Earlier this year, Facebook revealed a plan to release a new global cryptocurrency called Libra. While the coin is only going public in 2020, it’s garnered much anticipation from crypto-enthusiasts and even more scepticism from crypto-critics.
And although the coin shares a plethora of similarities with Bitcoin, it’s not here to replace the OG crypto. Here are five major differences between Libra and Bitcoin:
1. Libra is controlled by an association
Bitcoin was first envisioned and built by independent crypto developers. These developers are able to roughly direct the course of action for the coin but the final direction is set by participants within the network — this is all thanks to its decentralised system.
Libra, however, is owned and controlled by The Libra Association. The Libra Association is comprised of companies and organisations like Visa, Mastercard, Uber, Spotify and Vodafone, just to name a few.
In order to become a member of the Libra Association and have a single vote on validation consensus, companies needed to fork out roughly $10 million — in sharp comparison to Bitcoin’s next-to-nothing fee.
2. Libra is not completely decentralised
Bitcoin relies on an open-sourced and decentralised blockchain network — meaning the development, direction and resources are made available by various independent parties from all of the world.
All anyone who wants to become a Bitcoin miner, update the Bitcoin blockchain or act as a mode of consensus needs is access to the internet.
Libra, on the other hand, is not decentralised and although it also makes use of an open-source blockchain, the coin is validated and controlled by the Libra Association.
3. Libra relies on a validator structure
Bitcoin requires consensus to be reached through a Proof-of-Work structure — transactions are approved or rejected based on the ability of decentralised miners to solve increasingly complicated problems.
Libra makes use of a permissioned structure where, essentially, a network of validator nodes owned by members of the Libra association approve or reject a transaction. This means that all members of the association have equal authority over the validation process.
Members use validator nodes to vote on which transactions are accepted and which ones are denied — majority vote wins.
4. Libra is a ‘stable coin’
Bitcoin has often been called a volatile coin due to its unpredictable fluctuations in value. These fluctuations can be a result of the small market size, limited liquidity and almost non-existent regulation.
Libra, nevertheless, has been dubbed a ‘stable coin’ — this is because the crypto is pegged to a pool of international currencies (the Dollar, Pound, Euro, and Yen, the list goes on) and short-term government securities — securing it against a vast number of liquidities.
And notably, it is the responsibility of the Libra Association to manage these assets and ensure that the value of Libra remains consistent and, if necessary, offset price fluctuations in a foreign currency by adjusting asset compositions.
5. Libra is set to facilitate cheap and fast transactions
Bitcoin, the world’s first crypto, was created to act as a ‘store of value’ as well as a means to transfer funds on a global scale. Many Bitcoin carriers have used the coin as an investment in both technology and value.
Libra is Facebook’s chance to disrupt the current world financial system — and according to the whitepaper, their mission is to “enable a simple global currency and financial infrastructure that empowers billions of people” with fast, cheap and secure transactions, worldwide.
By Jenna Cook
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