1. Many large, established firms involved, before it even gets off the ground. How many successful innovations can you name that began with that organizational structure?
2. No clarity on what is the consumer’s pain point. For payments, cash still works well. Credit cards are so efficient these days that for many transactions they have replaced cash. And payment apps on phones are quite popular, particularly outside the U.S.
3. An apparent fascination with the solution. There is a lot of technical jargon floating around, which creates some buzz within a niche of software engineers. But if you think that they are a representative market segment, then you probably predicted that Unix would out-sell Windows in the market for home computers.
My impression is that the Libra project simply assumes that if you put together a reliable new digital currency, then the world will beat a path to your door. But nobody needs a reliable new digital currency per se. Show me a class of transactions that I want to undertake for which a reliable new digital currency is likely to be significantly more efficient than the next best alternative.
> How many successful innovations can you name that began with that organizational structure?
1. WiFi, and more recently 2. “Let’s Encrypt” which is a consortium to provide free TLS Certificates bypassing the rent-seeking that had set in amongst Certificate Authorities.
Generally, any innovation based on an engineering standard that requires strong marketing/branding to gain traction.
I have not looked into Libra so have no opinion but a Facebook led consortium does not raise red flags for me. From a market awareness/buzz perspective, it has nailed it. If the value proposition is there and the technology is on par with alternatives, that organizational structure may ensure success.
I read through the Wikipedia page for Libra. So I’ll walk back my response assuming that Kling is emphasizing “before it even gets off the ground” since the technology/standard is a work in progress.
WiFi and Let’s Encrypt were much narrower in scope.
My impression is that the Libra value proposition is pretty clear; a stable global currency that is independent of individual nation-states, banks, and payment providers.
> Show me a class of transactions that I want to undertake for which a reliable new digital currency is likely to be significantly more efficient than the next best alternative.
Transactions with/within developing nation-states with questionable currency and financial institutions. Effectively, global Alipay without foreign exchange fees and no vendor (Alibaba) risk and less regulatory (China) risk.
There’s always “Zelle”. A bunch of big banks get together and decide they don’t want PayPal and the new-ish payment sites and apps to eat their lunch, so they cooperate on offering their customers the ability to send and receive small-ish amount of money, mostly instantaneously, and mostly without fees.
It’s not about the ‘innovation’ – we’re just talking about reciprocal finance contracts and using the existing payment systems and secure digital finance ledger-keeping techniques.
In this case, having a lot a large, established firms from the very start is the point. It has to obvious to all potential users right away that the network starts right off with the potential to reach nearly all the institutions servicing the people and entities with whom they want to transact. And it helps in terms of establishing a focal point that there is no other similar and comparably-scaled alternative network that is the first think everyone else would think of using. That’s what puts the current in currency – the Aumann Common Knowledge that “everybody knows that everybody knows” that the token is universally accepted and perceived as extremely liquid.
Whatever else one thinks of the initiative, it would have been foolish for Facebook to not make it seem like they had that kind of institutional support and backing.
Agreed, kudos to Facebook. I’m now fascinated to see how this plays out.
I don’t think digital currencies have reached the “transaction” stage of their lifecycle yet. Most people hold them because they believe they will increase in value. I think this explains most of the impetus behind new currencies – if your new offering gets some traction among digital currency investors, you stand to make a ton of money.
If you just wanted to transact, you would piggy-back onto bitcoin. But there is no money in that.
If you just want to transact, you can already use PayPal; credit cards; or the existing banking, ForEx, and wire transfer systems around the world. No need to get all crypto about it.
Or if you want to go crypto and don’t particularly care about privacy or anonymity (i.e., breaking the law, or being a dissident from the reigning orthodoxy) then there’s CoinBase and a bunch of other places.
Libra isn’t even pretending to offer that, so that’s not a selling point or what it hopes will attract users so that Facebook can profit off that sweet, sweet surveillance capitalism. And the best kind of surveillance capitalism, where you actually get to track how much wealth people have, correlated with identity and demographic details, and all the transactions! Advertisers (i.e., the real customers) must be salivating.
The selling points are that people can expect that the reach of the Libra network will be immediately as vast as FaceBook’s, and that transaction costs will be lower than the stubbornly high premiums of questionable justifiability charged by the surprisingly small oligopoly which now dominate certain types of transfers.
