of Byzantine Fault Tolerance based consensus. The key difference is that the former two are permission less and the latter is permissive. Permission less in this case means that anyone can start a validator node and verify transactions this typically involves either proof of work or stake. Permissive means that only some validators are able to do that and that the consensus is based on verified identity: each validator has a known identity and only explicitly trusts certain other well known validators. As the article nodes, it would be a mistake to assume that that is only Facebook. What Libra does is actually similar to Stellar and Ripple, which are also based on permissive BFTs. Since I've used Stellar, I know a bit more about how that is structured. In short, in Stellar, anyone can start a validator and start validating transactions. This is commonly done by people with a need to validate transactions for scaling reasons. Every validator is configured with a list of other validators that they trust and a consensus quorum that needs to be reached between those for a transaction to be acceptable. The flip side is that for your transactions to be acceptable to others, they'd have to trust you. In practice these sort of bi-directional trust relations only happen on a need to have basis; for example because you and your business relations are swapping the same tokens with each other and have a business need to trust each other's work. The extended network of mutually trusting validators that trust each other directly or indirectly is the basis for the consensus. After some incidents with the Stellar network halting its consensus, Stellar is actually moving to reduce the reliance of the network on their own validators. The recent outage in May was actually root caused by several non SDF owned validators going down. This sounds bad but it is actually a safety feature: stellar will prefer partition tolerance and consistency over availability. Ethereum and Bitcoin have had issues with favoring availability over consistency. If you are running a bank, that is kind of a big deal. Libra is launching with a quite broad consortium that each will run validators. I imagine that like in Stellar, each of those validators will eventually be able to start trusting other validators at their own discretion. I'm assuming that that is what Facebook means when they say they will eventually open up. It seems like initially this will be tied to deals with Calibra, which is a subsidiary of Facebook and which is responsible for hosting the reserve that backs the Libra, and other stable coins that will be running on the network. A key difference with Stellar, which is run and controlled by a foundation representing its members, Calibra is instead a commercial entity owned by Facebook. Presumably the consortium members have some kind of contractual agreement with Calibra about this. In other words, Facebook as a owner of Calibra is a bit more special than everyone else. I imagine they also hold patents, trademarks, etc. as well. To be clear, the software itself is Apache licensed. Like many, I wrote up my own thoughts on Libra and wrote a lengthty article. You may find it here: https://dev.to/jillesvangurp/libra-blockchains-and-the-meaning-of-it-all-1clc https://dev.to/jillesvangurp/libra-blockchains-and-the-meani... In short, what they are doing makes sense practically, technically, and legally. People are obviously talking a lot about legislation currently and Facebook's motivations. My impression is that governments are mostly still applying and interpreting existing laws when it comes to blockchains and are actually quite slow in responding in a coherent and timely fashion with new laws. My guess is that Facebook and others are counting on this and are looking to create a financial reality where shutting this down becomes economically more difficult. In short, once they are moving lots of money around, shutting them down becomes impractical.
vinay_ys 7y ago
A brand new highly technical protocol with a brand new language has been announced along with open-source codebase and I am yet to come across a meaningful critique or review of the tech side of Libra. Politics aside, just the tech is quite interesting. I think it is silly that they think this will become big among the unbanked (in countries like India) when they can do only 1000 transactions per second. Nuts! Don't you think so?
vmurthy 7y ago
I am someone you might consider early adopter. I enjoying tinkering with the latest gadget, getting that fancy domain name with an extension like .ooo ( yeah! not kidding :-D ) but .. when it comes to FB, I don't mind being a luddite. Add to that, the country I live in currently (India) has a ban on cryptocurrencies and we have tons of alternatives like Paytm[0] and UPI (Inter-bank transfers in an instant)[1]. So, Mr Zuckerberg et al, thank you but no thank you. To me , the most interesting part is towards the end of the article (emphasis mine) > This applies even more to the Calibra wallet: Facebook promises not to mix transaction data with profile data, but that entails, well, trust ... We all know how the promises turn out [2][3] [0]https://paytm.com/ https://paytm.com/ [1] https://en.wikipedia.org/wiki/Unified_Payments_Interface https://en.wikipedia.org/wiki/Unified_Payments_Interface [2]https://www.theinquirer.net/inquirer/news/3032946/whatsapp-and-facebook-are-sharing-user-data-after-all-and-its-legal https://www.theinquirer.net/inquirer/news/3032946/whatsapp-a... [3]https://www.forbes.com/sites/lensherman/2018/05/23/zuckerbergs-broken-promises-show-facebook-is-not-your-friend/#359b79477b0a https://www.forbes.com/sites/lensherman/2018/05/23/zuckerber...
ptah 7y ago
one more step towards the irrelevance of democracy and towards increasing corporate control and influence
coralreef 7y ago
"while its members — who again, are the validators — do control the Libra protocol, Facebook does not control the validators. Which, by extension, means that Facebook will not control Libra." Within the designed protocols, yes, Facebook gets one vote equal to the the single vote of any other node. Outside the system lens, Facebook brings this product to potentially 2.38 billion users. That dwarfs the value that any other validator can bring. If Facebook becomes unhappy with what the consortium is doing, it can simply say "Hey, we're gonna stop using Libra, and start a new fork." So while they may not control other validator members, they can certainly strong arm them into falling in line.
deleted 7y ago
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314 points by stanleydrew 7y ago

