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Facebook’s Libra May Bank the Unbanked and Drive Crypto Mass Adoption, But at What Cost?

Updated: Jul 21, 2019

by Brady Luo, CEO of everiToken, DiFi Alliance Scholar

Mark Zuckerberg and I have at least two things in common. We are both passionate about helping people in developing nations gain access to financial infrastructure and technology that will help them save, spend, and transfer money with the same ease as those in the most developed countries. Further, we both strive to encourage all people of the world to join the global blockchain movement, driving mass adoption of cryptocurrencies.

Facebook announced its new blockchain stablecoin Libra on June 18th, promising to deliver financial services to the billions of people around the world that don’t have access to the banking and financial infrastructure many of us take for granted. By tapping into Facebook’s 2.7 billion monthly active users, Libra is in a unique position to accomplish much more than banking the unbanked - Libra may just become the catalyst for the crypto revolution, driving massive global consumer adoption of blockchain technology.

According to the World Bank, up to 1.7 billion people around the world are unbanked, which means that they don’t have an active bank account or the ability to obtain one. However, according to the same data, up to two-thirds of those people have a smartphone and access to the internet, which is all they need to take advantage of financial services built on blockchain technology. With its global reach and image, Facebook has the best chances out of any company to deliver blockchain finance solutions to the unbanked, exposing Libra’s users to the wider world of cryptocurrency at the same time, potentially causing an explosion of growth in the overall blockchain market.

However, Facebook’s venture into blockchain comes amid stagnating growth in key markets and concerns about future revenue. Libra offers Facebook a potentially huge new revenue driver, enabling the social media leader to further monetize its massive user base. Part of the monetary gain for Facebook and other partners in the Libra Association will come from revenues generated from the interest on Libra’s substantial reserves. Holder’s of Libra’s Investment Token, which will include Visa, Mastercard, PayPal, eBay, Uber, Vodafone, and other transnational corporate behemoths, will also have rights to share in this revenue. However, there is the also the potential to sell user data.

Given Facebook’s numerous privacy scandals, such as the Cambridge Analytica affair, execs have promised that Libra will not compromise user privacy. In his statement to the US Senate, Calibra Head David Marcus said that the Libra Association “can not, and will not, monetize data on the [Libra] blockchain.” Execs have gone to great lengths to build a moat between Facebook and Libra, emphasizing that Facebook will be “one organization among many” and “will have only one vote” - Facebook “will not be in a position to control the wholly independent organization.”

Marcus also said that “Calibra will not share customers’ account information or financial data with Facebook unless people agree to permit such sharing [emphasis mine],” which opens the door to burying a clause in the terms and conditions that might give Facebook access to all or part of that data, along with the right to monetize it.

Libra will be a permissioned blockchain, and only the master nodes (Facebook, Visa, Mastercard, et al) will have access to on-chain data. Facebook’s robust database of information on users should enable it to easily connect the dots between Calibra wallets and Facebook/Instagram/WhatsApp profiles, making this promise less powerful. Further, the mass of anonymized transaction data on Libra is valuable in and of itself, and may potentially be sold to banks or retail groups interested in measuring the financial preferences of large swaths of the population.

Libra is no doubt a hugely positive development for the industry, giving billions of people a foot in the door to the crypto world. However, as privacy becomes increasingly important, consumers around the world will also realize that they have other options besides Libra and will begin to explore other blockchains and infrastructure that provide the same type of service while helping maintain privacy and securely storing their user data without selling it to the highest bidder. Libra’s greatest accomplishment may yet be that it will become a gateway to for previously unbanked people to access increasingly better blockchain-based financial products.

Brady Luo, Co-founder and CEO of everiToken public chain,

True believer in global token economy based on blockchain, academic background in both engineering and finance, serial entrepreneur, multinational work experiences and multiculturalist.

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