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The Complicated Story of Facebook’s Libra

 

It’s quite seldom, especially these days, that we get to see both the left and right agree on anything.   Well, this unicorn jumping over a blue moon on a double rainbow Friday the Thirteenth was spotted just last week as both Democrats and Republicans throughout the United States Senate stood together and unanimously declared that they don’t like one this Facebook Cryptocurrency business one bit…but why??

 

 

In short, most of them don’t really know, truth is there’s a lot to it.  We’re going to do our best to give you the full picture as we take a look at Facebook and their current position in the market.  Then discuss the details of their recently announced Crypto Stable Coin Libra, tentatively scheduled for a 2020 launch, then finally we’ll speculate a few scenarios of what the future will look like if everything goes to plan for the social network juggernaut.

 

 

 

The Complicated Conglomerate

 

 

 

 

Facebook is one of the most complicated brands that there’s ever been.  The government doesn’t trust them, in fact, they make the government nervous. However, that doesn’t mean that they are embraced by radicals or libertarians where a status like this might have some appeal. They’re also not cool, nor rebellious,  or con-formative, furthermore, it’s been shown that too much time on their website can hurt your mental health.  They were called to congress earlier just his year, over allowing Cambridge Analytica to “steal” and resell customer data, it’s been said that they were a key factor in Russian social media manipulation of the 2016 US Presidential Election. Oh, and let’s not forget the “Myanmar Incident” where Myanmar’s military incited riots, murders, rapes which built into and ethnic cleansing, kind of a big one.

 

 

They have no real demographic of supporters, and what seems to be continuous allegations for breaches of privacy and have been cracked down on by governments from the US and throughout the EU. You would think this is the near end for this tech giant. You might even be led to conclude that the development of a cryptocurrency might even be a last-ditch effort to stay relevant in a world that is through with their endless shenanigans… but as I said, they’re a complicated company.

 

 

Witness the Power

 

 

 

While it’s true that the world seems to hate Facebook, it’s nowhere near as much as the world needs Facebook, even though they’re constantly blasted by media outlets on both the left and right, Facebook continues to grow, and grow and grow.

 

 

I know revealing that Facebook is still growing despite bad publicity and that their users publicly hate them is paradoxical, but it isn’t exactly a bombshell. What might actually shock you are their statistics, the numbers behind their continual growth are truly mind-boggling, here are just a few.

 

 

 

 

FB STATS:

 

  • Despite reporting their first negative month for new accounts in Europe, Facebooks accounts have continued to rise every quarter since inception (2004), the amount of FB daily active users around the world currently stands at around 2.5 Billion.
  • Facebook owns many other tech companies, most notably:
    • Instagram- 1 Billion Users
    • Whattsapp- 1.6 Billion Users
  • 83% of women on the internet use Facebook
  • 75% of men on the Internet use Facebook
  • Facebook has 210 Million Users in the United States Alone
  • Despite continuous privacy scares FB sees the following every single minute:
    • 317,000 Status Updates
    • 400 New Accounts Created
    • 147,000 Photos Uploaded
    • 54,000 Links shared
  • There are 55 Million Status Updates Daily
  • The Like Button has been pushed over 1.1 Trillion times
  • As of 2017 FB has over 5 Million Advertisers
  • Last year Facebook Generated $55 Billion with over $22 Billion in Net Revenue
  • FB is available in over 101 different languages

 

 

 

So to recap that every minute stat, you could also say there are 5283 status updates, 7 New Users created, 2450 Photos Uploaded and 900 Shared every single second, that is beyond comprehension.  I could go on and on, but let’s digest these numbers a bit, Facebook’s reach is staggering and truly unmatched, like nothing the world has ever seen.

 

 

Now they’re getting into the Crypto business, which they announced in June while releasing their whitepaper on Libra Coin.  The release caused an immediate reaction on Capitol Hill, with Maxine Waters leading the charge, calling for a moratorium on the project and spewing out endless amounts of furious yet disheveled soundbites.