I too dismissed Libra out of hand, but the coalition that Facebook is building is interesting. People say that "Fintech threatens the banks" but almost all Fintech companies partner with the banks in one way or another. Look at the companies involved with Libra and see that none of them are banks. Libra will still have a lot of money on deposit with the banks, but it might be the first Fintech that will really bypass them.

lostmsu 7y ago
Are they beating PayPal by the length of that list?
- Procrastes 7y ago
  I really think their play with Libra is to become a new M-PESA rather than a Paypal. They've got a good shot at doing it. Still makes no sense to me for it to be a cryptocurrency though?
- nabla9 7y ago
  PayPal is in that list.
  - lostmsu 7y ago
    Does that mean I can pay with Facebook currency on any website, that accepts PayPal?
drcode 7y ago
Where is the Visa press release? Where is the Uber CEO interview on Libra? The Libra membership list is kind of meaningless, given that none of the partners seem to have any interest of promoting the project... mainly Zuck just asked these companies "Hey, you want to be on a list for a tech project for some free PR?" and until we hear more from the partners there's no reason to take this list seriously.
- cameronbrown 7y ago
  It's likely going to be more stringent than that. I doubt Visa/MasterCard would allow their logo next to Libra without knowing what they're signing up for.
  - drcode 7y ago
    I'm sure Zuck & Visa signed an agreement that says "We agree to talk about some tech ideas and do some exploration under the name 'Libra' with no commitment from either party long term for anything." The talk about having to pay 10 million dollars is a red herring, I guarantee you Visa hasn't paid FB anything so far.
- pavlov 7y ago
  It's not entirely free: those companies are paying $10M to run a Libra node. That's still pocket change as a hedge in case it actually takes off. So maybe they're happy to shut up for now, let Zuck take the regulatory flack, and if it seems like Libra will take off on FB's efforts, they're positioned to benefit from adoption.
  - drcode 7y ago
    > those companies are paying $10M to run a Libra node Please show me a citation of where is says concretely that Visa/Uber/etc have handed $10M to this project. The Libra project so far is just wishful thinking about things that maybe, might possibly happen sometime.
    - deleted 7y ago
      [deleted]
    - pavlov 7y ago
      What kind of proof do you expect? Even if I somehow had the wire transfer receipt in hand, Facebook could simply be giving Visa and Uber a $10M rebate on their advertisement bill in return. This is not a material sum for these companies when it comes to such a major partnership. However, since these rules are supposed to apply to everyone who wants a seat at the Libra Association, I do assume that Uber and Visa are paying the fee.
salawat 7y ago
That's not going to happen. As soon as it does, we'll be seeing a crackdown on a wider swathe than just banks. What scares the bejesus out of me is what happens when tooling to link up personal data from data aggregators plus sufficient tooling around blockchain analysis is built such that a realtime tracking system of financial to other activity becomes possible. A full public record of all financial transactions is a hell of a surveillance tool, and with enough ancillary data, transactions are trivially deanonymized (assuming Libra is structured in a pro-anonymity way, which it won't be, because otherwise, banks won't have a thing to do with it.
- vocatus_gate 7y ago
  Monero for the win....the only truly fully anonymous cryptocurrency. Even if it never takes off, the existence of privacy-oriented coins like it can help influence public awareness of the importance of financial and personal privacy.

socialist_coder 7y ago

A huge amount of person-to-person sales take place through FB marketplace. If FB can drive some % of those people to use Libra that will be a good start to adoption.

CrankyBear 7y ago

"Which, by extension, means that Facebook will not control Libra." And, if you believe that, I have a fine bridge in New York I'll sell you for a few Bitcoin.

