David Gerard - Libra Shrugged: How Facebook Tried to Take Over the Money

Libra Shrugged

Also by David Gerard

Attack of the 50 Foot Blockchain: Bitcoin, Blockchain, Ethereum and Smart Contracts

Libra Shrugged

How Facebook Tried
to Take Over
the Money

David Gerard

Copyright 2020 David Gerard. All rights reserved. No part of this book may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information storage and retrieval system without the written permission of the author, except where permitted by law.

Commercial trademarks are named and depicted in this book for nominative use for criticism, reporting and commentary in the public interest, under 15 U.S.C. 1125(c)(3) in the United States and similar laws elsewhere. This usage is not intended to indicate endorsement by the trademark holders.

First edition, November 2020

ISBN: 9798693053977 (print)

Book site: www.davidgerard.co.uk/blockchain/libra/

Contact the author:

Art and design: Alli Kirkham www.punkpuns.com/author

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Contents

Introduction: Taking over the money

Facebook was the biggest social network in history. A stupendous, world-shaping success, with around two billion individual users across Facebook, Instagram and WhatsApp.

Facebook and Google overwhelmingly dominated Internet advertising. Facebook made $50 billion from advertising in 2018 $25 on average for each user, and $112 per North American user.

But no platform is forever. And governments were giving Facebook trouble over personal data abuses, election rigging and fake news.

A spending spree in the 2010s hadnt helped. Facebook bought Instagram in 2012 for $1 billion, Oculus VR in 2014 for $2 billion, and WhatsApp in 2014 for $19 billion, but these werent paying off the way Facebook needed them to. Facebook needed an out.

In 2017, Morgan Beller from Facebooks corporate development team had an idea: Facebook could diversify into finance with something called blockchain. She sent the idea upwards.

Mark Zuckerberg, Facebooks founder and CEO, looked at Bellers blockchain idea, and wondered: what if Facebook started its own private world currency? Facebook could have so much power that governments couldnt annoy them any more. It would be the Silicon Valley dream.

Facebook announced Libra in June 2019. Libra would be a new global currency and payment system. It would flow instantly around the world by phone. It could even provide financial inclusion for billions: banking the unbanked. All this, just by using a blockchain.

The details were vague, incomplete and contradictory. The currency would be backed by a reserve but at some point the Libra coins would become completely decentralised and out of anyones control. Libra would somehow bank the unbanked but there was no plan for how this would work. Two billion users meant the reserve would be large enough to affect whole countries financial systems, and knock out small currencies entirely but nobody involved seemed to have noticed.

But Libra would also make Facebook too big to control and lead the way for Facebooks Silicon Valley fellows to swing the power of their money as they pleased. Libra would be impossible to regulate; Facebook and their friends could work around any single countrys rules.

And Facebook would become the digital identity provider to the world. If you wanted to use money at all, youd have to go through Facebook.

Facebooks plan would also happen to break economies worldwide. Even the US dollar could be shaken. But, trashing entire economies would be a small price for someone else to pay.

Governments looked at Libra, and they saw another 2008 financial crisis in the making. European governments responded within minutes, America within hours, telling Facebook that this couldnt be allowed to happen.

Libra was as incompetent as it was arrogant and the world stopped it in its tracks.

When Silicon Valley says disruption, this means they dont understand what theyre doing, dont care to understand, and have only contempt for anyone who objects. Move fast and break things, as Facebook used to put it.

This time, the governments of the world said no.

But how did Libra fail so hard? How did Facebook spend two years working on Libra, to then put forward such a bizarre and ill-considered plan that left every financial regulator who saw it reeling in horror?

What was Facebook thinking with Libra? And what happens when another company tries the same trick?

Or when Facebook wont take no for an answer and releases the cut-down version that theyre already calling Libra 2.0?

Chapter 1:
A users guide to Libra

Facebook wants to do its own payment system, called Libra with its own currency! What does this mean for you? Whats the fabulous future that Facebook has planned for you?

None of this exists yet and it might never exist. In fact, this is the severely cut-down version of what Facebook really wanted to do. But if everything does all work out as Facebook has described itll work a bit like this.

Whats a Libra? Whats it worth?

A Libra is a currency unit in the Libra system. Like dollars, or pounds, or euros. Its symbol is three wavy lines.

The exchange rate to your local currency isnt quite fixed its set to the average of a basket of various other currencies.

If youre buying something where the price isnt listed in Libras, what you pay will go up and down from day to day welcome to the currency markets! Get used to doing quick calculations whenever you want to buy something.

Or just ignore the Libras, and use your local currency in the Libra system like you would in PayPal.

How do I use Libra?

You have a Libra wallet an app on your phone that lets you use your money probably from Novi (formerly called Calibra), which is Facebook. If you want to use your local currency (dollars, pounds, euros), itll work a lot like PayPal you have money in an account on Novi, and you can send money to other Libra users.

If you want to use the Libra currency, you can buy Libras with cash, or sell them for cash. The price will depend on the value of the Libra basket of currencies that day. Youll need to have your government identification on file with Novi.

You can send money or Libras to anyone with a Libra wallet Novi or not anywhere in the world.

You can buy things with Libras if theyre for sale with a price in Libras.

What about my personal information? This is pretty private stuff.

Novi says that it wont share your data with the main Facebook organisation except in as-yet-undefined circumstances.

Kevin Weil, vice president of product for Novi, says: Your financial data will never be used to target ads on Facebook.

You can definitely trust Facebook on this firm promise! And never mind all the times Facebook broke privacy promises previously, including their 2019 Federal Trade Commission fine and settlement for breaking their previous 2011 settlement over privacy issues.

Libra looks very like Facebook building a massive data-miner on top of the entire system of consumer commerce but they told US Congress that this definitely wont happen with Novi, at least. Itll be fine.

Am I stuck with Facebook and Novi?

There will apparently be other Libra wallet providers though as of late 2020, no-one else has announced any plans. Facebook apps, such as Messenger and WhatsApp, will only be able to use Novi but youll be able to send Libras (or dollars or pounds or euros on Libra) to and from the other providers, if any ever come along.

Novi promises full data portability so you can move all your Libra money and data to a new provider.