 

 

 

 

 

 

However, when it comes to distasteful soundbites Maxine’s fellow California based Democrat Brad Sherman took the cake during the second congressional meeting with Facebook when he dropped this tasteful comparison:

 

 

“We’re told by some that innovation is always good,” The most innovative thing that happened this century is when Osama Bin Laden came up with the innovative idea of flying two airplanes into towers. That’s the most consequential innovation, although this may do more to endanger America than even that.” – Brad Sherman (D) California

 

 

So what Is Facebook doing that could possibly be causing such a reaction??? I mean using the word “Innovation” four times in two sentences?  What does it all mean?  Well, …it’s what you probably thought… they’re trying to take over the damn world.

 

 

 

 

Libra Coin, by Mark Zuckerberg

 

The Concept

 

 

 

“Libra’s mission is to enable a simple global currency and financial infrastructure that empowers billions of people.”

 

 

This is the mission statement taken directly from Libra’s Whitepaper, short and sweet.  They go on to elaborate that there are currently 1.7 billion people who are currently outside of the global financial system, essentially they lack access to a bank account and all of the benefits attached to one.   Of the 1.7 billion, over one billion of them own a mobile phone, Libra’s goal is to grant the access of financial services to the people who need it most.

 

 

Next, they cite the example of pre-internet telecommunications and the markets uniformity in excessively high costs.  Twenty years ago it cost $.16 a text message, and you were hit with roaming charges and long-distance fees, these extra charges were expensive, and they were provider agnostic. Then with the coming of smartphones, it brought an end to this era, and now people all over the world can use their $40 smartphones to access the internet, talk with their friends and family and text for free.  Facebook intends to bring this same era of price competitiveness to the money services and financial industries.

 

 

Libra wants to allow people the ability to access the financial space without the high markups that are tacked on to non-bank on money transfer businesses, without the ridiculous charges for overdraft fees that banks charge and without the excessive interest rates on payday advance loans.  The truth is, these three services alone with their uniformly high markups make billions of dollars from some of the poorest members of our society.

 

 

This mission is the altruistic arm of Libra’s multi-prong approach, of course there’s more to Libra than just this, but it’s their lead-in, and personifies their mission statement.  To be fain as far as mission statements go, it’s a pretty damn good one, this is a just fight, and if it has the potential to defeats this industry, with Libra offering these services at zero cost, it will give billions of dollars back to people who need it most.

 

 

Payday loans alone generate $9 billion in revenue a year; they can charge their customers over 1000% APR, objectively speaking it’s some predatory shit.  It’s important to remember that this isn’t some type of welfare, nor is it unemployment, you need to have a job in order to qualify for these loans.  The recipients of payday advance services are often blue-collar workers just trying to make ends meet.  We’ll circle back to this, there’s more to cover on  Libra, but so far this doesn’t have me thinking “This is innovative as 9/11…” seriously Brad what the hell?

 

 

What Else??? Libra’s Cliff Notes

 

 

There’s a lot of ground to cover here, but I think it’s important to summarize essentially what makes Libra unique, which is quite a bit.  Everything from the “Libra Coalition” based in Geneva to the actual blockchain technology behind the token. Here’s the highlight reel of what Facebook has given us so far based on Libra’s Whitepaper:

 

 

LIBRA COIN:

 

