Should the world embrace cryptocurrencies? | Inside Story
Facebook’s cryptocurrency hasn’t been launched yet, but investors no longer trust it. Doubts about the success of Libra are expressed by everyone: crypto enthusiasts, regulators, programmers, ordinary users of social networks and even Donald Trump.
In search of decentralization
First of all, let’s remember that the cryptocurrency initially appeared with the sole purpose of getting finances out of the control of the central body, as it begins to feel undeniable absolute power over a person..
If you follow this meaning of the word «cryptocurrency», then Libra is a better definition «stablecoin», pegged not only to the dollar, but to a whole group of fiat currencies. Control over the blockchain of this coin will be controlled by a group of 25 companies, one of which is Facebook. Also included in the management team are Visa, Mercy Corps, eBay, Booking, PayPal, Uber, Kiva, Women’s World Banking and others. Obviously, a limited number of managers contradicts the basic principles of decentralization, so the first question arises as to why the Facebook blockchain is generally called decentralized..
In search of an answer, it is necessary to turn to the consensus algorithm that is used in blockchain – LibraBFT based on PoS. This algorithm fulfills the condition of the Byzantine consensus, but functions faster than PoW. For the sake of speed, you have to sacrifice the requirements for the network nodes, which in the Libra Network must be connected each to each, in contrast to the Bitcoin nodes.
Recall that control of each node is carried out by one of 25 companies (in the future, the number of companies that maintain full nodes will increase). As a result, it turns out that mining Libra is impossible, and it will be possible to become a network node only after the prior approval of the consortium. It will be possible to gain access to network management through the purchase of Libra Investment Token (LIT).
This blockchain cannot be called decentralized. You can talk as much as you like about the inconvenience of classic Proof of Work-coins and about the fact that 10 years later, bitcoin still cannot pay for milk in a supermarket, but this does not give the right to substitute concepts. Once again, an electronic payment system was created with a distributed, public, public-private, hybrid, special, fast, whatever, but not a decentralized blockchain..
Data breach scandal
In the cryptocurrency world, it is generally accepted that a public blockchain is a decentralized inclusive distributed ledger, but Libra’s definition of publicity has a completely different meaning. And here, of course, we will talk about privacy and scandals associated with leaked data from Facebook..
Given the few high-profile cases involving Facebook data breaches, there is a lot to think about for ordinary users. We are talking about 540 million entries, including Facebook ID and 22,000 unencrypted passwords. Now imagine that the attacker already has a Facebook ID and password to log into a specific user’s account. Until a certain time, this data does not bring monetary benefits, but at one point the same user links a wallet to his page and, without suspecting anything, replenishes it with a stablecoin in an amount equivalent to $ 1000. Further actions of the attacker are obvious.
What government authorities will require
No matter how a consortium of 25 companies resists regulators, the data from Libra Netwrork will still be under the control of state bodies, just like in the banking system. Recently, Facebook manager David Marcus confirmed that stablecoin will not launch without the consent of regulators, namely the Senate Banking Committee and the House of Representatives Finance Committee. Zuckerberg has already been to court hearings and does not want more of this experience..
For users, this means that their data can be disclosed, and Calibra wallets are blocked for completely various requirements of the tax authorities, internal affairs bodies, bailiffs, customs authorities, the Chamber of Accounts, etc..
Libra smart contract programming
At the moment, it is generally unknown what can be written in the Move programming language, since at the first stage only ready-made templates of smart contracts will be available. Zuckerberg is in no hurry to offer third-party programmers the development of any Dapp based on Libra, since all data leaks have occurred precisely because of third-party services..
It is already known that programmers will need to minimize the code size as much as possible, observing strict CPU / RAM standards (something similar is implemented in EOS). Also missing is the ability to update code.
Libra is not a decentralized cryptocurrency, but another means of payment that competes with PayPal and banks. Statements about the threat to the dollar on its part are not consistent, since it is a stablecoin pegged not only to the dollar, but also to the euro, pound sterling and the Japanese yen. Despite all the criticism and shortcomings, a huge base of potential customers Libra can still pull this project to a leading position among payment systems..