Michael J. Casey is the head of CoinDesk's Advisory Board and a senior blockchain research adviser at MIT's Digital Currency Initiative.
The following article was originally featured in CoinDesk Weekly, a custom newsletter delivered every Sunday exclusively to our subscribers.
Given how slow Washington legislators have taken to draft a coherent, informed perception of cryptocurrency, the House Finance Services committee's rapid leap to action last week over Facebook's ambitious Libra project was remarkably quick.
But let's not reflect on the details of the Rep. Maxine Waters (D-Calif.) Urgent requests that Facebook stop working with Libra until after hearings or on how European lawmakers made similar appeal [1
Unlike bitcoin, Congress representative can directly identify and speak with those responsible for the Libra project. They can summon them and thus push them. They can start with David Marcus, head of the Facebook subsidiary Calibra, but ultimately it is Facebook
CEO Mark Zuckerberg who will give the legislators the greatest possible influence.
In this case, the buck stops with Zuck.
Now imagine a congressional leader stopping the development of bitcoin. Who exactly will they push to end an open source project involving millions of globally scattered most unidentifiable developers, miners and users?
This distinction between a project with a single identifiable figure of authority and another whose management is distributed and unmanageable with a founder who has never revealed its identity – goes to the heart of a cryptic community criticism that the initiative of the social media giants is not censorship-resistant.
When someone is responsible, an interested party – a policeman, a banker, a regulator, a shareholder – can lean on them to make changes. And when the blockchain consensus model is based on a club-like authorized membership, a coordinated effort to change or censor the big box is always possible. And if the ledger or software can be changed by this pressure, the Libra platform cannot unconditionally promise to support open, unobstructed access for users and a lawless developer environment.
Let us be clear: Our designers have thought deeply about how to protect their project from Facebook itself, both in a real sense and in the public opinion. In its commitment to decentralization, the team has put the code under an open source license, handed over the network management authority to its own Swiss base, introduced in 27 external partners to work with Facebook as independent, authorized nodes on the network, and verbally committed to transition to a leave-free model over time. It is a structure and roadmap for Libra to grow and survive regardless of its origin as a Facebook project.
All that is good. But we are still in the original phase, one that is and will for some time hang on the centrality of a particularly powerful company.
The Cultural Problem
With the risk of saying the obvious, Marcus and his team are paid by Facebook. Follow the money as they say. But also, follow the code.
The all-important source code of the Libra protocol is now open, but it was perceived and rendered in Facebook. So, if project managers and programmers resist or not, the culture of that organization will fully feed into Libra's design priorities.
The elephant in the room is that a drumming of recent news has shown that Facebook's corporate culture is deeply poisonous. The company's model of surveillance capitalism has made users of banks in a global game of data manipulation, cultivated echo chambers of narrowness, irreparably damaging the worthy cause of journalism, and deeply undermining our democracy.
This legacy is inevitably the reason why people, including lawmakers, are concerned that Facebook may be in the process of creating a new international model of money and payments. Right or wrong, there is a fox-in-the-henhouse optics here that is unhelpful.
Wharton Professor Kevin Werbach claimed in the New York Times this week that Facebook's weapons are a bold effort to win back public confidence by leveraging the responsibilities of blockchain technology. But in the project's initial phase, with no choice but to rely on Facebook's early input, this legacy of past mistrust could easily become a major barrier to progress.
We should support Libra, not Facebook
Whatever the above, I actually want Libra to succeed. (Note: I also want Facebook to die. It is not a contradiction, these two outcomes can and should be separate. In fact, it is at the heart of the problem.)
The wave community has set its views on achieving economic inclusion for the 2 Billions of adults worldwide who do not have bank accounts. It is a noble goal, and they are intelligently done – from a truly international, cross-border, cross-currency perspective. Take all these people into the international economy, and the payouts can be big for them and for the rest of us.
And let's face it, bitcoin has dissatisfied not to live up to its lawyers' promise of a financial inclusion solution. Bitcoin's and other cryptocurrency's impact on the $ 800 billion global money transfer market is great.
Sure, admission can rise if off-chain Lightning Network meets its promise to enable larger-scale transaction processing, if stablecoin projects solve bitcoins volatility problems, and if new encryption solutions can improve both security and user experience with crypto letters. But these solutions will take time. We must act now.
Finally, it is not quite clear that global person-to-person payments are a viable bitcoin mode of use, perhaps because too many HODLing speculators crowd out all spenders. And of course, no other payment-focused crypto competition has set a large enough cushion in the money transfer market.
