By now, it is likely that you have heard of Facebook’s newly revealed cryptocurrency, Libra. It has raised a lot of questions. It has also captured international headlines for weeks.
In this blog post, we take a look at the branding of Libra. We explore how its branding relates to Bitcoin. However, the two entities are quite different in practice.
Libra has not gotten an overwhelmingly warm welcome. Many in the cryptocurrency and bitcoin circles are suspicious of it. Some feel that Facebook already has too much power due to the massive bank of data they have.
Many do not want to see that power extend into the world of currency. Even though Facebook owns Instagram, many people switched from Facebook to IG. This is because they have become tired of the stress and data issues of Facebook.
Most people interested in cryptocurrency have known that Facebook has been working on one. However, their reveal of Libra left many in the industry underwhelmed. Some feel that Libra is not really even a genuine cryptocurrency. They claim that it doesn’t offer any of the benefits of the Bitcoin brand.
So, What is Cryptocurrency?
Bitcoin is the first cryptocurrency. It’s also the most famous one in pop culture. It is a cryptocurrency because it uses end-to-end encryption to process transactions and transfer money. Transactions made through bitcoin are extraordinarily secure, irreversible, and recorded on the blockchain.
This technology is the backbone of Bitcoin. It acts as a digital ledger. Within Bitcoin, there is a constantly updating and uncompromisable record of all account balances. This means that no one can cheat the system.
The key features of the Bitcoin network are:
- High security
- Being almost impossible to manipulate
- It’s open to the world
- It’s decentralized
Anyone on earth can use Bitcoin to transmit money freely between places. Bank transfers between countries can be expensive and inconvenient. However, you can transmit currency using bitcoin in minutes.
A bank, government, or other authority does not manage Bitcoin. Its currency is scarce, cannot be artificially inflated, and cannot be controlled. Only 21 million bitcoin will ever exist, and there is no way to police or govern them.
Why Doesn’t Libra Hold Up?
In order to understand why people do not value Libra so far, it is important to understand why they do value Bitcoin.
The users of Bitcoin see value in a decentralized, global monetary system. Both in branding and functionality, this is what keeps people attached to Bitcoin.
Facebook’s Libra, on the other hand, does not offer any of these benefits. This is because Libra is not an open, stateless, decentralized currency system.
Libra is a Closed System
Bitcoin is an open and ungoverned system. Libra, on the other hand, will be closely managed. Facebook is partnering with other massive corporations to bring Libra to life. These include:
The founding members make up the Libra Association. This association will be responsible for processing transactions and maintaining its version of the blockchain. By the tentative 2020 launch of Libra, they hope to have more than 100 members managing nodes in the Libra Association.
Only 100 servers, or nodes, will supposedly maintain the entire global Libra cryptocurrency network in this scenario. Bitcoin, on the other hand, has over 10,000 global nodes verifying and broadcasting transactions with full nodes and mining nodes.
Anyone can operate these nodes without any kind of gatekeeping. This means that the nodes are decentralized. So if one is taken down or compromised, it does not affect the other 10,000+ nodes. This is part of what makes Bitcoin so secure and attractive.
Most People Cannot Participate
Anyone can operate a full or mining bitcoin node. That is not the case for Libra. Each founding member had to commit a minimum of $10 million to join the network. This means that only the incredibly wealthy can truly participate.
So, why would corporations and individuals pay to be members of Libra and run nodes? They do it to take advantage of benefits like:
- Control over a new monetary system
- Transaction rewards and dividends from the Libra Reserve
- Government-backed assets
Some have said that the Libra Association is roughly the equivalent of a corporation-run central bank, similar to the Federal Reserve. Government-issued assets will even back Libra.
Bitcoin Belongs To Itself
A coalition of corporations and the government back Libra. However, Bitcoin belongs only to itself and is backed by no state or government assets. Many have argued that this makes bitcoin valueless, but those who are pro-bitcoin say that this statelessness is exactly what makes bitcoin so valuable.
Government-issued currency is subject to issuance and inflation and centralized control. Bitcoin, on the other hand, is finite. It is also decentralized so it cannot be manipulated on a mass scale.
What Does This Mean For Cryptocurrency Users?
Bitcoin is decentralized. This means that no central authority can control monetary policy, charge you fees, police your activity, or freeze your accounts. Bitcoin is a truly open system, meaning that no one can stop you from transacting, decide how you interact with it, or take your coins.
Libra is a centralized network that gives others control over your funds. This means that it is not a cryptocurrency, but another banking system. They will be able to blacklist users and have access to all of your financial information.
Considering Facebook’s history of privacy issues and mishandling user data, many are uncomfortable with the idea of allowing them access to their financial data as well.
The Power of Branding
Ultimately, some feel that Libra has modeled its branding after Bitcoin’s while offering none of its actual benefits. However, this might be enough to push them to the top and compete with the actual institution of banking.
Bitcoin launched in 2009 with the goal of being a monetary system that exists outside of government and corporate control, is global, and allows anyone to participate. Corporations and the government back and control Libra, rather than individuals. However, they are claiming to offer the same thing as Bitcoin.
Libra may fall victim to regulators before it launches. But, if it does not, it will be a true test of the power of clever branding. Libra does not offer what Bitcoin does. But, can they be successful by claiming to do so in their brand messaging?
Only time will tell.
What do you think of Libra? Would you want to use it? Let us know below….