What is known about the cryptocurrency Facebook Libra and why it is necessary to Mark Zuckerberg

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Briefly about where and how Libra will be used.

On June 18, Facebook will present the first details about the developed Libra cryptocurrency and launch a test network, TechCrunch and The Block report with reference to several investors.

According to Facebook, Libra is a project that will allow 1.7 billion people in developing countries to access financial instruments and improve, not destroy the traditional financial system.

The company received support from Visa, Mastercard, PayPal, Uber, eBay and other financial and technology companies. The global launch of Libra will take place in the first quarter of 2020, at the end of 2019 will begin testing, reports the BBC.

Facebook does not plan to earn on cryptocurrency — the payment system has no Commission, and the company itself will pay users for operations with cryptocurrency, according to financial analysts.

Facebook's cryptocurrency project launched about a year ago, when the company hired former PayPal President and Facebook Messenger Vice President David Marcus to lead, according to the information.

Also on the team staff Coinbase, a former Vice-President of Instagram, Kevin vail, and the beginning of 2019, the project team Chainpace. The chief economist of the project was Christian Catalini, Professor at the Massachusetts Institute of technology.

In total, about 100 people work on the project, while the company constantly hires new people — Facebook posted 28 vacancies related to the blockchain.

Unlike the open culture of Facebook, the employees of the cryptocurrency project keep any information secret and work in a separate building.

Initially, the BBC assumed that the cryptocurrency would be called GlobalCoin, but The Information and TechCrunch talk about another name — Libra. In may 2019, Facebook registered the financial company Libra Networks in Switzerland, and also bought the trademark from the startup of the same name.

TechCrunch believes that LIbra is a play on words with the acronym for the London interbank offered rate LIBOR. Only "LIBOR is for banks and Libra is for people."

The main interest in the crypto project was shown personally by mark Zuckerberg, despite skepticism from the operational and financial Directors of Facebook.

Of the three investment scenarios, Zuckerberg chose the most expensive, and the payment system inside Facebook fits into Zuckerberg's statements that all money transfers should be no more difficult than sending a message in the messenger.

Libra token and its use
The Facebook cryptocurrency will be a "stable coin" — it is tied to a currency basket and low-risk securities, not to a single currency. This will eliminate the rate jumps, like other cryptocurrencies.

This was confirmed by Laura McCracken, head of the Facebook Department for financial services and payment partnerships in Northern Europe, in a conversation with the German magazine WirtschaftsWoche.

The company integrates cryptocurrency not only in Facebook, but also in Messenger and WhatsApp, as well as in partner platforms. Employees of the company will be given the opportunity to receive part of the salary in cryptocurrency.

In December 2018, Bloomberg reported that Libra will be used to transfer money between users in messengers. In February 2019, The New York Times reported on the change of plans and Facebook's desire to sell coins to users, as well as to negotiate with crypto-exchanges.

The company plans to launch "kryptonate" ATMs for the sale and purchase of Libra offline.

Also, Facebook is negotiating with sellers who will accept tokens for payment, and is considering paying users for viewing advertising and online purchases on a similar loyalty system with retail stores, the Guardian writes.

It is also noted that Facebook will not use the payment system for targeting advertising.

Who will manage cryptocurrency
The company takes into account its negative reputation in the field of personal data processing and understands that the ambitions of the project to control online payments can deter users.

To protect themselves from regulators to reduce the centralization of crypto currencies and to avoid the influence of negative reputation Facebook will hand over control of Libra Libra Foundation independent Association. The Fund will be managed by Sunita Parasuraman, the former head of Treasury operations on Facebook, reports The Information.

The Block received Facebook marketing materials on Libra and found out that there are 29 companies in the consortium. In total, Facebook expects to attract 100 members to Libra Association to fulfill the plan to attract $1 billion of investments to ensure the stability of the cryptocurrency.

Libra partners include eBay, Uber, Lyft, Spotify, Coinbase crypto-exchange, Vodafone Telecom giant, Mastercard, Visa, Paypal, PayU, Stripe and other organizations. Each investor contributes $ 10 million to gain access to the network and manage their own node.

Also, The Block notes that Facebook did not support the investment conglomerates Goldman Sachs and JPMorgan. In the case of JPMorgan, this may be due to plans to release its own "stable cryptocurrency" JPM Coin.

Why Libra need Facebook and can a company to earn it
With the help of Libra, the company plans to completely rebuild our own infrastructure and merge WhatsApp, Facebook Messenger and Instagram under the same platform, writes The New York Times. The total audience of potential users of the token is 2.7 billion people.

Facebook is developing its own payment system to integrate it into the applications of partners, stores and financial institutions, as well as on websites — similar to how the Facebook profile is now used to authorize on various platforms without the need to register and create an account.

The system of rewarding users for their activity in the social network, viewing ads and interacting with content serves as a tool that will reduce the level of criticism of Facebook about earnings on these users and improve their interaction with content, according to The New York Times.

It will also strengthen Facebook's core business — its own payment system will improve the understanding of what products and brands customers like, and will help to more accurately evaluate, rank and target ads.

Creating your own cryptocurrency may be Facebook's attempt to enter the mobile payments market and take a leading position on it, says David Martin, investment Director of the financial company Blockforce Capital.

Libra can become a powerful payment instrument in the markets of developing countries, for example, in Venezuela, where the purchasing power of Fiat currencies is unstable. Thanks to Libra, citizens of such countries will be able to access a more reliable financial platform than the national currency, writes financial and cryptocurrency expert Caitlin long in the Forbes column.

No less attractive for Facebook may be the domestic market, where only 44% of the population use a smartphone to pay. With its user base, the company can establish itself as a national and then a world leader in the field of mobile payments, says David Martin.

Usually banks, payment systems and networks charge a 2-3% Commission for each transaction paid by sellers. But, according to the wall Street Journal source, Facebook does not plan to take a Commission for transactions with Libra, it is unclear how the company will earn on cryptocurrency.

According to financial experts of The New York Times and CoinTelegraph, thus the company will create increased interest of sellers online and increase the audience of users of its platform before monetizing it.

Moreover Facebook can monetize the user base through advertising and earn on a basket of currencies and securities that provide cryptocurrency — according to Caitlin long's calculations, Facebook can receive about $235 million for every $10 billion in deposits.

Problems with regulators
Regulators in countries where there are no clear rules for working with cryptocurrencies can stand in the way of launching Libra. In may 2019, the us Senate banking Committee wrote an open letter to Facebook, demanding to disclose the details of the project. Senators are interested in how the company will process users ' personal data.

Also, Facebook representatives are negotiating with the commodity futures trading Commission to determine whether the cryptocurrency falls under jurisdiction. The company held several meetings with the us Treasury Department, Bank Of England Governor mark Carney and top managers of Western Union.

It is not yet known how Libra will be regulated and what role payment systems will play in its development — usually Visa and Mastercard do not support cryptocurrencies, as they see them as a threat to their business. What Facebook will offer and how Libra will actually work will become known on June 18.

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