06.19.2019
By Rob Daly

Facebook Banks on Hard Digital Currency

Social media giant Facebook and 27 other partnering companies and organizations plan to launch a digital currency, dubbed Libra, as early as 2020.

The new currency will be backed by a basket of bank deposits and low-volatility short-term securities held in reserve by the Libra Association, the project’s governing body, and will not be pegged to a specific currency.

Under the proposed model, the Association will mint coins only when an authorized resellers purchase the coins from the Association using fiat assets. It also will burn Libra coins only when the authorized resellers sell the coins back to the reserve at a price equal to the value of the basket.

The Association plans to apply the interest earned by the reserve towards covering the cost of the system as well as to ensure low transaction fees, and pay dividends to investors who provided capital to jumpstart the ecosystem.

A council that consists of a representative from each validator node will govern the reserve and the direction of the Libra network. All founding members will operate validator nodes.

“We hope to have approximately 100 members of the Libra Association by the target launch in the first half of 2020,” wrote the authors.

Every decision made by the council will require a two-thirds supermajority.

The Association initially plans to operate the network as a permissioned network.

The open source Libra blockchain will operate as a permissioned network initially, but with transform into a permissionless network approximately five years after its launch.

The blockchain’s architects developed the Move programming language and implemented Merkel trees to detect any changes made to the existing data.

Instead of using the proof-of-work model, the blockchain uses the Byzantine Fault Tolerance consensus model, which will operate even if up to a third of the validator nodes fail or are compromised.

The Association expects that the platform will eventually support billions of accounts with pseudo-anonymity.

In the meantime, social media met the announcement with mixed attitudes many agree that it has moved the dialog regarding digital currencies forward.

However, early reads of the project’s documentation have some blockchain experts seeing Libra as something other than a blockchain-based digital currency.

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