FACEBOOK’S LIBRA HOW DOES IT WORK


This brings us to the actual breakdown of how libra actually works. We start with “Move” which is a new programming language, built for implementing custom transaction logic and “smart contracts” on the Libra Blockchain. The eventual goal of Libra is to one day serve billions of people, and because of this Move is designed with safety and security as the highest priorities. In an effort to securely store transactions, data on the Libra Blockchain will protected by Merkle trees, which is a data structure used by other blockchains that enables the detection of any changes to existing data. Where this is different from previous blockchains, is older models view the blockchain as a collection of blocks of transactions, where the Libra Blockchain is a single data structure that records the history of transactions and states over time. This implementation simplifies the work of applications accessing the blockchain, allowing them to read any data from any point in time and verify the integrity of that data using a unified framework. There is much more than this when it comes to the technical aspects, and there are links in the program description if you want to do a further dive into how some of the actual code will fucntion. However right now we will move onto how the actually systems of exchange will work. “Libra is designed to be a stable digital cryptocurrency that will be fully backed by a reserve of real assets — the Libra Reserve — and supported by a competitive network of exchanges buying and selling Libra.” – Libra white paper This is a very important part of the whole process surrounding Libra. I am sure even those of you watching this video who are on the younger side, would have heard of the gold standard, or even hear the term used as an expression in the past. In the modern era, no western governments actual have gold reserves to back their fiat money supply, as they once did. What Libra is looking to do is to bring stability and trust to their currency, the new backing or gold standard if you like, will be fiat currencies from across the world. The assets behind Libra are a major difference between it and many existing digital assets. If you think of Bitcoin, there is nothing actually backing Bitcoin, this is one of the reasons that people have said before that bitcoin, and many other cryptocurrencies are inherently worthless, and the only true “value” is in the technology itself. Libra, in some sense, is in some ways what people have come to call a stablecoin. Which is just a way of saying that there is technically a backing from a fiat currency, and you should be able to withdraw or exchange fiat currency for Libra, and there should be very little fluctuation in the relative cost between the two commodities. Now, this is a very good thing in a lot of ways, as one of the main roadblocks in Bitcoin, and other cryptocurrencies becoming a payment method that is widely accepted is because there are so many huge swings in the value of the asset. Consider for a moment you were running a convenience store, and you were selling coke cans for 1 dollar a piece, I know this is not what coke costs now, but run with me on this for a moment. If you are selling your cans of coke for 1 dollar, and your customers are paying with Bitcoin, and imagine there is a market swing of 10% in the value of bitcoin from one day to the next. Well, if you sold a thousand cans of coke in a single day, and the following day bitcoin went down in value by 10%, then you have just lost $100, which may be all of your profits for that day. By comparison, imagine if you sold all the same cans of coke for US dollars instead of bitcoin, and there was a huge swing in the value of the dollar. Well, a big shift in the value of a fiat currency may be between 1-2% of the value of the currency. You can see right away how much easier this would be for the convenience store owner to know day to day what they are making from each transaction. And this folks, is a level of stability that Libra seeks to bring into the marketplace, using their digital asset. Some food for thought, if billions of dollars goes into this reserve bank, especially as Libra continues to grow, what will the future be, just of the Libra reserve bank? In this part of the video, I wanted to talk a lot about the people who will be partnering with Libra, and helping bring this project to life. Unfortunately, this is the third time I have had to reshoot this segment as the partners involved continue to pull out of the project. Because of that I am going to focus on what the partners will be expected to do, no matter who they end up being. To bring the project to fruition, the Libra Blockchain and Libra Reserve are building a governing entity that is made up of diverse and independent members. This governing entity is the Libra Association, which is presented as an independent, not-for-profit membership organization, headquartered in Geneva, Switzerland. According to Libra, the association strives to be a neutral, international institution. The association is designed to facilitate the operation of the Libra Blockchain; to coordinate the agreement among its stakeholders — the network’s validator nodes — in their pursuit to promote, develop, and expand the network, and to manage the reserve. The association is set to be governed by the Libra Association Council, which is comprised of one representative per validator node. Working together, they are set to make decisions on the governance of the network and reserve. When the project launches this group will most likely consist of the Founding Members: businesses, nonprofit and multilateral organizations, and academic institutions from around the world. All decisions are brought to the council, and major policy or technical decisions require the consent of two-thirds of the votes, the same supermajority of the network required in the BFT consensus protocol. By the time of launch Libra hopes to have 100 members of the Libra association, all running a respective node. So, who are these companies? Well, to give you an idea of the names in question, the last time I had to reshoot this segment, in one week, Visa, Mastercard and Paypal pulled out of the project, these are the heavy hitters that are getting involved. And this has had a mixed reaction, as some people see some good and bad potentially coming from it. The good thing is, in some sense having 100 nodes does give some sense of decentralization. On the other hand, there will now be a private currency, and the 100 or some of the 100 most powerful companies across the globe will be running it.

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