  • Libra is a stable coin, meaning the price is based on other less volatile derivatives. Which means most likely Libra won’t see the kinds of swing that we’ve  seen in Bitcoin or Ethereum
  • Libra will not be pegged to any one currency in particular
  • (Like Tether or True USD are to the USD for example) but rather a basket of currencies and other low-risk investments
  • All Libra coins will be backed with actual deposits (these deposits will be held in many different currencies and investments will derive the Libra’s value)
  • Libra will create a unique blockchain, one that they claim will be scalable and able to handle billions of transactions daily
  • Their Blockchain and other bi-products will be developed in a programming language called “Move:”
  • The Libra Association is a not for profit corporation based in Geneva, Switzerland, and it will be a coalition that oversees Libra. This coalition will ensure that Libra is being managed properly in terms of AML, KYC, Fund Management, Customer Privacy, Blockchain functionality, and many other aspects
  • The Libra Coalition will be comprised of 100 companies acting as the founding members, who will initially be the only parties designated to approve nodes on Libra’s blockchain
  • Each founding member will all pledge $10 Million each for authorization to have node sign-off authority. The fields of business that will derive the founding members of Libra’s Coalition you will see listed below, as well as a some of the companies that have already joined:
    • Payment Processing- Visa, Mastercard, Strip, Pay U, Paypal
    • Technology- eBay, Uber, Lyft, Spotify
    • Telecommunications- Vodaphone, Iliad
    • Blockchain- Coinbase, Xapo
    • Venture Capital- Andreesen Horowitz, Breakthrough Initiatives
    • Non Profits- Women’s World Banking, KIVA, Mercy Corp
  • Calibra will be a regulated subsidiary of Facebook and will handle all financial data and all other aspects of the financial services offered by Libra

 

 

Libra Coins Syndicate  Coalition: 

 

 

 

This for me was a lot to take in, the companies that are mentioned are almost all worth over a billion dollars.  So while the announcement of Libra Coin was news to both the public and apparently the US Government, this concept had already been discussed, alliances had been made, and with some of the most powerful companies in the world.  This was not only discussed, but hundreds of millions of dollars has already been collectively pledged by these entities listed and many more.  If everything goes to plan according to Libra’s Whitepaper, they’ll have $1 billion pledged by the world’s top companies in some of the most prevalent fields of business.  All this planning, and somehow nothing leaked, no one said a word, this shows that everyone involved is taking this very seriously.

 

 

 

 

E-COMMERCE

 

 

 

 

Allowing access to financial services for the poor is an amazing task to take on, and Facebook should be commended for such an initiative, but they probably never will.  As I said previously, this won’t be Libra’s only purpose, just one segment.  However, once this segment of the world takes their paychecks and converts them into Libra at a 1 for 1 exchange rate with no fee’s, what to do next?  Well, you’ve all seen ads on Facebook, right? Imagine a world where when these are clicked on instead of getting redirected to the advertiser’s website, and you’re able to buy the products and services directly on FB.  Donations to your favorite political candidate?  Owe your uncle money? Take any of these options, (even paying money to your family) and imagine seeing the $ amount owed, or a “Pay in Libra” option with a substantial discount/incentive, which one are you going to pick?   Every time someone opts for the discount, more USD are converted to Libra, and the Libra ecosystem continues to grow.

 

 

 

This is why Facebook opted to create a stable coin, although its value is unique in the sense that it doesn’t simply mimic the price any nations currency in particular, no Libra’s value will reflect the value of Libra. There will be no huge daily price swings for Libra, blockchain technology will be the only thing this coin has in common with the other Cryptocurrencies.

 

 

 

There are over 60 million active business pages on FB. Now, this might not apply to all of them, but what if next week they could suddenly sell their product directly through FB page without a redirect, scanning a fingerprint just like apple pay?

 

 

 

What if they never sold their product online before?  Then all of a sudden there’s an e-commerce website plugin designed in Libra’s programming language Move, just like that you’ve opened a new revenue stream for your business.  The point here is that there is for every hypothetical scenario, there’s a business experiencing it on FB right now.  Facebook will do everything they can to incentivize as many of these businesses as possible to contribute into the commerce on Libra’s blockchain, and by the time it’s rolled out, it should be seamless for as many of these businesses as possible to participate.  In addition to the simple integration, Facebook is bringing to the table a new consumer market 1.7 billion strong who now have more money than ever before with an avenue to shop online for the first time in their lives.