bhupy 7y ago
What's the counterargument to this?
- simias 7y ago
  The incentives don't seem to align in that direction. What would be the point for Facebook to create a promote such a currency if they can't control it at some level? I fully expect that even if the core of the cryptocurrency might actually be decentralized and not directly controlled by Facebook (and I don't believe that either, for the record) the practical implementation of this will give Facebook more than enough weight to shut anybody down if they so desire. A bit like how email is supposed to be decentralized but if these days gmail decides it doesn't want to play with you you're effectively screwed. Facebook (and other tech giants) have absolutely nothing to gain from decentralization and privacy when their entire trillion dollar business model relies on siphoning as much data as possible. Anybody thinking that Facebook is somehow going to usher the golden age of cryptolibertarianism and the decentralization of money is frankly shortsighted. Then again, shortsightedness is a common symptom of libertarianism (or is it the other way around?).
  - bhupy 7y ago
    But given the system laid out in the white paper, what specifically gives Facebook the ability to exert this kind of control, even in the long run? I think we all agree that Facebook is incentivized to behave in certain ways, but if self-limitation is baked into the system, how does that matter? This is a genuine question for which I would love an answer.
    - archenary 7y ago
      The author explained this (quoted below). Even though FB doesn't control Libra (protocol), they do own Calibra (digital wallet). If Libra takes off, Calibra stands a good chance of becoming the default way of transacting in Libra. FB then becomes the de facto leader and holds outsized influence over the direction of the project/industry, much like Gmail/email, Chrome/web and Google/web search. > And this is when this bet would pay off for Facebook (and the second point I missed in my earlier analysis): the implication that digital currencies will do for money what the Internet did for information is that the very long-term trend will be towards centralization around Aggregators. When there is no friction, control shifts from gatekeepers controlling supply to Aggregators controlling demand. To that end, by pioneering Libra, building what will almost certainly be the first wallet for the currency, and bringing to bear its unmatched network for facilitating payments, Facebook is betting it will offer the best experience for digital currency flows, giving it power not by controlling Libra but rather by controlling the most users of Libra.

padobson 7y ago

I can't help but think that Facebook doomed this "distributed ledger" possibility by trying to be first to market with a tarnished brand. The developing world would hugely benefit from a scalable technology that can efficiently service digital transactions. The piece demonstrates this with how quickly WeChat Pay and Alipay penetrated China. I can't imagine the possibility for prosperity when 3 billion consumers enter the global economy in a matter of years. Alternative currencies were always going to have to compete (or at least deal with) with powerful governments, and all the most powerful governments are most easily manipulated by appealing to a mass audience. The Facebook brand isn't capable of doing that right now. There's far more incentive for politicians to talk about breaking Facebook up than to encourage Facebook to embed itself in the financial lives of their constituents. If a decision is made to breakup Facebook, spinning off Libra will be right at the top of the list. I can't see how it survives as a stand-alone technology without the support of Facebook's network effects.

cflewis 7y ago
I was thinking the same thing. Either the product managers or the PR people are tone deaf (or why not both?). I once saw a PR person talk about how you had to earn your way to allow yourself to be part of certain larger societal conversations. Start at grass roots, earn trust there, step up to communities, earn trust there, step up to local governments etc etc. Being big doesn't earn you anything out the gate. I liked this idea. However charitably you think about Facebook, I don't think you could possibly surmise that Facebook has earned its way to the conversation of its stated aims of helping people who can't get credit cards use digital currency. I think Libra would have been marketed much better if it had been a separate company with FB taking a 51% controlling stake, and these other validators making up the rest.
- drcode 7y ago
  I think the real PR disaster will come when FB tries to "square the circle" and explains exactly how they are gonna keep people's Libra transactions fully isolated through the Colibra foundation while simultaneously allowing every FB app to have a built-in Libra wallet... I can't wait to hear the mental gymnastics that will be required to continue to uphold that claim.

cschneid 7y ago

Something I haven't seen yet: If my computer has a bit of malware land on it, do I lose my entire wallet worth of Libra irrevocably? If so, this seems pretty questionable as a mass-market money...

anchpop 7y ago
Maybe we can store libra in some sort of institution that would provide some guarantees, like returning your libra if they get stolen. They could make money by investing the libra they hold and keeping the interest.
- the_duke 7y ago
  Yes, that is a novel and brilliant idea. Since this is something similar to a old school money lenders table over which exchanges took place, we shall adopt the Old Italian word for table, banca, and call it a "bank"!
- skohan 7y ago
  Might not be enough: what if this institution fails? It would be even better if governments could ensure deposits in such an entity (up to $100k worth or so might be sufficient) to stabilize the Libre economy in the worst-case scenario.
Pamar 7y ago
It's a bit early to tell but... do you lose access to FB, whatsapp or whatever when your computer/smartphone gets infected? Or are you talking about malware designed to transfer money from your account to someone else's? Is this a problem for Paypal?
- cschneid 7y ago
  Paypal can reverse transactions, can Libra? Or is it like bitcoin, where I must protect my private key by any and all means, and then if it's lost, sucks to be me? And yeah, I mean "lose all your money due to a 0 day in your browser".

warp_factor 7y ago

I'm crossing my fingers that this pseudo crypto money never takes off. Having Facebook control this would be so terrible and the proof that we didn't learn anything over the last couple months. Don't fool yourself even though they released a white paper and some pseudo decentralized schemes this is no different than a casino chip. Unfortunately I feel like it might pick up and become a thing.

