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Will Facebook Change The Cryptocurrency Market?

With over two billion users worldwide, Facebook rules the social media space. But it is now setting its ambitions even higher, planning to take a plunge in the currency market.

Yes, Facebook is joining the cryptocurrency game. It is about to launch a Bitcoin-like currency called Libra. Cryptocurrencies like Bitcoin and Ethereum have generated a tremendous amount of interest as well as confusion. To learn more about cryptocurrencies, refer to our blog post – “Cryptocurrency For Dummies – What is Cryptocurrency & How Does it Work?

But in this blog post, let us focus on what Facebook plans to achieve through its proposed currency, Libra.

What is Libra?

Libra

Facebook’s Libra will be a cryptocurrency, which will allow you to make purchases or allow you to send money to individuals at almost zero transaction fees. According to Libra, “Libra’s mission is to enable a simple global currency and financial infrastructure that empowers billions of people.”

A Roman unit of weight, Libra in the context of Facebook’s cryptocurrency tries to invoke a sense of financial freedom. You can buy or spend your Libra online or at a grocery store near you by using third-party interoperable wallet apps or Facebook’s Calibra wallet, which the company plans to incorporate into all its apps, including WhatsApp and Messenger. Facebook is planning to launch its cryptocurrency Libra through its blockchain system sometime in the first half of 2020.

Facebook does not plan to control Libra fully. Instead, Facebook will get a single vote – just like other founding members of the Libra Association – which include Uber, Andreessen Horowitz and Visa. Each of the founding members has invested at least $10 million in the project. The open-source Libra blockchain will be promoted by the association with its Move programming language. The association also plans to enter into agreements with other businesses to use Libra for payment and give rewards and discounts to customers.

Facebook will launch a subsidiary company by the name of Calibra to handle its crypto dealings and protect the privacy of its users by not allowing your Libra payments to mingle with your Facebook data, which means it cannot be used for ad targeting. Your publicly visible transactions will not be tied to your real identity. Libra association members along with Facebook (Calibra) will earn interest on the money that users cash in, which is kept in reserves so that the value of Libra remains stable.

Facebook’s global digital currency plans to promote financial inclusion for those who don’t use banking services, and it is expected to have more privacy and decentralization. Facebook does not intend to make a lot of money immediately through Libra; instead, they want to be there for the long-term so that they can get more payments into its online domain. According to Facebook’s VP, David Marcus, “If more commerce happens, then more small businesses will sell more on and off platform, and they’ll want to buy more ads on the platform so it will be good for our ads business.”

What does Facebook want to accomplish with Libra?

As reported by Josh ConstineZuckerberg Money LibraEditor-at-Large for TechCrunch – “In cryptocurrencies, Facebook saw both a threat and an opportunity. They held the promise of disrupting how things are bought and sold by eliminating transaction fees common with credit cards. That comes dangerously close to Facebook’s ad business that influences what is bought and sold. If a competitor like Google or an upstart built a popular coin and could monitor the transactions, they’d learn what people buy and could muscle in on the billions spent on Facebook marketing. Meanwhile, the 1.7 billion people who lack a bank account might choose whoever offers them a financial services alternative as their online identity provider too. That’s another thing Facebook wants to be.”

The existing cryptocurrencies like Bitcoin and Ethereum are not properly designed to be a medium of exchange because of their uncontrolled price, which results in their erratic swings. It becomes difficult for the traders to accept these coins as payments. Also, these cryptocurrencies cannot be exploited to their full potential because there are not many places where they can be used in place of dollars, and it is not easy for the mainstream audience to deal in these coins. But Facebook can tackle this problem head-on because it has more than seven million advertisers and 90 million small businesses in addition to its user experience expertise.

Facebook now wants to turn Libra into another PayPal. Facebook is confident because it thinks that it is easier to set up Libra, it is easy to use as a payment method, more accessible to those who don’t have access to banking services, more efficient than others because there are fewer fees, and flexible and long-lasting due to developers and decentralization.

