Pursuing its relentless quest of expansion and
world domination, will the likely introduction of the new cryptocurrencyLibra
bring Facebook one crucial step closer toward achieving
The idea that the Libra Association, made up entirely of Venture Capitalists thus far, will ride in like a modern Robin Hood, helping hundreds of millions of underbanked people
to economically prosper is a fanciful phantasy. Have the charlatans of our modern age just devised another ingenious scheme to bring salvation to our troubled specious by enriching themselves beyond even their wildest dreams, or has the newly planned global currency indeed have the potential to revolutionize commerce in a way beneficial to the masses?
True, such a binary take doesn’t do any justice to the matter at hand. In spite of Facebook bashing having become incredibly popular, and in most cases the social media giant deserves it wholeheartedly, the Libra enterprise is much bigger than Facebook alone and needs to be analyzed in its entirety. But explaining such complexities to the general public seems to put off many journalists, yet the revolutionary potential and accompanying risks and dangers make this a necessity of paramount importance. Contrary to public perceptions, Libra, as far as the currency itself is concerned, is not owned by Facebook; perhaps more precisely put, it’s not owned by Facebook alone. Since we have only the surprisingly detailed
as well as other
to work with, it is unclear if and in what shape the new currency will hit the global market eventually. Furthermore, due to the technical questions and economic as well as legal complexities involved,
critical analysis is rare and difficult to come by, requiring time and effort.
The entire
rests on three pillars: There is the Libra currency, its governing body (the Libra Association) and Calibra, the digital wallet, owned and run by Facebook via a subsidiary entity to be set up. Each part of the Libra endeavor offers its own opportunities and entails its own risks.
The Currency
Despite using
blockchain technology, two features in particular set Libra apart from other cryptocurrencies such as
Bitcoin, for example. Firstly, the Libra blockchain will be a
permissioned one, and what sounds like mere technical jargon will have huge repercussions; it means that only members of the Libra Association will be entitled to run nodes, giving them exclusive control over the service and additional cloud for reckless
monetization. The Libra Association has hinted that it intends to move toward a more open arrangement, but most experts believe this, even with the best of intentions, difficult to achieve. So far, most of them argue, there has been no blockchain that has successfully moved from
permissioned to permissionless yet. One also wonders why, once Libra is up and running and yields economic dividends, members would want to reconsider a lucrative business model. Beyond that, Libra will be a stable currency, meaning that it will be pegged to a basket of low volatility assets, namely Fiat currency (the US Dollar, the Euro and the Japanese Yen) as well as government bonds and securities, making a central authority running the Libra currency indispensable. Therefore, clearly distinguishing it from other existing cryptocurrencies, it will be money for exchange rather than being a mere investment commodity, making it likely to be widely used in daily economic activities. In this lies the great potential for Libra.
The Libra Association
Turning our attention to the Libra Association, in its current shape and form it looks like a nice, cosy
of Venture Capitalists and entrepreneurial plutocrats, already sitting on top of the social pyramid, holding huge sway over our all lives. Since becoming a member of this anointed club requires
status and money, surely inviting distrust, public criticism and scrutiny, a commitment has been made to reserve some space for NGOs, non-for-profit organizations and academic institutions. The voting share of each member is fixed at only 1 percent irrespective of their monetary investment. Whilst it is doubtful that this will matter much in practice, these measures have surely succeeded in painting a more humane picture of the enterprise as a whole.
Calibra
If Facebook doesn’t own Libra and is presented on its governing council with not more than 1 percent of the voting share, what is truly in it for the social media titan? The product unlocking the jackpot for Facebook is Calibra, the digital wallet that will have potentially two billion users right after the currency is launched. Possibilities for cashing in on people’s purchases and transactions will know no bounds, and Facebook will finally find itself in a position to not just advance into the financial sector itself, but will have such a wide range of business options to rethink its entire business model. Facebook being Facebook, much-touted horror scenarios, such as Facebook invasively spying on financial transactions of its users, are not without merit. But abusing user data in the realm of social media is very different from wanting to play a role in people’s finances. When Facebook promised not to leverage user data after acquiring WhatsApp and Instagram, it was anybodies guess how long such honorable conduct would last; indeed, Facebook was quick to renege on previously made commitments. For once, however, consumer sentiments and Facebook’s own business interests might coincide and work toward the same ends; this is to say that, after making its foray into the world of finance, the company will choose to be much more subtle in how it utilizes user data. Perhaps it can even afford to be more open and transparent about its approach. Facebook might choose to integrate its various platforms and services to such a degree that it can offer users a multilayered social media experience and, lacking a better term, reimburse users for excessively taking advantage of their data by paying out Libra dividends. This sort of subscription model would work much better than one charging people for a less intrusive version of the Facebook experience. Banking on the likelihood that users will trade their privacy for ease and convenience is an enticing business proposition and likely to work. Users may even be coaxed into entertaining the illusion that they have control over their data and lives by getting micropayments for knowingly giving up their privacy. Thus, the new business model the company is concocting will be incredibly sophisticated and enormously difficult to fight. Teaming up with its other partners such as Spotify and Uber, to name only a few, they might eventually decide to accept payments in Libra only, and since Facebook provides the wallet...