Around when the original tech boom was getting started, I once read an article listing out some of the unaccountably high surplus premiums for certain kinds of services which constituted big juicy arbitrage opportunities and were thus ‘ripe’ for ‘disruption’ by anyone who could invent a bomb powerful enough to bust through the barriers to entry, and get to those big juicy apples which had, until then, for one reason or another, been put out of reach to ordinary entrepreneurial competition.
For example, there were commissions charged by stock brokers. Today, everyone is used to a world in which it has been possible to trade stocks worth lots of money, instantly online, and for just a few bucks, for 20 years or so. Once upon a time, however, it was slow and quite pricey!
There were the ‘sharing economy’ legal impediments to renting out your bedrooms or gypsy cabbing, and those were disrupted by companies like Uber and AirBnB willing to break the law and ask for acquiescence of the new normal later.
Then there were things like realtor’s fees (mostly still around), and of course high transaction fees (and bizarre delays in a digital age) for money wires and interchange from the great credit card duopoly of MasterCard and Visa.
Those latter fees have gotten a tiny bit better in the last two decades, but somewhat surprisingly, not much. Apparently it just takes the heaviest of heavy-hitters to do it. Even an entity as big and influential as Wal-Mart wasn’t able to become an ‘industrial bank’ and abandoned that original effort in 2007. But Facebook (and it’s major institutional ‘Friends’) might just be big enough to breach the barrier.
Doing know your customer rules are cheaper with AppleID.
Connect AppleID to biometrics then your credit rating is honest and prequalifies you for trading.
Bitcoin is a cryptocurrency. Libra is essentially a demand deposit in the Bank of Facebook. I believe Facebook is using cryptocurrency jargon to confuse the two ideas.
I’m not sure that is true. The short/succinct Currency section of Libra Wikipedia page ends with the following sentence:
> In contrast to cryptocurrencies such as bitcoin which use permissionless blockchains, Libra is not decentralized, relying on trust in the Libra Association as “a de facto central bank”.
My quick reading of this section makes think the key purpose of cryptocurrency/blockchain technology is to enable electronic fund transfers (both domestic and international) between individual members of the Libra Association without the need of an international fund transfer intermediary like SWIFT.
Your skepticism/cynicism certainly doesn’t hold well for the Facebook brand as the leader of this association. For Libra to work, it really depends on an association of large multi-national corporations that is insensitive to failure of one or more members.
Something like that. Libra looks like the old traveler’s check model – make an interest-free loan to the issuer in return for some convenience. In the Olden Tymes, traveler’s checks would trade at a premium to currency due to the counterfeit and provenance issues associated with cash in foreign parts.
Currency is cumbersome. I don’t carry it anymore. Let alone coins…in circumstances where I have to pay with currency and receive some coins in return, I just leave the coins on the counter.
With the new currency you never know how much bearer cash you have, the smart phone handles that, including making change. You will be completely unaware that you just spent digicash.
“Show me a class of transactions that I want to undertake for which a reliable new digital currency is likely to be significantly more efficient than the next best alternative.”
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Automated portfolio adjustment on a run time basis. This cannot be done if we have to call the central bank ledger service for every trade. Then we have micro pricing of content coming to the web, that does not work if we have to call the central bank ledger for each trade. Then we have compliance costs associated with the central bank ledger. Compliance costs can be spread over many trades if we skip call to central bank ledger for each trade.
Skepticism is probably correct, but as for point 1), the fact that lots of established firms’ names are associated with Libra does not mean they will have any particular role in it. They just ponied up some minor money to be on the inside of what Facebook is up to.
Well, new innovations don’t occur without some ideas that don’t work in the marketplace. And sure there loads of red flags with Libra that it is not wise to be an early adapter especially with one’s retirement savings.
However, it does appear Cyptocurrency have a place as Bitcoin has made 8 years and does not
1) There are lot libertarian investors in the world that love the idea of currency not produced by the government.
2) It is alternative along with gold for investors that see their home currency diminishing in value.
2) That is a lot of value for, say, Chinese and Russia investors, to have significant Cyptocurrency asset to have ‘get out Dodge’ money if they need to escape their home country. Call this the ‘Safety Deposit Box with $3M’ scene from Casino reality.
Unix does outsell Windows: Android is a wrapper around Linux, and iOS is based on the BSD kernel. I admit this is probably not what you meant.
Anyway the consumer pain Libra is targeting is hard for well-off Westerners to see because we don’t experience it. We have bank accounts. We can move money around easily. We don’t often need to bother with cash. Our local currencies are stable. If zero of those things were true for you, it would be easier to see the appeal.
This comment should not be interpreted as an endorsement of Libra.