Facebook released the Whitepaper of its cryptocurrency, Libra on 18th June 2019. The cryptocurrency community and Bitcoin maximalists welcomed the news as a positive impetus for awareness about Bitcoin. Nevertheless, one might still argue that, if Libra is globally used as a medium of exchange, what the use of Bitcoin [BTC] is?
An analogy with Gold could explain the difference between the two. While Bitcoin is a store of value, Libra, like many other FIAT currencies, is a medium of exchange. David Marcus, the Co-Creator of Libra, Head of Facebook’s Blockchain team and former head of PayPal suggested the same in a tweet, he said,
“Many want to pit Libra vs. Bitcoin. In my mind these two are not in the same category. BTC is a decorrelated (investment) asset. Libra is designed to be a stable medium-of-exchange. I have been, and remain a fan of BTC, but for very different purposes.”
If there was a competition between Libra and Bitcoin, Marcus seems to have conceded rather than overselling the facts. Moreover, he mentioned that Bitcoin is a ‘decorrelated asset’; an asset that has no particular utility; however, ubiquitous and limited in nature like Gold.
Samson Mow, Crypto-analyst and Blockchain expert agreed with David Marcus as he tweeted,
‘Totally agree with David. They are not in the same category. Libra is the western clone of Alipay, marketed as a cryptocurrency.’
What is Bitcoin then?
Andreas Antonopolous, an educator and author of several books on Bitcoin and cryptocurrencies, explained that since Libra is not borderless (imposed by Government constraints), censored, ‘permissioned‘ and even mutable to a certain degree on validators consent, it not an ideal cryptocurrency.
Bitcoin is open, borderless, permissionless, censorship-resistant, publicly verifiable and immutable.
All the other currencies like US Dollar, Euros, Yen, Yuan, and so on, are backed by the GDP of a country. The stablecoins pegged to these currencies are hence exposed to the same degree of risk a FIAT is. Libra, on the other hand, is backed by a basket of currencies and Government bonds. Being a cryptocurrency, it is also transparent and partly decentralized.
Hence, there is a high possibility that will become a popular medium if Exchange and challenge the current banking system. The new cryptocurrency enabled system will allow the ‘unbanked’ population of the world to transact freely using their phones.
Which cryptocurrencies do you think will become favorite mediums of exchange in the future? Please share your views with us.
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Nivesh from Engineering Background is a full-time Crypto Journalist at Coingape. He is an atheist who believes in love and cultural diversity. He believes that Cryptocurrency is a necessity to deter corruption. He holds small amounts of cryptocurrencies. Faith and fear are two sides of the same coin. Follow him on Twitter at @nivishoes or mail him at nivesh(at)coingape.com