Rebutting the charge that Facebook prevents competition regarding Calibra, they argue that any third party, unaffiliated with ither Facebook or the Libra Association, can develop its own version of the digital wallet, and, in a technical and legal sense, this is true. But noble words on shiny white paper make the argument hardly less bogus. No emerging competitor will have a user base of two billion people at its disposal; this in itself will give Facebook a head start and advantage no competition can match. Calibra ensures that launching this new, digital cryptocurrency will only know one winner, Facebook. Any cost benefit analysis must inevitably conclude that, for Facebook, the risks are negligible. However, the expected windfall for Facebook will give more impetus to those in Washington who want to see Facebook as well as other tech giants to be dealt with and possibly to be broken up using
The coming power struggle pitting the Robber Barons of our age against traditional policymakers and governments does not lend itself to a binary tale of Facebook versus the rest of the world or good versus evil. Rather, what we are witnessing is the byproduct of untethered financial deregulation and globalization as well as the emergence of a new digital economy. With nation-states having seen their ability to set financial and economic policies erode over recent decades, Libra poses a huge
threat, undermining the last bastion of national pride and sovereignty, issuing and printing money. Mitigating this threat by pegging the Libra to traditional Fiat currencies is nothing more than a short term fix, and most thoughtful policymakers seem to be perfectly aware of this. Because Libra will likely change the way we think and approach money, its impact on the nation-state as a political institution cannot be overstated but is only seldom discussed. Even though, both politically and culturally, the nation-state is still the only game in town, this doesn’t need to be the case in the future. Since most people have a strong and lasting commitment to their homeland, it surely takes plenty of imagination to envisage a future with much weakened or even without the nation-state as we know it today. But, with the digital economy and its global reach on the one hand, and the cultural and ideological attachment of the masses to the nation-state on the other, severe, mainly political, disruptions will occur rather regularly. The unintended consequences of Libra and whatever comes afterwards are impossible to predict, but considering that the digital revolution and its economic impact will be unprecedented in human history, they will have an evolutionary if not one day a revolutionary impact on our political institutions as well. The cultural warriors of today are indicative of these conflicts slowly coming to the fore. Since highly speculative thoughts about a post nation-state world order are not necessarily to be understood as a case against the nation-state as such, note that any future political order will have to include strong local and regional identities too. For all its failings, the nation-state has at least in the West ensured that many of its citizens were granted civil and political rights and lived in relative economic prosperity. Not surprisingly, there are those making a fairly
for nation-states playing a vital role in the future. Any political institutions with as much emotional appeal as the nation-state will die slowly, but even if they eventually do, a lot is worth preserving. Therefore, change just for the sake of it never bodes well, and in whatever form the digital economy produces new political institutions, these must not automatically lead to something better and less unequal. The economic imperative for change cannot be overlooked any longer, but it is uncertain what sort of new political arrangements will subsequently emerge. Surely, all such possible developments can only be sketched in very vague terms. But even if the Libra would never see the light of day after all, the genie is now already out of the bottle. Due to Facebook’s prominent involvement, policymakers and regulators will give Libra’s proponents a run for their money, but, even if this particular project were to end in political failure, economic considerations usually win the day. Therefore, reflexive government attempts to prevent these new economic developments are more than likely to be doomed in the long run. What lies in store for Facebook politically in the immediate future was evident in a recent
in Washington. For the time being, the same patterns will repeat themselves on a global scale.
Assuming that man-made disasters will not have rendered our planet uninhabitable by then, the story that will be told in the distant future about the time of the digital frontier may go a bit like this: It will be a record of human creativity and ingenuity; it will be one of unrivalled technical progress. But, it will also be one of individual ambition and collective greed. If we are not careful about managing the digital frontier and all the changes which have befallen us, the Libra might be remembered as a watershed moment, leading to the total triumph of
as postulated by Shoshana Zuboff.
Reflective contemplations 