scarface74 7y ago
The article specifically says that FB does not have a controlling interest or the ability to decide who joins the consortium.
- warp_factor 7y ago
  That's the way they marketed it. They know they had to do this little concession in order to get Libra to pick up so that people would repeat tirelessly that it's not controller by Facebook and therefore it's good. But it's controlled by Facebook and friends and the influence they would get over any decision is absolutely huge
  - scarface74 7y ago
    Do you have any citations that contradict the article? The Validators Who, then, are the validators? Well, Facebook is one, but only one: currently there are 28 “Founding Members”, including merchants, venture capitalists, and payment networks, that meet two of the following three criteria: More than $1 billion USD in market value or more than $500 million USD in customer cash flow Reach more than 20 million people a year Recognition as a top-100 industry leader by a third-party association such as Fortune or S&P These “Founding Members” are required to make a minimum investment of $10 million and provide computing power to the network. In addition, there are separate requirements for non-profit organizations and academic institutions that rely on a mixture of budget, track record, and rankings; a minimum investment may not be necessary. Libra intends to have 100 Founding Members by the time it launches next year.

Zoo3y 7y ago

The missing information here is how much of this currency will belong to facebook, and to each constituent. No matter how many orgs are added to the coalition, if facebook owns 50% of the coin then it's all a sham.

conanbatt 7y ago
Why? Its a convertible coin. It doesn't matter.
nabla9 7y ago
Owning coins does not provide excessive value or control for the owners, because it's basically just money market fund attached to the payment system. FB probably wants to tap into user payment records and that's why they push this.

bndw 7y ago

What about privacy? Most of these Internet giants make money hoarding user data; will Libra open up a new dataset to collect and monetize for these companies? Will Libra transaction data be more thorough than what they're currently able to get from 3rd parties?

drcode 7y ago
No worries, they're just gonna take a pic of your government ID and fingerprints for KYC requirements which are securely isolated in a vault in Switzerland where they will remain 100% safe, except in that rare instance where you need to buy a cup of coffee, and they therefore need to inspect all your records to make sure you're not funding terrorism. /s
- MBCook 7y ago
  From the various articles I’ve seen it looks like they don’t think they need to follow KYC because it’s not ‘real’ money. I’m sure the government will have something to say about that.
  - drcode 7y ago
    Yeah, that's really what this is all about- Zuck probably keeps asking stuff "can't we just have a payment button right here in an FB baby shower announcement?" and his legal departments says "you can't do that for lots of regulatory reasons, including KYC" and so Libra was born.
  - jacques_chester 7y ago
    New York State already requires KYC for crypto transactions. And since a certain amount of banking takes place hereabouts, that law has wider influence than New York.
scarface74 7y ago
And how is this is different from the credit card companies? They’ve been selling transaction data forever.

rookonaut 7y ago

Could the problem with the damaged brand be a reason why Apple is so keen on becoming a "privacy-as-a-service"-company?

MBCook 7y ago
I think Apple is doing that because they’re out of growth otherwise. They’ve sold most all the iPads and iPhones and Macs they can. The numbers may go up but nothing like when the iPhone was still growing. Services is the only part of the business that may have more than small growth levels left in it.
scarface74 7y ago
On one hand it is mostly bull. Apple has the benefit of having a “strategy credit” since selling user data is not part of its business model. But on the other hand, I can’t help but think that a gay CEO who grew up in Alabama really cares about privacy.
superkuh 7y ago
No. Apple cares about privacy and security because it wants to become a bank and payment processor. It had/has so much liquid capital it just makes sense. They've been moving that way ever since 2013 or so. All the concentration on security is so that their phones can be payment terminals and Apple can seek rent.

shipof123 7y ago

What would the advantage be in using Libra over a online wallet(PayPal, etc). It doesn’t have the anonymous nature of Cryptocurrency or its volatility. It’s backed by a currency, and they will still charge a fee, so why use it? EDIT: I realize that some people might not be able to get bank accounts, and know that makes more sense, but what other reasons are there?

chanwitkepha 7y ago

But what about Privacy and Security which we should concern.

quattrofan 7y ago

And no mention of Lightning Network...

rolltiide 7y ago
Why would this article mention that?
- langitbiru 7y ago
  Probably because the author mentioned that Bitcoin is not efficient (7 tx per second). But Lightning Network can make Bitcoin more efficient. I haven't looked into Lightning Network thouroughly so I can not make any comment whether it is up to its words.
  - bduerst 7y ago
    They didn't mention it because Lightning network is only brought up and pushed by people who have a stake in it. It only scales with transactions, not users, and is still pinned to Bitcoin.
ilaksh 7y ago
They also didn't mention Ethereum 2.0's scaling abilities or any of the other cryptocurrency scaling techniques that are already available.

