đź’Ż ONE HUNDREEEED!!Â
What a ride!
We'd like to take a brief moment to thank all of you who've been reading since the early days, and to welcome the new readers to this new, crazy, interesting world.
Your constant encouragement and words of appreciation, as well as the feedback and criticism, is what has kept us going for this long - together with the crazy amount of amazing new software being created all around the world with a singular mission: to decentralize all the things, and give the power back to the people.
And, in a remarkable alignment of stars and planets, it could not have happened at a more momentous time in the history of this industry: Token Economy turned 2 last week (we could say we skipped 4 weeks on purpose to have this happen..) and Uplung #4 is coming up this week!
Just kidding. Obviously we are referring to Facebook's unveiling its plans for the Libra blockchain, its native crypto asset Libra, its custodial wallet and subsidiary Calibra, a programming language (Move), and its governing body the Libra Association.
Barely 18 months ago, in his usual annual challenge post, Zuck
announced that he was going to spend the year studying decentralized technologies and crypto currencies. Well, it turned out he was not messing around.
There have been
so. many. hot. takes this week that it's frankly challenging to say something that has not been said already.
But we'll try to highlight a few things that we believe are important.
- let that sink in: one of the largest corporations in the world is going all in on "decentralized" technology and "crypto" currencies (deliberately using " " as both terms are highly debatable by the purists in the room and ourselves, but that’s not the focus of this post). Regardless of whether their plan will eventually materialize, this will go down as the moment in time the world, and the legacy institutions and corporations in particular, realize the genie is officially out of the bottle. The impact on general awareness will be unprecedented.
- Also, the scale of their ambition is truly mind-boggling: in one go, Facebook has outlined a plan for a global, digital central bank (the Libra blockchain with its native currency), a global digital bank (Calibra) and a smart contract language for developers to build financial applications on it. If that does not send shivers down the spine, keep reading...Â
- Make no mistake though, the killer feature is access to a captive audience of 2.4B people from day one. That's by far the world's largest “digital nation”. Going from 2.4B to 7B, or however many we are these days, was not going to change the game for Facebook, particularly with their current state of affairs, but wiring that nation up with its native financial infrastructure and currency surely can. And 15 years in, post Cambridge Analytica and other privacy debacles, Facebook had no choice but to completely change the game to stay relevant for the next 15+ years.
- As nation-states continue to lose grips with the internet economy, the dystopian idea of a sovereign, corporate-led, digital nation is taking shape, and it's freaking scary. Not just as a citizen, but presumably for governments, regulators, central banks and the likes. And it's certainly not going to go down easily with those guys, judging by the
immediate reactions it
generated. As of today, it seems pretty unrealistic that the SEC or the EU finance authorities would enable Calibra or other “resellers” to provide fiat-to-libra onboarding services, as that would mean tolerating the issuance of a competing currency to their magic paper monies potentially culminating in a Libra-denominated petrol future version of this world.
The SEC probably can’t prevent the Libra Association from building the infrastructure and creating the chain - but they sure as hell can make sure that no-one in the west is able to buy any for fiat. That would essentially cripple (how has noone yet used this term to talk about Ripple yet) the effort from day 1.
BUT there's now a strong, powerful and cohesive lobbying group in place, the 27 Founding Members: in David Hoffman’s
words “The appending of these logos is Libra’s statement to all governmental bodies: “You have to fight all of us”, “We’re too big to stop”, and, the most strategic, “Forget anti-trust, because no single company operates Libra”.Â
It’s interesting that the Bank of England for example seems to have
taken an unexpectedly supportive stance towards it, a sign that others might cave in too? It will be fascinating to watch this battle unfold and see who’ll come out strongest.
Perhaps none of them?
We imagine Facebook has surely spent months lobbying regulators and finding potential legal avenues to make sure that happens - we’re just extremely curious to see exactly how this will work.
- Another interesting aspect to watch unfold is the composition of the Swiss Association. It's undoubtedly very US centric at the moment, and one can relatively easily see the behind-the-scenes power lines connecting each party. All that obviously stands at odds with the globally inclusive vision and messaging of "banking the unbanked" that permeates the Libra branding and materials. Whether their plans to decentralize (and democratize) the governance are credible or realistic is yet very much unclear.
- One of the most interesting presences in the Association is clearly the Visa / MasterCard duo. At a first glance it could look like a “keep your enemies closer” situation, as one might imagine that if something like this started to take very wide adoption, then there should be a substantial impact on online (and why not also physical) card payments.
But the other scenario could be Visa / MC getting a seat at the table so that they can in the future leverage the massive rails (technology, distribution, branding, contracts, and so on) they have already built and start creating financial products on top of the Libra platform and currency.
There’s probably enough for a movie in here.
- From a more technical perspective, Jill's
take shows how they decided not to reinvent the wheel, pragmatically cherry picking from various approaches and designs at various degrees of the decentralization spectrum. And presumably believing that semi-decentralization will be just fine for more people and use cases. A case of last mover advantage? Only time will tell.
- The economics are also fascinating, and the reserve
paper is one we particularly recommend reading. Two takeaways from it: (i) Libra won't be pegged to the USD, nor to any other currency for that matter. It will be a truly global currency that inherits monetary policies from and smooths out the volatility of any single state currency or economy. A signal of an inevitable de-dollarization? (ii) Libra will be fully backed, so not fractional at the settlement layer. Tyler Cowen
raises some very interesting questions, particularly on whether fractional banking might emerge at higher layers. Christian Catalini (one of the 53 authors of the white paper)
responded, effectively non excluding the possibility of it.
- Zooming out a bit more, Libra completely blurs the lines between finance and tech once and for all. Pretty soon we'll refer to "Fintech" as just "Finance", in the same was as "ecommerce" is becoming just "commerce". Banks and financial institutions more generally won't just want to be on- and off- ramps to Libra. They will want to build stuff on it, or they'll be forced to in order to stay relevant.
- Lastly, a closing thought on who all this will be good or bad for: undoubtedly great for truly decentralized, censorship resistant store of value and smart contract platforms. Great for privacy preserving tech. Potentially not so great for other semi-decentralized platforms. Phenomenal for general awareness, particularly amongst the developer community.
Enough with Libra already, off to a bunch of cool new products that actually got released this past week.