Facebook is working hard on building a brand-new cryptocurrency system called Libra, sort of like Bitcoin and Ethereum, except it will be much better, at least according to Facebook.
With all the talk about Libra, cryptocurrency, regulation and the rest, no one seems to wonder about what existing solutions normal people will be using to solve the problems for which Libra is suited. This isn’t strange at all actually – in all you’ve read about Facebook’s Libra, how much have you read about the pressing problems it will solve, the unmet needs it will address – right? Mostly what you read about is how Libra will solve all sorts of problems that today’s crypto-currency systems have, how many partners they have and how wonderful it will be.
Libra will be an infrastructure “out there” somewhere, with lots of important people and organizations making sure it’s wonderful. But in practical terms, most people will use it via an e-wallet, an app that they install on their smart phones. That’s where a name that hasn’t appeared a great deal pops up: Calibra. Calibra is a newly-formed Facebook subsidiary that will be the e-wallet for Libra. It will “integrate with” Facebook’s WhatApp and Messenger, giving it incredible consumer reach.
You can read all about what it will do, but it’s basically an e-wallet for holding e-cash and providing basic functions like sending and receiving e-cash to and from another e-wallet. Except for the little “detail” that instead of sending real money, you’re sending the Libra cryptocurrency, and will have to go to an additional step to move dollars in a bank account to and from your Calibra wallet, converting to or from dollars along the way.
Putting aside the fancy new terms of cryptocurrency and the rest, does using a phone to make person-to-person payments remind you of anything? How about Venmo, the P2P e-wallet used by over 51 million people, which is now part of PayPal? How about Cash App, the rapidly growing P2P e-wallet installed in about 60 million phones?
These are proven consumer applications which have already gone through numerous upgrades and feature additions, used at least weekly by tens of millions of people.
Facebook has incredible reach, and billions of cash in the bank gotten by selling your private information to advertisers. They will certainly make a lot of noise. How does Facebook’s proposed system compare to Venmo and Cash App?
- Venmo and Cash App just use dollars. Simple. Facebook will use the newly invented Libra, which needs to “work,” something Facebook isn’t good at doing.
- If you split a bill and need to send $7.30 to your friend, you just do it with Venmo and Cash App. With Facebook, you’ll have to convert it to Libra, send that, and have it be converted back. Hopefully the exchange rate won’t move too much.
- Venmo and Cash App support free P2P payments. The Calibra website claims it will be “low cost,” but they have yet to say what the cost will be; after all, there is a HUGE cryptocurrency infrastructure to support, none of which is needed by the existing cash apps.
- It’s easy to imagine Facebook will find a way to sell the information about your transactions to the highest bidder, or somehow find a way to “monetize” what you do with your money. It’s what they do!
- Libra and Calibra will work for international payments! With exchanges from local to Libra to foreign currency, two exchanges instead of one. That’s certainly something Cash App and Venmo don’t do today, and will appeal to some fraction of a hundredths of a percent of the market. Except for the proven massive cryptocurrency uses for money laundering and international crime, who will have yet another channel to support their illicit activities.
Facebook’s Libra is getting all the attention any giant corporation could want, including some attention I suspect they’d rather not have, from regulators. But in the end, will they be able to make this massive software effort work? Will it do anything consumers want better than existing apps like Venmo and Cash App that are in widespread use? There is good reason to be skeptical.