gooseus 7y ago

> The largest leap will come last: Libra as a genuine currency, not simply a medium for transaction. This will be function of volume in the previous two use cases, and is understandably concerning to governments all over the world. Well that's certainly an understatement. This is literally the only mention of government through-out the entire article. The only mention of banks is in the previous paragraph stating there are no banks in the coalition. Banks and governments go together like peas and carrots, they also control pretty much everything and have for hundreds and thousands of years. This control is derived from a few places, but primarily from a monopoly on the control of the currency and the monopoly on coercive force. No government is going to let FB and any coalition do an end run around their national currency and their banking institutions. They're also not going to partner with an international consortium to have them replaced with something they only partially control. I really don't know why this isn't a larger part of this conversation. I think people need to be cracking more history books and less William Gibson and Neil Stephenson novels.

soulofmischief 7y ago
Do you worry any Libra-centric regulations will have negative impact towards true libre currencies like Bitcoin Cash?
buboard 7y ago
Banking has existed for a few centuries, and state controlled money is something recent too, it used to be that multiple sources minted coins. And bitcoin which has existed for 10 years and is far more threatening to governments has not been extinguished.
- nine_k 7y ago
  Gold coins can be minted at multiple places, or admitted foreign, because their value is gold by weight. Mass fiat money are no more than 2 centuries old, in most places less than 60 years (see Bretton-Woods). They have to be tightly controled by state.
  - 7y ago

cconroy 7y ago

Pink plane reasoning like this makes you dismiss bitcoin as not scalable. The blue idea is to scale off chain with smart contracts whether centralized or not. Compare cos fighting this to those not like cash app which are building on top of bitcoin.

reddygaru 7y ago

I have a totally out of the box thought here. I think Libra is a distraction from Facebook for people to forget Cambridge Analytica etc. FB may have unleashed this as a weapon for people to rally up or againast and Fb doesn't care if it succeeds or fails because it is a new category and doesn't affect it's bottomline.

buboard 7y ago
facebook.com's s bottom line is in exponential decay since a few years. They are trying to find a future here.

jeremyjh 7y ago

This article seems to be making the claim that the Libra blockchain will not be viewable by anyone other the validators. This is counterintuitive - even if only validators can confirm new blocks I expected the chain would be public, there would be explorers, etc. Does anyone know if this question has been answered somewhere definitively?

lucasverra 7y ago
https://librabrowser.io/stats https://librabrowser.io/stats already exists for the testnet with real time stats

Chris_Chambers 7y ago

The Jews gained a monopoly over your currency in 1913. Zuckerberg is a Jew. If the government will not nationalize and seize total control of the privately-owned Federal Reserve then they certainly won’t stop this either.

lanrh1836 7y ago

I haven’t found many “takes” on Libra talk about Calibra, which is FB’s Libra wallet and, if this thing takes off, would likely by default be the top wallet for Libra transactions. Calibra would require full identity verification e.g. submitting SSN and a copy of your picture ID. Getting that info is way beyond what FB has about you now.

olivermarks 7y ago

Disappointed Ben didn't add a paragraph or two about privacy concerns. The MC, Visa will float on top of libra unencumbered by bank fees, but our relationship with credit card firms and our privacy is regulated in the western world. The Calibra wallet logic is going to need greater privacy protections for the user or we will have a situation worse than the current platform monopolies, with only pea shooters like the EFF working for users https://www.eff.org/issues/privacy https://www.eff.org/issues/privacy We need new law like the US section 230 for personal rights and privacy as well as free speech https://www.eff.org/issues/cda230 https://www.eff.org/issues/cda230

jmull 7y ago

Pretty interesting. It's good to see a deeper analysis of this. This part though: > ...while its members — who again, are the validators — do control the Libra protocol, Facebook does not control the validators. Which, by extension, means that Facebook will not control Libra. That's true, but from my point of view, that distinction isn't too important. In either case, there are a relatively very small number of individuals who control Libra in an opaque way. By spreading the control out a little, I think it reduces short-sighted and single-perspective thinking, which is good, but it's still going to be run in a self-interested way for the handful of companies that control it and the executives that control those companies.

filereaper 7y ago

Tangential, but has Facebook done anything to reduce the power-consumption in Libra? I'm not enthused about supporting anything that worsens the global climate crisis and its irresponsible of large companies to support cryptocurrencies with its terrible power usage right now.

unknownsavage 7y ago
It doesn't use mining, so requires negligible power to run.
ilaksh 7y ago
Its not a real cryptocurrency. It doesn't need to be robust or use a lot of power.

ghayes 7y ago

My primary concern is that with a set of 20 or 100 validators, you can’t call it a decentralized platform (it’s a blockchain run exclusively by a centralized consortium). The article discusses the fact they intend to to decentralize it in 5 years, but that would be the equivalent of a dictator stepping down and promoting democracy which... doesn’t always come to pass.