 

 

 

Daily Implementation

 

 

Facebook also owns Whattapp, a messenger service used by over 1 billion people. They will no doubt integrate Libra into its interface,  likely as the source of their money transfers.  This is already has been a proved concept for years in China, the messenger service Wechat integrated Unionpay into their interface allowing users to send each other money by selecting a contact name, scanning someone else’s phone via QVC code, enter an amount, and send.  You can even gamble with your friends right in the messenger app.  While Unionpay isn’t a cryptocurrency, but rather a network connected to nearly every bank throughout China (very similar to PayPal), however, I speculate the concept will be very similar to this with Whattsapp and Libra.

 

 

 

 

 

The United States is one of the few countries that haven’t opted into adopting a preferred national messenger service yet, like Whatsapp, Wechat, or Vibor. When we eventually do, we’ll learn what we’ve been missing. The only messenger app that really made go at the US market was Facebook Instant  Messenger, however, due to well-reported privacy breaching terms and conditions on this app that broke in the news right around the time of its launch, Americans refused to and if they did it was typically under protest.

 

 

Shortly after Instant Messenger’s failure to catch on FB purchased Whattsapp, it’s safe to say that this is a market space that they have had on their eyes for a while now. With a user base in the billions and a proven business model currently implemented in China and throughout Pacific Asia, it’s a safe bet that What’s App will be integrated to support the Libra ecosystem in some capacity.

 

 

 

The US Government’s Attack On Facebook

 

 

 

There’s a lot of global push-back on Libra, and Congress is going on the offense, and they’re not alone the majority of the articles read something to the tune of “How Libra can affect your real-life wallet” or “What makes Libra so predatory.”

 

 

After you get past their anger and the general mistrust that congress has for Facebook, the actual concerns when in regard to Libra coin is that they are building something that’s essentially circumventing the regulatory process in place to register as a bank, which has the potential to disrupt and rival the US Dollar and ultimately the global economy. Additionally, they’re entering a space that lacks the regulatory framework to provide proper over site of a business of their magnitude.  Finally, there was even grumblings saying that if this is truly an inevitable evolution of business, and that the United States should be on the forefront of such world-changing innovation.  Instead, Libra is registered as a non-profit based in Geneva, Switzerland.

 

 

This is a brief summary of some of the major highlights from the many grievances, that have been expressed by congress over the past two weeks.

 

 

 

Conclusion

 

 

 

Even this early on, it shows that Facebook has put in meticulous work and planning into Libra’s launch. When the day finally comes that Libra goes live, for better or worse, Facebook will be setting a precedent as the first business of their caliber to put out a proprietary built Cryptocurrency running on in house developed blockchain technology.

 

This can’t not be a big deal, any long-time supporter of Cryptocurrencies knows what a significant milestone this is, despite how you may personally feel about Facebook.  I mean for a long time we were proud to have the Winklevoss Twin’s, and they were just the Harvard Connection…. alright I guess we’re still proud to have them too (but side note, how much do you think they hate Mark Zuckerberg right now?).

 

 

Regardless of your thoughts on Facebook, and if you’re within the bell curve, they’re probably not the warmest. The task they are attempting to embark on, launching a medley of financial service products at zero cost, helping to put billions of dollars a year back into the pockets of people who need it the most. If they can successfully execute this task, simultaneously it will have the effect of toppling over some of the most predatory businesses out there.

 

 

 

Check Cashing facilities, and Payday Loan shops, work together in what can only be an oligopoly,  setting pre-agreed upon excessive fees to their products and services in unison with the price of their competitors.

 

If Facebook takes these services and offers it as a loss-leader at zero cost to the customer, these companies will get squeezed out of their respective industries virtually overnight.  Objectively speaking, I think this is admirable, one of the more noble innovations to be utilized on blockchain,  and frankly I commend Facebook for it.  With that said, here’s what I believe to be their true motives behind Libra…

 

They are creating the ability to rise above regulatory scrutiny, and if I had to speculate, this was pitched by Facebook to the Libra association, more so than any potential $ amount to be earned .  Most of the companies forming the coalition have been stung by the SEC as well as many other regulatory agencies more than once. I’m sure something diabolical was said while drinking Brandy by an over sized fireplace to the tune of, “If we all stick together in this, we will only have to answer to one another, not some arbitrary regulator with a vendetta. We don’t need to ask permission, we’ll cooperate but will not cease, what can they do?  The world couldn’t afford to shut us all down”

 

 

 

During Libra’s pre-launch period,  congress will continue to probe and attack Facebook. With Maxine Water’s continuing her demand for a moratorium on the Libra project, Facebook has and will remain polite and respectful, and while they might continue to cooperate throughout the entire process, they’re not stopping. Why would they?