So perhaps the recipe for a global expansion of payouts lies with an internationally stable internationally stable international low-volatility stablecoin, a basket of leading fiat currencies and developed with formidable programming and marketing resources of 28 technological and economic giants. When you combine Facebook's, Instagram's and WhatsApp's user numbers, the number of potential wallets goes to $ 4 billion. Global networking effects. Immediately.
Everything else that is alike – that is, if we ignore, for now, the genesis problem of Libra that inherits Facebook's toxic roots – one can also argue that a permit, corporate network is the best approach to Libra blockchain in place of a completely open , lawless chain like bitcoin or ethereum. The heavy lifting needed for early global traction – software development, marketing efforts, and public policy search – requires significant business resources to be deployed in a targeted and coordinated manner that is difficult for open source blocking communities to achieve. There are efficiency benefits that can come from centralization.
As the project grows, Libra hopes to expand the consortium. This can undermine the coordination efficiency, but in a classic centralization-versus-decentralization exchange, the addition of new members – more NGOs, some banks, a union and some public pension funds – will achieve greater diversity and lower interoperability. It's far from perfect, but the timed transition brings things closer to the censorship resistance at a time in the future when it comes to meaning – if they come there.
What this means for bitcoin and crypto
As a page, I also think Libra's success will be positive for bitcoin – and the price action last week suggests that the market looks the same.
Here's why: At present, there is a value proposition that holds good for bitcoin, that it becomes more fluid, digitally up-to-date risk insurance vehicles than gold when people need to preserve value in something immune to political and institutional risk. That argument can be strengthened if Libra succeeds in converting billions of people into digital payment cards because it will broaden the power of block-based digital money as the future. At the same time, because of its origin as a Facebook-initiated, authorized system, Libra will not shake the notion of being exposed to political, ie, censorship. For many, Bitcoin, aka digital gold, will be the obvious option.
However, the currency basket-supported Libra token is a true competitor to other reserve-supported crypto tokens, such as the USDC, issued by the CENTER coalition originally formed by Circle and Coinbase, GUSD, Gemini & # 39; s stablecoin and PAX, from Paxos.
But we can imagine events that work in the latter favor. Developing countries such as India, for example may become hostile to a new currency coming into circulation that sucks the demand away from their local currencies, but they will be more accepting of a digital dollar, as the green circulation is already circulating in their economies. Users can also be happier to keep tokens associated with single sovereign currencies than in a difficult-to-measure basket. And if concerns about centralized control undermine confidence in Libra or limit innovation, the fact that these tokens are built on really negligent blocks can make them more appealing (even if you still have to rely on the reserve holder to guarantee price stability.)
Anyway Whatever happens, the world of cash flow is enormous. It's $ 6 trillion a day alone in currency transactions. It provides plenty of room for different models, different tastes and different trust systems to coordinate digital value exchange.
Get our priorities right
The greater risk is not that Libra succeeds and Mark Zuckerberg enriches even more, but neither Libra nor one of the crypto competitors succeed in breaking down barriers to economic participation. Financial exclusion expands poverty, which in turn prepares terrorism and war.
And if we assume that the technology, if it is not finished, finally comes, then the biggest threat to a political error is. 19659004] The subtitle of both Waters' statements and the European legislators was that this private exchange system cannot be allowed to replace national currencies. It is not what Libra intends, but the notion that it undermines national sovereignty over money can rely on fear and ban Libra. And if that happens, it puts an ugly precedent for or all other competing ideas, whether it's the USDC, GUSD, PAX or DAI or anything else.
The project's ability to promote economic inclusion can also be damaged by the Financial Action Task Force, or the FATF, embracing a new rule to exchange cryptocurrency. If ratified by enough countries that can limit the free flow of crypto competition among addresses that have not been through a bank-like "know your customer" process. In other words, it can be a real obstacle for Libras and everyone else's dream of economic inclusion for "unbanked".
Bottom line: The Libra team has their work cut out, and we all have a lot on it. The project representatives must face the reality that at least the money still stops with Zuck and regulators will use it against them.
We should all wish them success in trying to convince politicians that an open system of global financial transactions is important. (It is encouraging that the Bank of England takes an open attitude, which suggests that technical companies such as Libra have access to funds directly from the central banks . can convert this important project into something more creepy. Facebook's own story is a reminder of the risk we face.
I wish there was another company running with this ball right now. But since it is not, the need for all of us to be directly interested in this project is even greater.
We must demand that our representatives provide clear and informed oversight that holds companies like this to the account and restricts their monopolization powers. But we should also expect smart, open mindedness that encourages companies to compete and innovate in an open system that creates opportunities for everyone on this planet.
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