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On 18th June, 2019 Libra Association introduced it’s plans to develop Libra as global [crypto] currency. Since then everyone rushed to write about and many spread misinformation — including some content trying to shed a bad light on Libra initiative.

In addition to that confusing [mis]information, US Senate Committee on Banking scheduled a hearing on Libra. Several members of US House of Representatives requested a moratorium any further development of Libra.

I am big fan of Libra — based on facts and the value of Libra’s vision.

I can understand reasons for FUD but Libra is the best thing that has happened to Blockchain and cryptocurrency.

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I’ll write more to do my part to see Libra come to life. To begin with, here are some basic facts about Libra:

1. Libra is [good] Cryptocurrency

Libra is a cryptocurrency and is similar to Bitcoin from that perspective. However, it is not the same as Bitcoin because Bitcoin is not pegged to any fiat currency. On the other hand, Libra tries to peg to real currencies — not just one but to a basket of currencies (which is very hard). In other words, Libra keeps all the goodness of Bitcoin while staying compliant and making it lot more usable (by pegging to fiat currencies).

2. Libra will be limited to currency use-cases

It gets confusing when Libra talks about smart contracts but it is obvious that Libra is being built to be a cryptocurrency and will remain so. The smart contracts that Libra refers will be smart contracts that operate on cryptocurrency — unlike Ethereum which is developed to run broad smart contract use-cases including non-financial Blockchain applications.

3. Libra is [almost] a stable coin

There are two extremes in cryptocurrencies — when it comes to their volatility against real fiat currencies.

One extreme is like Bitcoin that has no real pegging or correlation to fiat currencies. For that reason, the value of Bitcoin [in relation to a currency like USD] has high volatility — which makes it unusable for your real-world spending.

The other extreme is a stable coin where the coin value is always pegged to real fiat currency like US Dollar. This is highly valuable because the value of stable coin is not volatile against real currency — which makes it far more usable for real-world transactions.

Libra aims to minimize volatility of Libra value against real currencies (such as USD, CHF, EUR etc.). Removing volatility is impractical — that is why, Libra chose to minimize volatility instead if removing it. I admire the team for carefully positioning themselves without promising a stable coin. This kind of pragmatism is what makes me think they will be super successful.

4. Libra is led by Facebook, but not controlled by Facebook

Too many people wrote about “Facebook Libra” and some of them demonized Facebook for trying to control privacy, data etc etc. but if you carefully understand the Architecture of Libra Blockchain and composition of the Libra Association — two things will be obvious:

a. Libra will truly be controlled by Libra Association. Facebook may or may not like this but they are forced to structure it this way because making a coin near-stable (i.e. non-volatile against real currencies) requires a coordinated effort and costs a lot of money. Just a reminder — it takes Central / Federal Reserve Banks to achieve this kind of stability.

b. Libra (and Facebook) needs association members and more of them to make it happen because adoption of the coin is critical to its success.

Libra depends on its partners for adoption

5. Libra nodes are permissioned but anyone can participate

This is a bit tricky one but is fairly understandable.

In public Blockchain networks, anyone can run nodes and validate transactions. That will lead to a lot of nodes. A lot of nodes, in turn, will lead to (a) compute-intensive consensus algorithms and (b) hard to scale Blockchains. Ethereum is the most popular public Blockchain and it is experiencing both of these problems now.

In a permissioned network, only authorized parties can run nodes in the network and validate transactions. “Only Permissioned” means less nodes, less intensive consensus algorithms and scalable Blockchains.

If I were to do it, I would have done exactly this way.

In fact, I wanted to run Hyperledger in a permissioned network to solve specific use-cases. Remember — ‘permissioned’ only means you cannot run a node that participates Libra network but you can always program your smart contracts on top of their nodes — Libra Association intends to open up the ability for you to program on top of Libra with Move language.

I’ll write more on technical and business aspects of Libra. Stay tuned…

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Libra 101: Five Basic Facts was originally published in Cryptocurrency Hub on Medium, where people are continuing the conversation by highlighting and responding to this story.