sigmar 7y ago
I've been wondering about this too. I don't see how the incentives are setup that the Association would want to move towards an entirely permissionless network. Especially if Libra gets heavily adopted at 100 nodes (as they don't need to improve trust at that point and letting more companies into the association will decrease transaction throughput).
- nybble41 7y ago
  There are also some technical barriers on the path to a permissionless network. The consensus algorithm Libra is using currently requires full connectivity between validators and is only robust so long as 2/3 of the validators can be trusted. Much has been made of the risk of a "51% attack" against Bitcoin, but one need only control 1/3 of the validator nodes to disrupt Libra, which is a far lower threshold than 51% of computation capacity. Your standard botnet isn't much of a threat to Bitcoin since the participating devices aren't optimized for mining, but Libra would be an entirely different matter.
  - woah 7y ago
    The 1/3rd / 2/3rd pattern in a lot of blockchain BFT protocols is really elegant. If 1/3 of the voting power of a chain wants it to stop, then it probably shouldn't be running. It takes 2/3rds of the voting power for the validators to actually steal anyone's money or alter history. Your botnet example is a non-sequiter. Since power in BFT protocols does not stem from the wasting of electricity, botnets have nothing to do with any possible attacks on a BFT system.

narrator 7y ago

What is the benefit of Libra exactly? Why not just set it up like WeChatPay or Paypal as a centralized database? I guess like gambling chips or video arcade tokens, the lack of belief that it's real money might confuse some people into spending it more freely. Another thing is is that they can take all the money that's paid into Libra and run a hedge fund with the reserves because they can write their terms and conditions so they can do whatever the heck they want with the "reserves" and not tell anyone what they're doing. Another benefit is that they can facilitate illegal commerce on facebook by letting people conduct cross border transactions outside of AML/KYC land that a PayPal like system would require. They can also tie identities to coin transactions to analyze transactions for further ad targeting. Did I miss anything?

jshowa3 7y ago

Here is the important thing to understand about the Libra Association: while its members — who again, are the validators — do control the Libra protocol, Facebook does not control the validators. Which, by extension, means that Facebook will not control Libra. But Facebook does control Libra just by virtue of providing infrastructure. They're also part of the consortium. So again, why is the author trying to make it seem like Facebook has no control?

bongobongo 7y ago
It's a kind of mind-trick that only occurs in articles and white papers about cryptocurrencies and blockchain technologies. I've noticed that they often end up proposing a distributed private shared database controlled by a corporate cartel and call it "freedom."

boh 7y ago

Adding the words blockchain and cryptocurrency to this new Facebook initiative gives it an air of "innovation", the sort that reacts to criticism with "this is too new and innovative for you to understand", and "stogy governments don't like to innovate like we do, so they want to stop us with old timey regulation (and consumer protections)". Libra is essentially an ETF. It's a vehicle that will take deposits from customers and invest them in interest-yielding securities and currencies. Unlike a bank, customers forfeit their right to gain interest from their deposits and it will instead service operating costs (and any money left over goes to founder members). Libra is effectively planing to receive deposits, manage money and process transactions, despite not even attempting to meet regulatory requirements (though they plan to "shape the regulatory environment"--their words). What's so innovative about this venture is its potential for further data harvesting and potential income streams. Facebook isn't going to harvest any data produced from this venture--that is unless the customer willingly gives it to them. Why would a customer willingly provide this access to Facebook? I think anyone using FB for the past decade can answer that question--those regular TOS updates are hard to follow. Libra isn't so much a subversion of the existing order, as it as an act of financial engineering to service a social media company. What it "could be" doesn't justify what it already is.

thatfrenchguy 7y ago
> Libra is essentially an ETF But what they invest in will be interesting: what happens when the next financial crisis comes ? When the dollar plunges ?
- 2a96eb7d685a49c 7y ago
  Part of the solution is that it is a basket of currencies rather than just the dollar.
- mountainofdeath 7y ago
  These sorts of "currency" are typically invested in short term, low-risk deposits. Think bank certificates of deposit, US treasuries and the equivalents in foreign currencies.

AlphaWeaver 7y ago

This article captures one of the biggest problems I've seen in the discussion about Libra, which is that everyone has been writing it off as a currency that Facebook can control. In reality, Facebook's control is limited to being equal to the other members of the Association. Facebook controls the Calibra wallet, _not_ the currency as a whole. The thing that really drove this point home for me was when I browsed to both websites. Browsing to the Calibra wallet website, the entire site broke because I have blackholed all Facebook and tracking domains through NextDNS. When I browsed to the Libra website to view the whitepaper, everything worked just fine. This is a great demonstration of who is in control of what. That being said, I think this article also outlines the clear incentives as to why Facebook would like to promote Libra in the first place, which is the data they have the potential to gather through the Calibra wallet.

jbverschoor 7y ago

I dunno.. it’s nice and all that these companies support it. But they are exactly the kinds of companies that don’t have the best customer service.

miguelmota 7y ago

Do companies that bought in to join the Libra alliances for 10 million each mean that they'll receive all transaction history and purchasing patterns of everyone on the Libra network as well as receive a share of the fees in the future? Sounds like a bargain if that's the case

buboard 7y ago
the blockchain only contains wallet addresses, not info about who is buying what. only sites having access to the checkout can know that.

