For five years now, at least more intensely, terms have entered our daily lives that concern the economic and technological field and which sound to us like some kind of "exotic fruit".
"Cryptocurrency", "Bitcoins", "blockchain", "peer to peer", "mining" are some of them. Some have been playing with increasing intensity in the press lately. The reason for this growing appearance is perhaps the greater involvement of citizens with cryptocurrencies and the corresponding economy. To the extent that it now concerns large financial institutions, financial and technological giants as well as stock exchanges.
The lion's share in the first half of 2019 is taken by his new effort Facebook to invade the cryptocurrency economy with its own "Pound».
The social media giant unveiled earlier this week its plans to launch Libra, and joined forces with 28 partners in one entity, the Libra Association. The headquarters of the entity will be Geneva which will control the new digital currency which will be released in the first half of 2020.
We have been hearing more and more about bitcoins and their value in recent years. And how can we take advantage of their exchange rate with conventional money as we know it.
Cryptocurrency is therefore a "peer-to-peer" decentralized electronic form of money which is based on the principles of cryptography to secure the network and verify transactions.
Most cryptocurrencies use a Distributed Database as the backbone of their system, the so-called Blockchain. Introduced in 2009, bitcoin became the first successful decentralized cryptocurrency. Due to the open nature of its software, many developers were allowed to experiment with its code and modify it (forking). Since then, a multitude of new cryptocurrencies have been created in which efforts have been made to improve or even add functions such as faster transactions, greater anonymity, etc.
The main feature of cryptocurrency is its decentralized character and through it its resilience to any form of control and intervention.
The key features of a cryptocurrency are:
- Absence of a central authority to control or confirm transactions.
- Possibility of use without submitting personal data.
- Universal possibility of use in any space and time
- Ability to send very small but also very large transactions at a very low cost
- Use of Blockchain technology.
- Ability to participate in anyone in currency issuance (mining).
- Restriction and disclosure of the money stock.
- Anonymity in transactions and often without traceability.
- Use open source
The blockchain consists of a "chain" of records related to transactions, in a public ledger. Each new block of entries - a "block" - connects to the previous ones, creating a new "chain", ie a "blockchain". These blocks are connected to each other.
In this way, the ledger - accounting book functions as a comprehensive and decentralized accounting book, which is common and accessible to all participants, since everyone saves a copy of something that ensures the security and transparency of transactions.
The new cryptocurrency is expected to help billions of users easily access international transactions, a move that could potentially shake the international banking system.
Libra is aimed primarily at people who do not have access to traditional banking platforms. This venture is part of the company's efforts to expand beyond social media to e-commerce and global payment systems.
To make the use of cryptocurrency a reality, the social media giant has already set up a subsidiary called Calibra, which will offer e-wallets for those who want to save, send and spend libras. This company will be affiliated with Facebook's messaging platforms, the Messenger and WhatsApp, which already have over one billion users.
The Facebook after receiving the "yes" from big financial boulders is expected to launch the cryptocurrency immediately. To do this, each of these companies contributed at least $ 10 million to the company, giving the company more than $ 1 billion to proceed with its issuance. Companies that formed the consortium include companies such as Mastercard, PayPal, Coinbase, eBay, Lyft, Uber and Kiva.
Even ATMs intend to build so that people can easily convert physical money into Pound. However, it still has many regulatory hurdles to overcome, convincingly answering how it will manage money laundering and fraud.
The management of the consortium will not be co-located with Facebook, as the popular social networking site is facing the distrust of the global community. The scandal with Cambridge Analytica but also the issue of spreading fake news through its pages keeps the ambitious project at a safe distance.
The largest networks abroad have dealt extensively with the details of the new cryptocurrency that is coming to stay. Or at least that is how its creators and sponsors envision it.
The prospect of a cryptocurrency accessible to billions of users of Facebook and other platforms it manages could not help but alarm European and American officials, as well as senior executives at international financial institutions.
French Finance Minister Bruno Lemerre said it was "impossible" for the Pound The Group of 1 (G7) - which includes France, the United Kingdom and the United States - wants to set up a forum to assess risks. digital currencies, such as the libra, in the financial system. This was reported by a Financial Times article, citing a letter from Lemerre and the Governor of the Bank of France, François Villeroua de Gallo. This group will include central banks and the International Monetary Fund (IMF), according to the FT.
Meanwhile, Marcus Ferber, a German MEP, warned that Facebook could become a "shadow bank" because of the plans for digital currencies.
In an article in the Financial Times, Facebook co-founder Chris Hughes claims that "the Libra cryptocurrency will shift most of monetary policy control from central banks to private companies. "If global regulators do not act now, it could be too late." He added that the companies that will supervise the new currency will put their private interests - profits and influence - above the public ones.
But beyond the central reactions to the future of Libra, the main users will be everyday people. Which in recent years show increasing interest in the use of cryptocurrency.
According to a recent study by Internet security company Kaspersky, a lack of understanding and trust makes consumers wary of using cryptocurrencies. Specifically, while 29% of people have some knowledge of cryptocurrencies and there is a demand for the use of technology, only one in ten (10%) fully understand how they work.
Consumers show a desire to get involved in the crypto economy but a knowledge gap prevents them. Almost one-fifth (18%) stopped because it became too technically complicated.
This lack of understanding could lead to distrust of cryptocurrencies' ability to keep consumer money safe. For example, almost a third of 31% of respondents said they believe cryptocurrencies are quite liquid and need to be stabilized before they can be used. There is also a common perception among consumers that cryptocurrencies will not be in our lives forever. One third (35%) believe that cryptocurrencies are a fad that is not worth dealing with.
The recent move by Facebook will make people aware of these currencies, but what is not clear is the consequences. According to the research, the security of such currencies as well as the data of their users are issues that need to be resolved from the beginning.