On Facebook’s Libra blockchain

This is a quick com­men­ta­ry abo­ut just anno­un­ced „Face­bo­ok cryp­to­cur­ren­cy”, Libra, fol­lo­wing the radio show abo­ut the topic I’ve been invi­ted to (in Polish and behind pay­wall, unfortunately)

https://audycje.tokfm.pl/podcast/76998,Facebook-bedzie-mial-swoja-kryptowalute

With the anno­un­ce­ment of new cryp­to­cur­ren­cy, Face­bo­ok, leading the ini­tia­ti­ve, hopes to cata­pult itself into, and may­be even­tu­al­ly domi­na­te, the new para­digm of „Web 3.0”; the Inter­net of money, the digi­tal sys­tem of value flows and emer­ging eco­sys­tem for busi­ness and inno­va­tion opportunities.

Łukasz Jonak, Ana­li­tyk DELab UW

This isn’t any­thing new, Face­bo­ok did simi­lar thing once befo­re. 15 years ago it domi­na­ted what now is cal­led Web 2.0, the Inter­net of con­tent cre­ated by and con­su­med by eve­ry­day users (as oppo­sed to big por­tals). Web 2.0 was the world of blogs and first Inter­net com­mu­ni­ca­tions (ICQ any­one?). Face­bo­ok lowe­red the entry bar­rier to self publi­shing even more whi­le cor­ral­ling much of the con­tent-cre­ation acti­vi­ty within its  busi­ness and tech­ni­cal infrastructure.

Face­bo­ok seems to have been pay­ing atten­tion to the deve­lop­ments in cryp­to­cur­ren­cy, distri­bu­ted led­ger tech­no­lo­gies, fin­tech and distri­bu­ted finan­ces, and, con­tra­ry to many eco­no­mi­sts and busi­ness leaders, did not down­play its poten­tial, redu­cing it to the nar­row, clo­sed enter­pri­se appli­ca­tions. Face­bo­ok’s goal is the same as Bit­co­in and Ethe­reum – to cre­at a glo­bal cryp­to­cur­ren­cy and finan­cial eco­sys­tem. In fact, you could chan­ge name „Libra” in the offi­cial com­mu­ni­ca­tion abo­ut the cur­ren­cy to any other esta­bli­shed cryp­tos and it would­n’t chan­ge the gene­ral meaning or sen­ti­ment of the text. Espe­cial­ly the part abo­ut „ban­king the unban­ked”, pro­vi­ding finan­cial infra­struc­tu­re to tho­se in the under­de­ve­lo­ped parts of our pla­net, is a stra­ight­for­ward bor­row from cryp­to ide­olo­gy. Libra has one colos­sal advan­ta­ge over exi­sting block­cha­ins: Face­bo­ok’s bil­lions of exi­sting users, for whom the lat­ter is the inter­fa­ce to the­ir social life and world of digi­tal infor­ma­tion; now it is abo­ut to beco­me an inter­fa­ce to Libra-based finan­cial eco­sys­tem as well. The Face­bo­ok’s onbo­ar­ding capa­bi­li­ties are uncomparable.

The Face­bo­ok’s mini­mum long term plan seems to be to use block­cha­in tech­no­lo­gy to stay rele­vant for the years to come; to cha­in itself even more to the eve­ry­day lives of users and busi­nesses. To „bank the unban­ked” means in this case „to face­bo­ok the un-face­bo­oked”, which will be the case when Face­bo­ok „wall” and Mes­sen­ger beco­me the default gate­way to the new finan­cial ecosystem.

Face­bo­ok makes it look like the­ir new ven­tu­re adhe­res to the valu­es and ide­olo­gy of block­cha­in-sphe­re. In the whi­te paper, the distri­bu­ted natu­re and the secu­ri­ty and sta­bi­li­ty orien­ted focus of Libra is show­ca­sed. The Libra Asso­cia­tion, the gover­ning body of the new block­cha­in, orga­ni­za­tion com­pri­sing of mul­ti­ple equ­al peers is sup­po­sed to ensu­re sys­te­m’s poli­ti­cal decen­tra­li­za­tion (no one enti­ty will have the power to deci­de block­cha­in’s faith.) Libra is using ele­ments of the sta­te-of-the-art, pro­ven tech­no­lo­gy, but also inno­va­tes in terms of not using Pro­of of Work con­sen­sus algo­ri­thms, which is whe­re many new gene­ra­tion block­cha­ins are headed as well. People hired to deve­lop Libra are renow­ned, world-class specialists.