yabadabadoodoo 7y ago

When Zuck met Erik (Prince)

bluetwo 7y ago

Sounds like a great new way for Russian to buy ads on the sly to interfere with our next elections. Other than that, I can't think of a use case.

figlicious 7y ago

Thing with libra is that its not a cryptocurrency nor does it move the distributed agenda forward. It moves transactions from happening off-the platform to being on it. FB is in it for themselves. The consortium of third party players is for shielding themselves from anti-trust concerns

hidayatshah 7y ago

Log game

creeble 7y ago

Forgive my stupidity, but I don't understand this statement by Ben (Stratechery): "In practice, it is much more complicated: while a limited set of “validators” — aka miners — share a history of transactions in (individual) blocks that are chained together (i.e. a blockchain), what Libra actually exposes is the current state of the ledger. In practice this means that adding new transactions can be much quicker and more efficient — more akin to adding a line to a spreadsheet than rebuilding the entire spreadsheet from scratch." How is this different than Bitcoin, and why does it require a different level of trust? You are still trusting the validators (miners) either way, correct? And how is it more efficient?

snarf21 7y ago
Libra intends to use Proof of Stake. This means that the initial members will "stake" some amount of Libra and now all transactions can only be validated by them. You as an individual can't validate any new transaction. The assumption is that because the PoS validator has a huge stake in this currency, they will behave rationally or otherwise they would devalue their own stake. The trust here is completely centralized and is a rich get richer model. If FB or PayPal or a member doesn't want to add your transaction, they can completely block you. They control what is true. Bitcoin uses Proof of Work. Consensus is decentralized. Anyone can do some "work" (hashing in this case). If they find the magic number to get the right hash, they get rewarded by the Bitcoin protocol itself. This is also the only way new Bitcoins are created. It is only when one of these magic numbers gets found that transactions get added to the Bitcoin ledger (every 10 minutes). The rule is that the longest ledger chain wins so everyone is running in parallel. You don't need to own any Bitcoin to do mining to get "free" Bitcoin. The trust is decentralized (in terms of control) and no one can prevent anyone else from validating Bitcoin transactions as long as you follow the same rules as everyone else.
- creeble 7y ago
  Probably too late to keep this discussion going, but... I understand Proof of Stake vs. Proof of Work. But what Ben says about only "publishing the current state of the ledger" doesn't seem to relate to whether PoS is used. It's certainly not inherent to PoS that the entire blockchain isn't published. Maybe he's just confused about how PoS works (but I somehow doubt that). I understand how PoS makes things more efficient by entrusting a single validator (or any small subset of validators) rather than having essentially a contest, and I understand why this is also inherently less trustworthy than PoW. But Ben never mentions Proof of Stake anywhere in his explanation, just that the blockchain's "current state" is the only thing "exposed". I'm juse trying to understand what he's getting at there.

apo 7y ago

> In practice, it is much more complicated: while a limited set of “validators” — aka miners — share a history of transactions in (individual) blocks that are chained together (i.e. a blockchain), what Libra actually exposes is the current state of the ledger. In practice this means that adding new transactions can be much quicker and more efficient — more akin to adding a line to a spreadsheet than rebuilding the entire spreadsheet from scratch. The author seems to be referring to the two different accounting models in crupyotcurrency: the coin model and the account model. The coin (aka UTXO) model mimics physical cash. A transaction changes ownership of a digital token, leaving a chain of ownership in its wake. This is the model used by Bitcoin. The account model credits and debits specific amounts from an account. This is the model used by Ethereum. The author seems to imply that the speed of a network depends on which accounting model is being used. It doesn't. In both cases, signatures must be validated, and this is the most costly computation. In neither case is the entire chain of transactions reloaded to verify a single payment. Instead, the most recent state is extended. Transaction volume is largely a function of how open the network is and how trusted the parties are that write blocks. The more open the network to membership by arbitrary players, the slower it will be. The less trust in those writing blocks, the slower it will be. Bitcoin users value censorship resistance and insist on validating their own blocks (or at least they should). The network is configured make this possible by, for example, setting a block size limit among other features. Libra will need none of this. Validators will be implicitly trusted. What they say goes. A certain minimum hardware spec can be set and enforced, ensuring fast payment processing, at the expense of censorship resistance and openness.

