I’m Lina! I’m the Global Marketing Director at BTSE. You can find me on Twitter at https://twitter.com/LinaSeiche.
The Libra Lie: Why Facebook’s “Cryptocurrency” Will Not Become Permissionless
Facebook has been very busy lately, tracking you through photos that you download, denying that it’s a social network, and buying approval to violate your privacy. Adding to its unfavourably lively media presence these days is Facebook’s latest venture which takes them into the cryptocurrency space: Libra.
In an act of either insincere marketing or sincere delusion, the social network (yes, it is one) blatantly misused the term “cryptocurrency” to label its digital coin, instantly causing global-scale debates that range from privacy concerns over the implication of legal consequences to whether Libra actually is a cryptocurrency to begin with.
It’s not.
The fact of the matter is that upon launch, Libra will not be permissionless, and it will not be a cryptocurrency. The main characteristic and purpose of a cryptocurrency is its censorship-resistance. It achieves this through a decentralized infrastructure that allows it to operate without a central point of control and failure.
Libra is not censorship-resistant. It’s a digital currency set to be operated by a group of corporate giants who, through their participation, will gain access to and control over the financial activities and holdings of billions of people around the world.
A centralized digital currency puts every single user at risk of complete surveillance and not only defeats, but completely contradicts the purpose of a cryptocurrency.
Libra’s developers themselves seem to be aware of this, stating,
“we believe that for the Libra network to achieve its full potential, it needs to be permissionless.”
libra.org
As such, Facebook has voiced its ambitions for Libra to “gradually [transition] to a permissionless state in the years to come”, citing an impossibility to operate a permissionless network that is both scalable and secure at the current point in time.
The desire to build a permissionless network might seem commendable, but once you take a look underneath the enthusiastic surface of Facebook’s pursuit, you might begin to question how serious this approach really is – and how much of it is a calculating tactic to push PR and avoid further criticism.
Let’s take a look at five reasons why Facebook’s Libra will likely not become permissionless:
Facebook Could Have Started Out Permissionless
According to the Libra white paper, there is no “proven solution that can deliver the scale, stability, and security needed to support billions of people and transactions across the globe through a permissionless network.”
Libra will cost Facebook and its partners billions of U.S. Dollars to set up and run. The scale at which these companies are operating easily relegates most cryptocurrencies to play-money and fun experiments. As an example, the $5 billion dollar fine Facebook agreed to pay to buy our privacy is larger than the market cap of five of the top ten cryptocurrencies.
If you’re looking for a permissionless payments network and have access to billions of dollars in funds, you could, if you so desired, attempt to create your own coin.
You could also use that money to invest in the development of applications that improve the scalability, stability, and security of a permissionless network that’s alive and thriving today: Bitcoin.
Second layer technologies like the Lightning Network tackle some of the exact issues Facebook cites as hurdles on the way to making Libra permissionless. However, they do so on top of an infrastructure that is already permissionless, already secure, and has already stood the test of time, not only surviving numerous political and technological attacks, but coming out stronger from all of them.
Facebook’s goals (if they are genuine) seem to align perfectly with those of the developers and users of Bitcoin. In supporting Bitcoin’s ecosystem, Facebook would have sided not only with the strongest and most secure cryptocurrency, but also with some of the smartest minds alive today, creating a plethora of opportunities to drive research, development, and adoption.
Facebook did not do that. Facebook instead created its own coin. That alone should deliver enough proof that Facebook is not interested in a decentralized cryptocurrency.
You Can’t Earn Much From a Permissionless Libra
A permissioned Libra, however, holds a number of tempting revenue streams for Facebook. Calibra, the subsidiary Facebook set up to seemingly separate its own from Libra’s operations and ensure the safety of financial and user data (a statement we have no choice but to trust in), announces it will be “cutting fees“. While the official website doesn’t include any numbers, we can be sure that Facebook will not want to miss out on transaction fees with its soon-to-be permissionless currency.
Although according to Libra’s white paper, developers will be able to build their own wallets on top of Libra, upon launch, the only wallet available will be Calibra, with a gigantic head start over any third-party wallets to be developed post-launch. By ensuring that all Libra users have to turn to Calibra at least for a certain amount of time, Facebook anticipates an additional spike in revenue from ad placements and will further be able to play out its advantage by being not only the first to provide a wallet, but also the first to implement additional financial services across its apps.
A Permissioned Libra Means a Powerful Facebook
A permissioned Libra lets Facebook set a (long) list of criteria and charge a minimum of $10 million dollars to operate a validator node. For their investment, Facebook’s group of initial validators or “founding members” received Libra Investment Tokens on which they will be earning interest depending on the amount they contributed.
The investment further grants each founding member a seat at the council of the Libra Association, a non-profit organisation based in Geneva. The Libra Association Council forms the association’s governing body and has ultimate control over the direction of Libra’s development, according to Facebook:
“The council delegates many of its executive powers to the association’s management but retains authority to override delegated decisions and keep key decisions to itself, with the most important ones requiring a greater than two-thirds supermajority”
What’s not clear are the amounts each founding member invested. Facebook’s stake is especially interesting here: as the main corporation behind Libra, it wouldn’t be surprising to see Facebook investing a substantial sum into the project – a highly centralizing factor.