But the­re are so many questions and doubts. The open (per­mis­sion­less) natu­re of the new sys­tem is aspi­ra­tio­nal. For the time being it will not be possi­ble for just any­bo­dy to beco­me a vali­da­tor of trans­ac­tions in the sys­tem; the vali­da­tor nodes» ope­ra­tors will be cho­sen from among the Libra Asso­cia­tion mem­bers, and new mem­bers will be accep­ted at Asso­cia­tio­n’s discre­tion. As of now, the Asso­cia­tion itself doesn’t look much like a diver­se and decen­tra­li­zed gover­ning body. It com­pri­ses of pay­ment com­pa­nies (Visa, Master­card), plat­forms, servi­ce pro­vi­ders (Uber, Ebay, Spo­ti­fy, Face­bo­ok) and big inve­stors who will all mutu­al­ly bene­fit from con­trol­ling the direc­tion of finan­cial revolution.

Face­bo­ok’s own invo­lve­ment both in the Libra Asso­cia­tion and in buil­ding archi­tec­tu­re of the sys­tem is being heavi­ly down­play­ed. It is cle­ar tho­ugh that FB will have a huge leve­ra­ge in the Asso­cia­tion, brin­ging to the table its user base, witho­ut which the who­le enter­pri­se would not be possible.

The whi­te paper sta­tes that not Face­bo­ok direc­tly, but its sub­si­dia­ry, Cali­bra, will take part in the Asso­cia­tion and the deve­lop­ment of Libra, as to ensu­re „the sepa­ra­tion of social and finan­cial data”, which means, keeping pri­va­cy of users intact. Only this is not how you take care of the­se things in the block­cha­in-ver­se. You don’t rely on any­bo­dy­’s word (in this case that the­re will be no data-mat­ching betwe­en Face­bo­ok and Cali­bra), you check cryp­to­gra­phic pro­ofs, the mathe­ma­ti­cal locks built into the sys­tem, which make cer­ta­in things phy­si­cal­ly possi­ble, and other not. Ano­ther issue not mana­ged by the Libra block­cha­in itself seems to be  the mecha­nism ensu­ring the sta­bi­li­ty of the Libra cur­ren­cy. It will not be an algo­ri­th­mic „sta­ble-coin” in neither the sen­se of Tether (peg-based) nor DAI (mar­ket-based). Libra will be bac­ked by „real life” assets: depo­sits and inve­st­ments, guar­ded by „custo­dians”, aga­in, the lat­ter appo­in­ted by Libra Asso­cia­tion. The­re are many are­as, it seems, whe­re Face­bo­ok et con­sor­tes seem to be tel­ling us „don’t wor­ry, we’ve got this, we know what we are doing, just trust us”. This is not a very block­cha­in-like way.

How will the world react, spe­ci­fi­cal­ly, the regu­la­tors? The case of the Euro­pe­an Union is espe­cial­ly inte­re­sting. One of the tech­no­lo­gies the Euro­pe­an Com­mis­sion seems to be bet­ting on in try­ing to relie­ve the grasp of GAFA (Google, Ama­zon, Face­bo­ok, Apple) on Euro­pe­an citi­zens is inde­ed block­cha­in. The­re is no use in try­ing to build Euro­pe­an Google or Face­bo­ok coun­ter­part, the right way is to try to tech­no­lo­gi­cal­ly leap-frog big cor­po­ra­tions by buil­ding new gene­ra­tion inter­net, foun­ded on new tech­no­lo­gi­cal para­digm. Only that Face­bo­ok is pre­pa­ring to launch itself into this new para­digm as well, poten­tial­ly making its influ­en­ce event stron­ger. It will be inte­re­sting to watch what Euro­pe­’s answer will be.

Autor pro­jek­tu: Łukasz Jonak

Pro­jekt finan­so­wa­ny ze środ­ków pro­gra­mu „Dia­log” MNiSW