On Tuesday (June 18), Facebook announced that its subsidiary Calibra is building “a connected wallet for a connected world” (this wallet is also called Calibra). Calibra is designed for Libra, Facebook’s new cryptocurrency (a stablecoin). This article aims to answer all the questions that you may have about Libra and Calibra.
Q: What is Libra?
Libra is a price-stable cryptocurrency built on top of the Libra Blockchain. It is fully collateralized by the Libra Reserve, which is a basket of cash reserves (corresponding to several fiat currencies) and low-volatility cash-equivalent assets.
Libra is available to anyone who has a basic smartphone and internet connectivity, and the aim is to make it be available all over the world.
Libra will be listed “on multiple regulated electronic exchanges throughout the world,” which will “offer both web portals and mobile apps for users to buy and sell Libra.” There are also ongoing talks with “principal cryptocurrency trading firms and top banking institutions as authorized resellers to allow people the opportunity to exchange their local currencies for Libra as easily as possible. “
Q: What is the Libra Blockchain?
The Libra Blockchain is “a decentralized, programmable database designed to support a low-volatility cryptocurrency that will have the ability to serve as an efficient medium of exchange for billions of people around the world.” It is implemented by the Libra protocol.
Initially, this will be a permissioned blockchain (which uses the Byzantine Fault Tolerant consensus algorithm).
Q: What is the Libra Association?
The Libra Association is an independent not-for-profit membership organization headquartered in Geneva, Switzerland. Its role is “to evolve and scale the network and reserve and leads a social impact grant-making program that supports financial inclusion efforts worldwide.”
Its members are “a group of diverse organizations from around the world.” The Founding Members “each run one of the validator nodes that form the network that operates the Libra Blockchain.” One of the goals of the Libra Association is “to work with the community to research and implement the transition to a permissionless network over time.”
Here are some of the Founding Members:
- Payments: Mastercard; PayPal; Visa
- Technology and Marketplaces: eBay; Calibra; Spotify; Uber; Lyft
- Telecommunications: Vodafone
- Blockchain: Coinbase; Xapo
- Venture Capital: Andressen Horowitz; Thrive Capital
Q: How does the Libra Reserve Work?
In case you are wondering where the money in the Libra Reserve comes from, Facebook says:
“The money in the reserve will come from two sources: investors in the separate Investment Token, and users of Libra. The association will pay out incentives in Libra coin to Founding Members to encourage adoption by users, merchants, and developers. The funds for the coins that will be distributed as incentives will come from a private placement to investors. On the user side, for new Libra coins to be created, there must be an equivalent purchase of Libra for fiat and transfer of that fiat to the reserve. Hence, the reserve will grow as users’ demand for Libra increases. In short, on both the investor and user side, there is only one way to create more Libra — by purchasing more Libra for fiat and growing the reserve.”
Users of Libra “do not receive a return from the reserve.” Instead, the interest income from the funds in the Libra Reserve will be spent in two ways:
- “to support the operating expenses of the association”, such as “investments in the growth and development of the ecosystem, grants to nonprofit and multilateral organizations, engineering research”; and
- “to pay dividends to early investors in the Libra Investment Token for their initial contributions.”
Q: What is Calibra?
Calibra is a wallet for Libra. It is available both as a standalone mobile app (which means you do not need a Facebook account) and also from within Facebook’s Messenger and Whatsapp. It will allow you to send/receive money (Libra) to/from other people; top up (which means converting your local currency into Libra); and withdraw local currency (which requires conversion from your Libra to fiat). You can also use Calibra for “to pay for everyday transactions, like buying a coffee, buying groceries, or taking public transportation.”
Once Calibra becomes available, you can sign up for an account; this will require using a government-issued ID for the KYC process.
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