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> The white paper explicitly gives the Libra Association (i.e. Facebook and its partner validators) governance control over the cryptocurrency. > Here's an eas

> The white paper explicitly gives the Libra Association (i.e. Facebook and its partner validators) governance control over the cryptocurrency. > Here's an easy scenario to imagine that shows how incentives would get misaligned: Facebook and the other validating nodes of Libra are financially compensated by interest from the collateral for Libra tokens. If Libra is successful in its mission, it will become a global currency that's stronger than the assets that underly its collateral. > When this happens, suddenly Libra being a collateralized stablecoin stops making sense. Kind of like when the US Dollar no longer needed to be backed by gold since it was a strong enough currency/unit of financial measurement on its own. The US then got rid of the gold standard and has since saved itself untold money in custodial expenses they would have been paying to hold all that gold. > The Association would never do this for the Libra however since it is literally how they are funding their own operation. Even if it's in the best interest of all Libra users, the centralized governance association with all of the authority to make this improvement would choose not to because it's not in their best interest to do so. > There's no leap of imagination there - it's just how power and incentives work. Your basing this argument on the fractional reserve monetary policy that the libra association is hedging against. I believe we are moving towards a world in which global currencies become the norm. There will be 2 types of global currencies, corporate currencies and decentralized currencies, aka Libra and Bitcoin. Both forms will have to have a mechanism that prevents inflation, Libra will do that by being fully backed, Bitcoin does that through Nakamoto consensus. With digital currencies it becomes possible to move your entire "cash" holdings in a matter of minutes, so a fixed supply currency like Bitcoin insures that Libra will never dilute it's supply because the barrier to exit the currency is so low. In democratic countries like the US the mechanic that prevents massive inflation is mostly voters' influence over the federal reserve. Of course it isn't perfect the dollar has been inflated ~300% since leaving the gold standard. With corporate global currencies we don't have such voting powers.

carleverett 7y ago
I don't think Libra's collateralization is a hedge against fractional reserve monetary policy, I think it's just Facebook's way of ensuring consumer confidence that a Libra is actually worth something, and the most proven way to peg a stablecoin to a value. I don't think this is necessary in a mature crypto economy where digital currencies are being used more than fiat currencies. I agree though that crypto monetary policy will play a huge role in the future though, and in the case of Libra, policy will be decided by the Libra Association. All I'm saying is that the Libra Association is not necessarily the best group to be making those decisions because collateralization is how they're funded. The US Fed doesn't have that same conflict of interest... they're paid by US taxes regardless of how their decisions turn out.
- codetrotter 7y ago
  > I think it's just Facebook's way of ensuring consumer confidence that a Libra is actually worth something, and the most proven way to peg a stablecoin to a value. Or even just to have people use it. I can’t afford to hold crypto right now because I don’t have any savings, only debt. But if there was a crypto that had a stable price and which was accepted by merchants, and I perceived it as trustworthy I’d use it for my purchases instead of using a credit card or debit card. Libra is not going to be it for me because I don’t trust Facebook and I don’t want them to have any involvement over my money. But I will admit that it has potential for a lot of the Facebook userbase to start using it.

carleverett 7y ago

I don't think Libra's collateralization is a hedge against fractional reserve monetary policy, I think it's just Facebook's way of ensuring consumer confidence that a Libra is actually worth something, and the most proven way to peg a stablecoin to a value. I don't think this is necessary in a mature crypto economy where digital currencies are being used more than fiat currencies. I agree though that crypto monetary policy will play a huge role in the future though, and in the case of Libra, policy will be decided by the Libra Association. All I'm saying is that the Libra Association is not necessarily the best group to be making those decisions because collateralization is how they're funded. The US Fed doesn't have that same conflict of interest... they're paid by US taxes regardless of how their decisions turn out.

codetrotter 7y ago
> I think it's just Facebook's way of ensuring consumer confidence that a Libra is actually worth something, and the most proven way to peg a stablecoin to a value. Or even just to have people use it. I can’t afford to hold crypto right now because I don’t have any savings, only debt. But if there was a crypto that had a stable price and which was accepted by merchants, and I perceived it as trustworthy I’d use it for my purchases instead of using a credit card or debit card. Libra is not going to be it for me because I don’t trust Facebook and I don’t want them to have any involvement over my money. But I will admit that it has potential for a lot of the Facebook userbase to start using it.