After more than a year of rumors and speculation, Facebook has launched its own cryptocurrency Libra. Facebook Libra is backed by a bunch of other corporations including Visa, PayPal, Spotify, eBay, Uber, MasterCard, and others. It’s a clear indication that these companies would accept Libra as payment on their platforms. Bitcoin, a popular cryptocurrency, has been trying to gain acceptance and validation for years. Let’s check out how Facebook Libra differs from Bitcoin.
Libra aims to become a low-cost, more efficient, and more accessible payment method. Cryptocurrency experts believe Facebook’s digital currency could gain mainstream acceptance, which Bitcoin has been aiming for years. The launch of Libra could also boost the adoption of Bitcoin.
Libra is created by Facebook and has the backing of numerous large corporations. In contrast, Bitcoin was created by an anonymous person or group going by the name Satoshi Nakamoto. They are both based on Blockchain technology.
Facebook Libra vs Bitcoin: Trust
Bitcoin is a virtual currency that does not involve any third parties. You don’t need to trust a third party with your data or money. You can stay anonymous while sending Bitcoin payments to anyone, anywhere in the world.
But that’s not the case with Libra. Here, you have to trust Facebook and other intermediaries with your money. You will have to exchange your money for Libra tokens. The social networking giant will build a ledger of all transactions. You have to trust Facebook, a company notorious for violating user privacy and compromising the data of hundreds of millions of people. Facebook is by far the least trusted company in the world.
Bitcoin is decentralized in nature. There is no central authority to issue or manage the digital currency. You can download a Bitcoin wallet or choose to create your own wallet. Users have the freedom to download the open source code – which is available for free – and run their own node. It’s like the digital version of gold.
Facebook Libra is not exactly a cryptocurrency because it’s centralized. It’s a digital currency with all the characteristics of a fiat currency. It’s like the digital version of the US dollar. Libra would have multiple central nodes that could be shut down by the government.
How they work
Bitcoin doesn’t depend on a single government or company. It’s the developers and Bitcoin community that determine what is going to happen to Bitcoin. If you think there is a better use case, you have the freedom to create your own coin by hard-forking the code.
Bitcoin users can send money to anyone in the world if they have their own private keys and wallets. They don’t need someone’s permission or approval. It lets you send money irrespective of where you live. And you can be completely anonymous.
Since Facebook announced Libra, the governments have started pushing back. Libra will have to ban individuals and countries on the US sanctions list, including North Korea and Iran. Facebook and its partners will determine what will happen to Libra. They have formed Libra Association, a non-profit organization, to manage the payment system.
There is a limited number of Bitcoins in the world, which means its value is not dependent on inflation or government control. Libra’s value will be influenced by these factors. That helps explain why Bitcoin has become an investment and store-of-value, though it was originally intended to be a platform to facilitate transactions.
Since Libra is backed by the US dollar and other fiat currencies, it won’t be as volatile as Bitcoin. The extreme volatility in Bitcoin has prompted people to trade the cryptocurrency.
Facebook would want to make Libra as secure as possible. But it might not be as secure as Bitcoin. The Bitcoin network has been running for more than a decade, and has never been hacked. It is by far the most secure computer network out there. But your private key could still be vulnerable to hacking if you don’t take precautions. Facebook Libra has centralized nodes, which could be vulnerable to data breaches and DDoS attacks.
Facebook is the first major technology company to launch a virtual currency. We could see many other tech giants introducing their own digital currencies in the future.
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