According to Facebook’s Libra documentation, “Success will mean that a person working abroad has a fast and simple way to send money to family back home, and a college student can pay their rent as easily as they can buy a coffee.” When you look at exploitative remittance services charge, which averages around 7% for the money sent abroad, totaling $50 billion from users annually, it certainly seems to be a big improvement. Libra would allow microtransactions of a few cents, which is unthinkable with the in-built credit card fees.

But it is a steep climb for Facebook ahead in the cryptocurrency market.

How does Libra work?

All you need to do is cash in your local currency and get Libra, which you can spend like dollars, with fewer transaction fees and without disclosing your identity. You can also cash your Libra whenever you want.

The Libra Association

It would have been difficult for the general public to trust Facebook in the crypto world, which is why major corporations have been assembled to form the Libra Association. This not-for-profit entity headquartered in Switzerland will overlook the development of the token, keep the reserves safe and streamline the governance rules of the blockchain.

Some of its founding members as reported by The Block’s Frank Chaparro include:

Payments: Mastercard, PayPal, PayU (Naspers’ fintech arm), Stripe, Visa

Technology and marketplaces: Booking Holdings, eBay, Facebook/Calibra, Farfetch, Lyft, Mercado Pago, Spotify AB, Uber Technologies, Inc.

Telecommunications: Iliad, Vodafone Group

Blockchain: Anchorage, Bison Trails, Coinbase, Inc., Xapo Holdings Limited

Venture Capital: Andreessen Horowitz, Breakthrough Initiatives, Ribbit Capital, Thrive Capital, Union Square Ventures

Nonprofit and multilateral organizations, and academic institutions: Creative Destruction Lab, Kiva, Mercy Corps, Women’s World Banking

Before the official launch of Libra, Facebook plans to increase its present 28-member founding members to 100.

The Libra currency

The Libra cryptocurrency will be represented by three wavy horizontal lines. To make it a good medium of exchange, the value of Libra would largely stay stable. The value of Libra would be attached to a basket of bank deposits and short-term government securities for a number of internationally stable currencies like dollar, pound, yen, Swiss franc, and euro. To keep the Libra stable, the Libra Association will maintain the basket of assets, and they can also change the composition when required to counterbalance major fluctuations.

The exact start value for Libra is still under consideration, but it is likely to be close to internationally stable currencies.

The Libra Reserve

Every time someone cashes in a dollar, that money goes into the Libra Reserve, and the person gets an equivalent amount of Libra in exchange. Should someone cash out of Libra, the Libra that is returned would be destroyed or burnt, and the person gets the equivalent value of the local currency in exchange. It means that there would always be 100% of the value of the Libra in circulation.

The Libra blockchain

All Libra payments would permanently be recorded in the Libra blockchain, which is a cryptographically authenticated database. Libra blockchain is a public online ledger engineered to handle 1,000 transactions every second. It means that the Libra transactions would be much faster as compared to Bitcoin (which allows seven transactions every second) and Ethereum (which allows 15 transactions every second). 

The founding members of the Libra Association will operate and verify the blockchain. 

Libra transactions cannot be reversed. The Libra association in case of an attack will temporarily stop the transactions and take corrective measures for future smooth operations.

The Libra blockchain currently is known as ‘permissioned,’ and here only those entities that fulfill certain requirements are admitted to a special in-group, which will control the blockchain through consensus. But as of now, the Libra association has not found a reliable ‘permissionless’ structure that is safe and secure. The goal of the Libra Association is to create a permissionless system.

What are the incentives to use Libra?

The Libra Association wants to involve more developers and merchants for its cryptocurrency project. The association plans to issue incentives, possibly in the form of coins to those who use the currency. Those who bring in more customers and keep them active for over a year will be rewarded. Traders will also receive a percentage of a transaction for every transaction they process. Businesses can keep the incentives or pass a portion of it to their respective customers.

