Facebook, the largest social media network in the world, is working on its cryptocurrency* and blockchain project called Libra. The main goal is to offer a crypto service for users to be able to send and receive funds through a virtual currency that will be called Libra.
TheLibra Blockchain will be working with a consensus algorithm that relies on validators. These validators are responsible for maintaining and governing the Libra blockchain network. Initially, Libra granted votes to Founding Members, entities that meet a set of criteria and that own Libra Investment Tokens after investing $10 million on the project.
Facebook considers that the eligibility criteria is going to protect the network from malicious activities. At the same time, these companies would also be trying to protect their validators from different attacks. The Libra Investment Token represents an expectation of returns from interest on the reserve the company has. This would incentivize the validator to remain operational.
According to the Libra Association, its founding members include the following firms:
Mastercard, MercadoPago, PayPal, PayU, Stripe, Visa, Booking Holdings, eBay, Facebook, FarFetch, Lyft, Spotify, Uber, Iliad, Vodafone, Anchorage, BisonTrails, Coinbase, Xapo, Andreessen Horowitz, Breakthrough Initiatives, Ribbit Capital, Thrive Capital, USV, Creative Destruction Lab, Kiva, Mercy Corps, and Women’s World Banking.
Many of them have different roles in the market and have different approaches to digital assets. Nonetheless, they see a possibility of growth in Libra and the chance to make the difference in the payments industry.
Mastercard is a multinational company that is headquartered in the United States. The firm has been operating for over fifty years in the payments industry offering credit cards to individuals from all over the world.
Credit and debit card companies have been operating around the world for a long period. They offer the possibility for individuals to make payments through posnets installed at merchant locations in different locations in the world.
Virtual currencies have been used many times by merchants to reduce fees that card companies take. Thus, MasterCard could be benefited by implementing and integrating Libra into its operations to move funds around the world, help merchants accept payments and reduce the fees that they ultimately take.
Some companies have launched their prepaid MasterCard cards linked to Bitcoin accounts. Libra could wok with MasterCard and allow clients to use cards backed by their Libra funds.
MercadoPago is a company located in Argentina related to MercadoLibre, one of the largest marketplaces in Latin America. The firm has invested in Libra but it didn’t inform which are their expectations about the project.
The firm simplifies payments for users that want to make purchases in shops and online. It is possible to pay using a cellphone, QR codes, send money through chat or even social networks. Furthermore, clients can receive funds to start their projects and finance their ideas.
Libra could help the firm have an even larger penetration in the market, reduce overall costs and improve the services that they offer to users. Until now, the company didn’t have contact with the cryptocurrency market or Bitcoin.
This is perhaps one of the most popular companies to process payments in the United States and other developed countries. The firm has been offering services to merchants and individuals from all over the world for a long period.
The cryptocurrency community has several times commented about the high fees that it is necessary to pay for using their services. Transactions tend to have high fees and they do not have very attractive exchange rates for users. This makes it difficult for many individuals that do not have enough resources.
Furthermore, there have been several complains regarding how the firm deals with the funds that users hold on their accounts. In many cases, the funds remain frozen for several months until the firm decides to unlock them.
With Libra, PayPal could improve the presence it has in the market and start offering better services for users. Although there is no information about the plans they are trying to follow, the decision to invest in Facebook’s Libra project may be closely related to its plans for the company.
eBay is also investing in Facebook’s crypto project. The multinational e-commerce platform facilitates consumer-to-consumer sales using its website. At the moment, the firm is operating in over twenty countries around the world.
This is not the first time that eBay is investing in payment companies. Back in 2002, PayPal became a wholly-owned subsidiary of eBay, something that ended in 2015. eBay has a real interest in improving its payment system.
With this new investment on companies such as Facebook and the crypto project Libra, eBay payment system may change. We could see a firm that would be fully integrated with the Libra ecosystem and that would allow individuals to pay directly from their Calibra account using the Libra digital asset.
Uber, the popular company that offers different services such as ridesharing and food delivery is now investing in Facebook’s blockchain and crypto project. In the past, there were many initiatives related to Uber accepting cryptocurrency payments. However, none of them was able to succeed and be released.
Several users would like to make cryptocurrency payments when using Uber applications. Having Uber connected to a cryptocurrency wallet is something that many would consider valuable and that would certainly use.
Being invested in Libra is a very promising signal that shows into which direction Uber is trying to move. Although they may not add Calibra support, they may understand how to offer better services to users that want to use virtual currencies.
Coinbase is one of the largest and most popular cryptocurrency exchanges in the market. Located in San Francisco, the company decided to invest in Facebook’s blockchain project. This is just one of the few crypto-related companies investing on the project, along Xapo, BisonTrails and Anchorage.
This cryptocurrency exchange could be one of the first ones to be adding support to Libra. However, the crypto exchange is not recognized for being the first one listing tokens. Other platforms added support to many altcoins before than Coinbase.
Being the first mover in the industry is something that could benefit Coinbase, allowing it to remain ahead of other competitors in the space. Moreover, Coinbase allows merchants to accept crypto payments. By adding support to Libra, many users and merchants would be able to receive Libra payments.
The venture capital firm Andreessen Horowitz (a16z) has also invested in Facebook’s Libra. The firm invests in early-stage startups and also other companies.
At the moment, Coinbase is operating in around 32 countries and offers bitcoin transactions and storage in 190 countries around the world. The firm as invested in different companies related to virtual currencies through $300 million dedicated cryptocurrency fund.
Being part of the first investors in Facebook’s Libra would allow the company to understand how other firms are moving in the crypto industry and which are the most important trends int the ecosystem.
As we mentioned before, many other companies are investing in Facebook’s crypto project. The company is now dealing with regulators and regulatory issues in different jurisdictions to be able to operate in the market. Regulators are worried about the effect the digital currency could have in the monetary policy of many countries and on the general economy.
It is worth pointing out that there are no banks or traditional financial companies investing in the Libra project. Although there is no information on whether Facebook didn’t accept investments from these companies, these firms are currently in a situation of vulnerability if they don’t move in the same direction the crypto market is following.
Certainly, Libra is currently making traditional financial companies worried. Facebook wants to offer users the possibility to send and receive fast payments from their Messenger, WhatsApp or Calibra applications. Billions of users are currently connected through these services, this is why regulatory agencies are trying to understand Facebook’s goals and motivations.
All the companies we described have their interests and reasons to invest in Libra. However, most of them expect to be benefited in case the digital currency created by Facebook is released to the market next year as it was planned.