Facebook’s Libra: Big Bang Or Big Crunch? A Technical Perspective And Challenges For Cryptocurrencies

JOHN TASKINSOY

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Category : Business
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By : JOHN TASKINSOY

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Abstract

Libra cryptocurrency is a new invention; as with any disruptive invention, Libra blockchain presents some risks. Facebook’s formal announcement of Libra had the “big bang” effect in the cryptocurrency markets; equally, the industry will witness “big crunch” if Libra sputters out resulting from a failure to receive all appropriate approvals from central banks, regulators, and law makers who are eager to run headlong into backlash to Libra in order to punish Facebook with a troubled past of privacy abuse and exploitation of users’ data. Libra’s unique features are distinctly different from Bitcoin and over 2,400 altcoins. Although Facebook claims Libra as a permissioned decentralized blockchain, but this is far cry from truth because Libra is a non-mineable cryptocurrency without the need of providing mathematical solutions to double spending problem. Under Bitcoin’s permissionless decentralized blockchain without a trusted third party, every new bitcoin is minted through a mining process which starts with a block, and then a ledger comprising timestamped transactions in a chronological order is distributed to all nodes (miners) in the Bitcoin network who check and validate transactions based on consensus before they are added to the end of each coin in its block. As a start, Libra blockchain will be governed by the Libra Association as a de facto central authority, which will initially comprise 28 private founding-members, each of which will act as a validator to ensure Libra’s stability. Libra is cost efficient in electricity usage and more consistent than other cryptocurrencies; Libra’s superior functionality, higher security, and vast scale due to its user base of nearly 3 billion will eventually make Libra become a viable alternative reserve crypto-currency to the dollar. Libra’s proof-of-stake algorithm supported by a new programming language “Move” plus the use of LibraBFT consensus make Libra 1/3 more secure than Bitcoin, Libra can function correctly even if 1/3 of its network fails or hacked. Libra’s PoS leads to higher transaction throughput, lower latency, and lower energy cost.