Libra privacy concerns

Individuals can spend and own Libra through Libra wallets like Calibra and other third-party Libra Association members like PayPal. The philosophy is to make it easy for an average consumer to send money to a friend or use it wherever they want just as they conveniently send a Facebook message.

About the privacy of the Libra, Mark Zuckerberg had this to say, “It’s decentralized — meaning it’s run by many different organizations instead of just one, making the system fairer overall. It’s available to anyone with an internet connection and has low fees and costs. And it’s secured by cryptography which helps keep your money safe. This is an important part of our vision for a privacy-focused social platform — where you can interact in all the ways you’d want privately, from messaging to secure payments.”

What is the difference between Libra and Bitcoin?

There is a mixed bag of reaction for Facebook’s Libra cryptocurrency project. Some say that it will be nothing more than PayPal with the addition of blockchain technology, while others say that it will lead to more adoption of traditional cryptocurrencies like Bitcoin. 

The Bitcoin and Libra are different. While Bitcoin is a decentralized network – which is permissionless and censorship-resistant – Libra will be operated by a group of companies that will still remain answerable to the governments of the world.

There is some skepticism, though, among the lawmakers of several countries against Facebook’s attempt to create their digital currency. As regards monetary policy, Bitcoin and Libra are poles apart. While Bitcoin follows its own supply schedule, Libra is only backed by a basket of currencies that are issued by governments. Libra, unlike Bitcoin, has a face, which can be targeted by the government whenever they want to regulate it.

Also, since Libra will not operate in a permissionless manner, it is debatable for some whether it qualifies as a cryptocurrency or not. Moreover, when talking of Facebook, it is difficult for the consumers to totally forget about all their privacy-related scandals.

Libra seems to be a minor variation of the traditional financial system and is unlikely to have any significant impact on the Bitcoin price.

Will Libra change the world?

According to Facebook’s Libra white paper, the goal is as follows: “A stable currency built on a secure and stable open-source blockchain, backed by a reserve of real assets, and governed by an independent association.”

Their stated aim is to create better access and improved, inexpensive and open financial services for all people – regardless of their location or economic status. The road ahead for Facebook’s Libra project is arduous and is difficult for a single entity to achieve. That is why a consortium of corporations is coming together to helm the project.

But only time will tell whether Libra project gets the support from various stakeholders – most importantly of all – consumers.

With the great potential of Libra and other cryptocurrencies, encryption technology is more important than ever – especially in the corporate world. DocuServe has the industry experience and solutions to protect company data, keeping employees productive without risking data loss. Our eServe encryption solution provides content security in the cloud, mobile access, security at rest and in motion, encrypted data security, remote wipe and much more. Contact us to learn about our industry-leading solutions.

 

 


Blockchain 101 with Docuserve

Blockchain 101: What You Need to Know About Blockchain

Have you heard about blockchain?

Chances are you must have heard about it, but probably haven’t given blockchain the kind of weight it deserves. But make no mistake, blockchain is a technological marvel that will have far-reaching effects on not just the financial services market, but on other industries and businesses, as well.

If you find Bitcoin and cryptocurrency fascinating enough to delve into and explore, you also need to know something about blockchain.

A blockchain is a distributed and shared database where the database storage devices are not all linked to a common processor. It is a list of growing records, called as blocks, which are connected and secured by cryptography. Every block is connected to the previous block and has a transaction data and timestamp.

Cryptography ensures the safety and security of a blockchain. Users are only able to edit the blockchain parts they own, and that is if they have the private keys which are mandatory to write to the file. Cryptography also makes sure that your copy of the distributed blockchain remains in sync with others.

Blockchain is intrinsically resistant to data modification. It is a public, open, distributed and shared ledger that can record transactions between parties in a certifiable, efficient and permanent way. Blockchain is used as a distributed ledger and is managed by a P2P (peer-to-peer) network jointly sticking to a protocol for authenticating new blocks. And, once data is recorded in any block, it cannot be changed. To change the data, all the subsequent blocks have to be altered, which is not an easy task and can happen only with majority collusion.