 

 

 

Congress states that they don’t want FB to circumvent the required steps  already in place to register as a bank…

The problem with that is what they’re creating clearly is not a bank, this is actually a pretty ignorant comment for an elected official to make.

 

Their next frustration/grievance comes from the lack of over site for digital currency space that Facebook is preparing to enter…

Well, seriously whose fault is that?  There has been more than ample time for the SEC or CFTC or both to develop bylaws and create the regulatory framework necessary to oversee this market, they just never bothered to do it.  It was apparent that regulations written for futures and commodities didn’t adapt for digital currency, and tailored regulatory guidelines needed to be drafted specifically for this asset class.  For those of you who remember, when Bitcoin was near its peak in early 2018, the SEC was moving full speed ahead to “Get a Handle on this Market.”

 

 

So the what happened?   Bitcoin’s price dropped, public interest fades, and so do the regulators.

You can’t punish a company for entering a market that you didn’t bother to make rules for. Everybody loves to enforce rules in a bureaucracy but creating the regulatory guidelines, this requires serious effort, but it’s the job of the regulators, they just didn’t do it.

 

 

Libra has detailed in their Whitepaper of not only their intent to have Libra be overseen by their coalition but to also their intent to create a subcommittee that will act as additional regulatory oversight.   Sure this might sound naive, maybe a little pompous, and it probably is, but in reality who controls cyberspace?  It’s going to be difficult for Maxine and the gang to appoint themselves to have complete over site over an industry that has no centralized location.  As far as candidates for this job, the US is way down the list, we are laughably unequipped to properly facilitate this when compared to many other countries that have already built regulatory infrastructure and created guidelines specifically for Cryptocurrency. The more this goes on, the more it just doesn’t seem like there’s much the can really do to stop this even if they wanted to.

 

 

 

“We’re told by some that innovation is always good, The most innovative thing that happened this century is when Osama Bin Laden came up with the innovative idea of flying two airplanes into towers. That’s the most consequential innovation, although this may do more to endanger America than even that.”

 

I still can’t shake this Brad Sherman quote, I mean if I had to say something positive about his quote, maybe that it’s passionate?

 

Where does this passion come from exactly?  An amazing fact about the Payday Loan industry Is that they’re one of the biggest lobbyists out there, something Mr. Sherman is well aware of. At $67,500 in contributions, he is one of the biggest recipients of Payday Loan money from their lobbyist’s  in the entire democratic party.  Maxine’s on the list as well, while her number is much lower and likely not her motivation for the moratorium it is something to keep in mind.

 

 

This whole thing can be a bit confusing; I mean maybe FB is the bad guys maybe not, but either way, it sure doesn’t make our politicians the good guys by default.  I think Libra like Facebook can change this industry in ways politicians could never imagine.

 

 

There’s a lot of money to be made here, and Facebook knows this of course, the launch of Libra Coin has been very well thought through.  It’s also going to help a lot of people save money and release them from the predatory payday loan cycles millions find themselves in.  While this might have been applauded at one time, the public opinion of this social media monster has changed.  Take this fact and add in that the predatory business models Libra will attack are being perpetrated by businesses that are currently paying money to the same people in congress who are fighting to stop Libra the hardest, and choosing some of the harshest things to say about it, all in the name of integrity.

 

Brad Sherman and Maxine Waters continue to blast Facebook, my question is if they make the comparison of Facebook to Al-Qaeda, wouldn’t this make Brad and Maxine members of the Taliban? It’s like I said… this thing’s complicated.

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