jillesvangurp 7y ago

Technically what Ethereum, Bitcoin and Libra are doing are each variations of Byzantine Fault Tolerance based consensus. The key difference is that the former two are permission less and the latter is permissive. Permission less in this case means that anyone can start a validator node and verify transactions this typically involves either proof of work or stake. Permissive means that only some validators are able to do that and that the consensus is based on verified identity: each validator has a known identity and only explicitly trusts certain other well known validators. As the article nodes, it would be a mistake to assume that that is only Facebook. What Libra does is actually similar to Stellar and Ripple, which are also based on permissive BFTs. Since I've used Stellar, I know a bit more about how that is structured. In short, in Stellar, anyone can start a validator and start validating transactions. This is commonly done by people with a need to validate transactions for scaling reasons. Every validator is configured with a list of other validators that they trust and a consensus quorum that needs to be reached between those for a transaction to be acceptable. The flip side is that for your transactions to be acceptable to others, they'd have to trust you. In practice these sort of bi-directional trust relations only happen on a need to have basis; for example because you and your business relations are swapping the same tokens with each other and have a business need to trust each other's work. The extended network of mutually trusting validators that trust each other directly or indirectly is the basis for the consensus. After some incidents with the Stellar network halting its consensus, Stellar is actually moving to reduce the reliance of the network on their own validators. The recent outage in May was actually root caused by several non SDF owned validators going down. This sounds bad but it is actually a safety feature: stellar will prefer partition tolerance and consistency over availability. Ethereum and Bitcoin have had issues with favoring availability over consistency. If you are running a bank, that is kind of a big deal. Libra is launching with a quite broad consortium that each will run validators. I imagine that like in Stellar, each of those validators will eventually be able to start trusting other validators at their own discretion. I'm assuming that that is what Facebook means when they say they will eventually open up. It seems like initially this will be tied to deals with Calibra, which is a subsidiary of Facebook and which is responsible for hosting the reserve that backs the Libra, and other stable coins that will be running on the network. A key difference with Stellar, which is run and controlled by a foundation representing its members, Calibra is instead a commercial entity owned by Facebook. Presumably the consortium members have some kind of contractual agreement with Calibra about this. In other words, Facebook as a owner of Calibra is a bit more special than everyone else. I imagine they also hold patents, trademarks, etc. as well. To be clear, the software itself is Apache licensed. Like many, I wrote up my own thoughts on Libra and wrote a lengthty article. You may find it here: https://dev.to/jillesvangurp/libra-blockchains-and-the-meaning-of-it-all-1clc https://dev.to/jillesvangurp/libra-blockchains-and-the-meani... In short, what they are doing makes sense practically, technically, and legally. People are obviously talking a lot about legislation currently and Facebook's motivations. My impression is that governments are mostly still applying and interpreting existing laws when it comes to blockchains and are actually quite slow in responding in a coherent and timely fashion with new laws. My guess is that Facebook and others are counting on this and are looking to create a financial reality where shutting this down becomes economically more difficult. In short, once they are moving lots of money around, shutting them down becomes impractical.

vinay_ys 7y ago

A brand new highly technical protocol with a brand new language has been announced along with open-source codebase and I am yet to come across a meaningful critique or review of the tech side of Libra. Politics aside, just the tech is quite interesting. I think it is silly that they think this will become big among the unbanked (in countries like India) when they can do only 1000 transactions per second. Nuts! Don't you think so?

vmurthy 7y ago

I am someone you might consider early adopter. I enjoying tinkering with the latest gadget, getting that fancy domain name with an extension like .ooo ( yeah! not kidding :-D ) but .. when it comes to FB, I don't mind being a luddite. Add to that, the country I live in currently (India) has a ban on cryptocurrencies and we have tons of alternatives like Paytm[0] and UPI (Inter-bank transfers in an instant)[1]. So, Mr Zuckerberg et al, thank you but no thank you. To me , the most interesting part is towards the end of the article (emphasis mine) > This applies even more to the Calibra wallet: Facebook promises not to mix transaction data with profile data, but that entails, well, trust ... We all know how the promises turn out [2][3] [0]https://paytm.com/ https://paytm.com/ [1] https://en.wikipedia.org/wiki/Unified_Payments_Interface https://en.wikipedia.org/wiki/Unified_Payments_Interface [2]https://www.theinquirer.net/inquirer/news/3032946/whatsapp-and-facebook-are-sharing-user-data-after-all-and-its-legal https://www.theinquirer.net/inquirer/news/3032946/whatsapp-a... [3]https://www.forbes.com/sites/lensherman/2018/05/23/zuckerbergs-broken-promises-show-facebook-is-not-your-friend/#359b79477b0a https://www.forbes.com/sites/lensherman/2018/05/23/zuckerber...

ptah 7y ago

one more step towards the irrelevance of democracy and towards increasing corporate control and influence

coralreef 7y ago

"while its members — who again, are the validators — do control the Libra protocol, Facebook does not control the validators. Which, by extension, means that Facebook will not control Libra." Within the designed protocols, yes, Facebook gets one vote equal to the the single vote of any other node. Outside the system lens, Facebook brings this product to potentially 2.38 billion users. That dwarfs the value that any other validator can bring. If Facebook becomes unhappy with what the consortium is doing, it can simply say "Hey, we're gonna stop using Libra, and start a new fork." So while they may not control other validator members, they can certainly strong arm them into falling in line.

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