Blockchains by design are secure and represent a distributed or shared computing system with high levels of Byzantine-like fault tolerance. As a result, blockchain technology allows data management in a decentralized and an autonomous way. Therefore, blockchain is best suited for medical record keeping, recording of events and other record management activities like transaction processing, identity management, food traceability, voting or documenting provenance.

The Invention of Blockchain

As mentioned earlier, blockchains are designed to be secure databases. The concept of blockchain came into existence in 2008 by a person or group under the pseudonym of Satoshi Nakamoto, and then introduced as the part of the digital Bitcoin currency for the first time in 2009. For all Bitcoin transactions, the blockchain acts as the public ledger. With the help of blockchain technology, Bitcoin became the first digital currency to solve the problem of double-spending, and that, too, without the use of a central server or an authoritative body.

What Are The Different Types of Blockchain?

Public blockchains – Public blockchains like Bitcoin are big distributed networks that work through a native token. Anyone can participate in this forum, and at any level. They have open source code, which is maintained by the community.

Permissioned blockchains – A permissioned blockchain like Ripple control roles that people can have in a network. They are big and distributed systems, and also use a native token. In permissioned blockchains, the core code may or may not be open source.

Private blockchains – These are smaller systems, and do not use a token. Membership in private blockchains is closely controlled. Consortiums prefer this type of blockchain where members are highly trustworthy, and confidential information can easily be traded without any problem.

All of these are blockchain types, and all of them use cryptography, which allows users on any given network to securely manage the ledger in a decentralized way.

The Importance of Blockchain

The internet is a decentralized forum, which we use to share most of our day-to-day information, but for financial transactions, we are forced to resort to a tried and tested system of a centralized financial institution, such as banks. Even the popular PayPal payment for online transactions only becomes effective once we integrate it with a credit card or a bank account.

With blockchain technology in place, people can transact and do business with each other directly without the involvement of a middleman. The blockchain technology helps remove the middleman as it performs these three vital roles:

  • Records all transactions
  • Establishes identities
  • Establishes contracts (typically a prerogative of the financial services sector)

Blockchain technology, if implemented, can have a far-reaching effect on the financial services sector, as it has huge market capitalization. Though it will cause an upheaval in the financial services market, the technology can considerably improve the efficiencies of the financial services business.

Not only will the financial services sector be able to benefit from blockchain technology – other industries also stand to gain tremendously. Other than Bitcoin, the technology can also be used to store all sorts of digital data, including computer code.

The piece of code can be programmed to perform a function when some parties key in their entries, which is nothing but getting into a contract. This code could also decipher external data feeds, anything that can be analyzed by the computer – such as news headlines, weather reports or stock prices – which could be used to create contracts that will automatically be filed as and when the conditions are met. These are referred to as smart contracts, and this can open an exciting number of opportunities.

One blockchain pioneer is Ternio. Based in Lewes, DE, Ternio provides blockchain for the programmatic digital advertising industry. Says Ternio co-founder Ian Kane:

“At Ternio, we use Blockchain to solve the many problems facing digital advertising such as domain fraud, bot traffic, lack of transparency and lengthy payment models. Ian Kane of Ternio_Blockchain CompanyThe issue is that incentives are not aligned, causing both advertisers and publishers to feel they are on the losing side of the deal. Blockchain is the solution to bring transparency to the supply chain because it inherently brings trust to a trustless environment.

“By reducing the number of bad players in the supply chain, it enables the good companies to thrive. Most important, publishers are able to collect a higher percentage of the total ad dollars entering the ecosystem and will do so at the time of impression delivery. Blockchain is still in its infancy, but the underlying technology is here to stay and all ad tech companies should be looking at how it can help to improve their business.”

How blockchain is different from Bitcoin

Bitcoin and other cryptocurrencies are able to exist only because of blockchain technology. For example, Twitter is a social medium platform that is on the internet. The internet makes Twitter possible, but Twitter itself is not the internet.

