What to expect?
- A rant like opinion on Facebook Libra’s change of philosophy
- 8 Tweets from David Marcus and our corresponding questions
- 8 counter-statements
- A look at why Facebook’s Libra can be a good thing
After operating in the stealth mode for 9 months, Facebook’s Libra project has updates for the public.
David Marcus, Head of Libra, has posted a series of tweets providing updates on Facebook’s Libra project.
There are 8 tweets in this Tweet update chain and we will refute each one of them separately. Here we go:
TWEET 1 of 8: Claiming that people and small businesses will benefit
Excited with the progress of @Libra_ in the last 9 months. I keep on thinking about all the people and small businesses that could benefit from the Libra Network already being operational – especially now during these times of unprecedented hardship. 1/8
Yes, we agree that Facebook’s Libra could open a brand new way of conducting commerce over the messenger and through its great outreach might bring banking facilities to those otherwise denied.
Small businesses are the biggest victims of data breaches. Breaches make it difficult for people to use their debit cards or credit cards at a small business (although they are not the perpetrators). Facebook is at the forefront of these data breaches, even getting away with $5 Billion fines. If such a data breach happens on Facebook’s Libra network – and impacts people and small businesses who may be relying on the Libra’s payment network – who will take the responsibility of such loss of trust and revenue?
If the past is any indication, Facebook has an unhealthy history of affairs with data breach and privacy eroding practices.
Question: Will Facebook’s Libra take full responsibility for declined sales if such decline happens after a breach on Facebook or Libra’s platform?
Tweet 2 of 8: What do these members stand to gain?
The Libra Association is now funded by its members (with less than 10% of the funding coming from Facebook), and has adapted its plans after engaging with key stakeholders globally. 2/8
It is a safe bet that the members who paid $10 Million dollars to be part of the Libra’s network are not doing it for charity or out of the goodness of their hearts. How are these members benefiting from participating in the network? Are they going to get access to the user information on the network for running the nodes as members?
Question: Doesn’t PAID membership to run the node make this more centralized than a decentralized project, as such, isn’t it detrimental to the crypto spirit?
Tweet 3 of 8: Individual currency based stable coins
Most notable evolutions are: a) the creation of single currency stablecoins, e.g. ≋USD, ≋EUR, ≋GBP, in addition to Libra Coin (≋LBR), which will now be a Move smart contract “stitching” together fixed nominal weights of underlying stablecoins. 3/8
If there is not a single currency on Facebook Libra’s project and if we have to deal with multiple currencies, how is the fluctuation in individual exchange variances be dealt with? If it is going to be the same as usual, why should anyone use Libra instead of the US Digital Dollar? Technically, can a company like Twitter or Skype or MS Teams introduce US Digital Dollar to be sent via messenger and dilute Libra’s use case?
Tweet 4 of 8: Comprehensive KYC with a known breacher?
b) a comprehensive network-level system around anti-money laundering (AML), Combatting the Financing of Terrorism (CFT), and sanctions enforcement. 4/8
We are assuming this means there will be an extensive KYC process. Who conducts this process? Do you want people to trust a company that has a history of breaches with user privacy? Would we want people to reveal even more sensitive data like social security numbers, passport details, etc., with a company, in our opinion, that trades privacy for profits?
Question: Can people trust Facebook’s Libra with sensitive personal information? Even if KYC is handled by a third-party, using Libra will give Facebook massive amounts of personal spending habit data – what happens to this data? How will it be used? Will it be monetized? If so, will users get any share of this monetized data? Will users permission be explicitly procured for the use of such data or will it be buried in a gigantic fine print?
Tweet 5 of 8: Deviating from original plan even before launching!
c) replacing the originally planned transition to a permissionless form of governance to a market-driven open and competitive network. 5/8
When I read market-driven – I am reading: whatever profits us.
I read competitive to mean – highest bids get hands on whatever we get from our naive users.
When I read open – I read advertisers/bidders get a backdoor view of all data.
Question: Is Facebook going to put a written statement listing out how they will hold themselves responsible if a future data or privacy breach happens on any of their platforms?
Tweet 6 of 8: What about privacy and data protections?
d) building stronger protections into the design of the Libra Reserve to protect consumers, even in the most adverse situations. 6/8
Protect consumers from who? Facebook? Will the user information on Libra platform be shared across other platforms owned by Facebook? If so, what happens when the data that migrates from Libra to other platforms – what type of protection will users be guaranteed against any data breaches on other platforms. Will the permission to ‘transact’ the data across multiple platforms be explicit or something that is hidden in 30,000 line fine print?
Question: Is there an insurance component for Libra users in the event of a data breach?
Tweet 7 of 8: Will participating organizations only get monetary benefit or more?
The other thing that changed considerably since we first announced the Libra project in June is how members of the Libra Association have stepped up in a big way. It’s been so rewarding to see this organization become operational and increase its independence. 7/8
If all the organizations that have left the Libra project earlier wish to come back, will they be allowed? If they will be, what changed? Except Facebook’s Libra accepting to play by the rules (that the project was supposed to overcome) – nothing really changed – as such – what is the justification of these companies to return to Libra network?
Question: Will the projects that participate in Libra network have access to users spending behavior data?
Tweet 8 of 8: This one is actually a good thing
We will collectively continue to work as hard as we can to enable people and businesses to send and receive money globally as easily as it is to send a text message and at a much lower cost – but for now – here’s Libra’s updated white paper: https://t.co/vWeFD1cGAi 8/8
Well, in the end, Facebook has an amazing global user base and can become the Trojan Horse that carries the US Digital Dollar to the world. If this happens, it could be a big blow to the Chinese Digital Yuan.
Question: Will the information between digital dollar and Facebook’s Libra bridge seamlessly to follow the money easily to avoid nefarious activities?
Here is why we wouldn’t trust Libra!
As they say, history may not repeat but it certainly rhymes, and Facebook has a history of privacy breach incidents that not only repeat, they repeat often and bigger than the previous one. They paid $5 Billion in fines and did we mention, no one ever went to jail for playing with people’s privacy.
This is one of the biggest concerns we have about Facebook entering the money space. As a financial services company – Facebook will have access to even more sensitive information and spending behavior. How will this data be used in advertising and in some form manipulating consumer behavior?
Our skepticism is not about Facebook’s ability to pull this off, we know they will, our skepticism is about ‘should they be in this space altogether.’
Here is why we think Facebook’s Libra is a good thing
World is echoing the ‘China distancing’ sentiment. While the countries are grappling with COVID crisis, China has moved forward with Digital Yuan (Central Bank Digital Currency) plans and is rolling out the digital currency in May 2020.
The US can use Facebook’s Libra as the medium to reach a much broader population with Digital Dollars.
Ultimately, Facebook’s Libra could become the US Digital Dollar’s Trojan Horse into the financial world of the unbanked and cement its place as ‘global reserve’ further.
In addition, acceptance of Facebook’s Libra could propel the Bitcoin and Cryptocurrency movement as people will start realizing that Facebook’s Libra is not truly decentralized. This could be the mass exposure we need for people to realize what Crypto is.
Thank you for reading and sharing this article. Stay safe and healthy!
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