Is Facebook’s “Libra” The Dollar’s Killer App?
Is Facebook’s “Libra” The Dollar’s Killer App? Authored by Jeffrey Tucker via The American Institute for Economic Research, via ZeroHedge
Facebook changed the way we communicate, interact, and gather information. You don’t have to love all the results. But the reality of the shift in our lives is undeniable.
Will Facebook’s new initiative to create a cryptocurrency do the same for money and payment systems? Most likely no, but the creation of its Libra will take a step in the right direction, away from dollar monopolization and mediated payment systems toward genuine choice in currency.
Money Can Be Innovated
The greatest single contribution of Bitcoin and cryptocurrency generally is that it taught the world that money can be subject to market-based innovation. It can be more than what we knew. Most strikingly, crypto wraps together the medium of exchange and the means of payment, making it possible effectively to use cash, peer-to-peer, all over the world, without having to tap the services of a third-party supplier.
That’s completely new. Two decades ago, no one even believed such a thing was possible.
It had been so long since there had been any real innovation in monetary technology that it was tempting to believe it couldn’t happen. Forever, it was believed, money would be codified by government, printed in physical form by a government bureaucracy, and made digital by banks and credit card companies that bear the bulk of the counterparty risk. With that system came high costs, long waits for final settlement, and many layers of permission.
What Bitcoin did – and it was so astonishing that it took many years before the experts could believe their eyes, and, even now, the ranks of the incredulous are legion – was bypass this entire settled infrastructure. It put in its place a distributed ledger to record monetary ownership rights and changes among them. It used cryptography for security. It allowed unmediated access. It created a protocol to regulate the creation of new tokens. It rewarded nodes that hosted the system and confirmed transactions with hot-off-the-press tokens.
In a wild burst of brilliance, it solved most but not all of the problems associated with the great dream of a new cash for the internet, one that is fully denationalized: operating outside states and borders.
One problem for Bitcoin that it could not solve was the regulatory issue. States have worked for half a decade to force it to behave like the old-style money it was meant to replace. Other remaining problems (user interfaces, wild fluctuations in valuation, and scalability) are known and fixable in the fullness of time, especially now with such robust competition in coins.
Meanwhile, the innovation of the distributed ledger itself was there for the world to see, copy, and use. Blockchain tech has built a large industry the world over. Cryptocurrency itself has a market cap of $265 billion today, and Bitcoin Core alone supports 400,000 transactions per day. That’s still small compared with mainstream payment systems, but the trend forward is inexorable.