How blockchain functions

Blockchain is comprised of blocks, each of which records some current transactions. These blocks permanently go into the blockchain, and new blocks are created as soon as old ones are completed.  All these blocks are linked to one another in a sequential and linear manner, and each block has a hash of the previous block. The blockchain contains all the information, from the last block to the first-ever block.

Once a transaction takes place, the information remains in the blockchain permanently. It cannot be copied or deleted, it can only be distributed. The technology is completely secure, as blocks can only be added with complex cryptography.

Blockchain databases are autonomously managed for sharing information between two parties. Since it is a P2P network that has a shared or distributed timestamping server, there is no need for an administrator. The person using the blockchain is the administrator.

There is no third party involvement in blockchain because the users validate each time one person pays to another for anything. The details of the transactions are recorded in the blocks publicly, which are later verified by other users. All the participating computers – referred to as nodes – share the database of the blockchain. Every node gets a blockchain copy, which means that you get public records of all the transaction that ever happened on the network.

Blockchain technology has the potential to improve our existing financial services sector, including banks. As this disruptive new technology stands ready to change the world, the decision-makers in financial services and other industries now face the challenge of developing a strategic approach to adaptation.


Information on Cryptocurrency

Cryptocurrency For Dummies: What is Cryptocurrency & How Does it Work?

There is tremendous interest in the cryptocurrency space right now, and equal parts confusion, uncertainty, and doubt. Bitcoin, cryptocurrencies, blockchain, ICOs. What do these even mean? This guide will be a brief overview of what cryptocurrency is and how it works.

Cryptocurrency is a general name referring to all the encrypted decentralized digital currencies like Bitcoin. The underlying infrastructure that makes these cryptocurrencies what they are is called blockchain. At its simplest, a Blockchain is a shared database (ledger) that everyone can write to and access to verify transactions. It is extremely secure because the transactions are encrypted with 256-bit cryptographic keys. So instead of the record of every transaction that has occured on a server, all the information is kept in the decentralized ledger (the blockchain).

These ledgers are constantly checked against one another automatically to stay up to date with the master. The master is the longest most agreed-upon chain at any given time.

“Anyone (or any program) can check the ledger any time because the ledger is public. But, everything on the ledger is encrypted, so unless you have the key for the ledger slots you’re trying to look at, all you see is nonsense. This is how the system is able to be secure, but also public. Everything is encrypted using an algorithm that is, as of now, unhackable.” – Adam Kerpelman, founder and CEO of Juris – Human-Powered Dispute Resolution for Blockchain Smart Contracts, 

When a new coin comes out it usually releases a “white paper” which is like a sales pitch. Initial Coin Offers (ICO’s) are new coins used for crowdfunding. Cryptocurrency is legal and taxable in the US, but it isn’t legal tender and is treated as an investment property. With that said, due to its infancy and history so far, cryptocurrencies should be invested in and used with their historical volatility in mind.

Is Cryptocurrency Safe?

Says Scott Amyx, of Amyx Ventures, “Cryptocurrencies are inherently very safe but the vulnerability of cryptocurrencies lies not with the underlying technology but rather with people and institutions — hackers trick the user into divulging access to the exchange, typically your email address and a password (via phishing) or to the private key in your wallet. Specific to exchanges, the most common way is to hack into your email account and then request a password reset to the exchange.”

To mitigate this risk, Amyx recommends enabling  multi-factor authentication.

Cryptocurrency wallet_Crypto wallet

Where Do You Keep Cryptocurrency?

  • A third party exchange such as Upbit and OKEx
  • A first party wallet with a public key  which allows others to give you cryptocurrency and a private key (to open the wallet for withdrawal)
  • In the case of an exchange, investors can buy and store digital currency using their service.
  • For a wallet, you are responsible for keeping the private key safe so that no one can hack into your wallet.

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