Right now, Libra depends on Facebook. Facebook is developing it, Facebook is funding it, Facebook is controlling it, and even after the official launch, this will, if at all, change only gradually. The Libra Association, which is yet to formally come together and elect its founding members and managing director, formed after Facebook had conceptualised and started architecting Libra. Rather than involving its stakeholders for feedback and second opinions, Facebook went solo with the initial development and only onboarded Libra’s first association members at a later point in time, inevitably positioning them at less significance to the project than Facebook holds itself.
If combined with a major stake in the Libra Reserve, this gives Facebook an immense amount of power over the decisions made and enables it to pressure other council members into voting for decisions that are beneficial to Facebook. If Facebook quits, Libra fails, and every council member loses their investment.
Facebook’s importance to Libra is the reason why U.S. regulators are focussing their investigations on Facebook rather than the other founding members; this essentially renders the association whose purpose is the formation of an independent governing body for Libra useless. It all comes down to Facebook, and the U.S. government knows that.
A Permissionless Libra Would Break Rules
If it was achieved, a permissionless setup would mean the removal of any central entity and point of failure behind Libra and enable the network to run and govern itself. It would elevate Libra from a centralized to a decentralized currency and lift it out of the reach of authorities seeking to regulate and control it.
Power and control aren’t easily surrendered. No regulator likes to see a digital currency that is outside of their control. And if Libra isn’t breaking any rules just yet, the simple step is to create a rule that it will break:
Regulators can’t stop Bitcoin. Bitcoin is too strong, too decentralized, and impossible to crack down on. Governments around the world have missed their chance to kill the biggest threat to their power.
They won’t make that mistake again.
Libra is a centralized currency that Facebook is trying to decentralize. Interrupting this process will be harder for regulators once Libra is on the market; that’s why these days, we’re seeing lively movement on the authorities’ side. While Facebook has said it would seek cooperation with lawmakers, ultimately, this would drive Libra away from the permissionlessness it seeks to achieve. But unless Facebook finds a legal loophole, it won’t have much of a choice other than to comply with the law that, as a centralized entity, it is subject to.
You cannot just create a permissionless network, especially not under public scrutiny. There is a reason why not a single cryptocurrency has managed to become the “next Bitcoin”.
Facebook Doesn’t Know How to Make Libra Permissionless
In Libra’s white paper, Facebook lists a number of issues that complicate the operation of a permissionless network. These issues are well known and have been widely discussed in the cryptocurrency space. Topics Facebook mentions include on-chain governance, scalability, and a decentralized reserve function.
And that’s really all Facebook does. It acknowledges the existence of these issues and the need to fix them. It also acknowledges that Libra doesn’t provide any solutions as of today.
Mentioning the need to address certain problems and adding the occasional line that through internal research and community support, the team is convinced they will achieve their goal, is nothing but nice-sounding empty words. Libra’s roadmap is vague, and especially with a track record like Facebook’s, trust isn’t earned through merely voicing intent.
We don’t know how Facebook plans to make Libra permissionless, and neither does Facebook. Will they figure it out? Maybe. Is that enough to make you trust them?
Facebook’s Five-Year Fairytale
According to Facebook, the off-chain governance system is needed to ensure stability, scalability, and security in the early days of Libra. The association pledges to initiate its transition to a permissionless network within five years’ time.
Until then, Libra will be operated by a network of tech giants in full control of their users’ finances. And as long as the transitioning process is initiated within that timeframe, it will align with Libra’s roadmap. How long the transition will take, how permissionless Libra will eventually become, and how much power Facebook will retain stays unclear, and perhaps that’s intended.
Five years is a long time. Enough time to ‘get to know’ your users and their spending behaviours. Enough time to bind them to you through comprehensive financial service infrastructures. Enough time to tweak the promises you made pre-launch. Enough time to establish an extremely powerful alliance of corporations that cover the largest part of your users’ everyday lives.
Five years is a long time to build an empire.
And maybe Facebook does seek permissionlessness. This pursuit, however, is not only highly ambitious, but might just turn out to be impossible for a centralized technology heavyweight with a questionable track record in regards to consumer trust.
Whether or not Libra actually launches the way it is planned remains to be seen. Either way, Facebook is asking its users to trust that this time, it will be different, and that this time, all intentions are good.
But Facebook is one of the last companies on this planet that deserve your trust.
This article was inspired by the initiative librenotlibra.info which seeks to inform about the misrepresentation of and potential dangers associated with the launch of Libra.
Amazon: From Book Worms to Blood Sugar
A Tech Giant Dominating Health Care – What Could Go Wrong?
Amazon Prime Health is upon us. A long list of seemingly random endeavours into health-related fields in the past couple of years are coming together and drawing the outlines of what we are observing with a number of global players today: they are entering the health care industry.
The health care sector is the final frontier for tech giants like Amazon. Expected to rise to just over $10 trillion in size by 2022, it’s an industry that will never die and targets every single person — and that, in many places, is in dire need of innovation. Tech companies like Apple and Amazon exploring the field might initially have come as a bit of a surprise to many. But at second glance, it actually starts to make a lot of sense, and Amazon’s recent steps into the health care ecosystem raise the question: is this a good thing or a bad thing?
What Amazon Is Actually Doing
Amazon has been taking active steps to establish a presence in the healthcare industry. Recently, the company filed a patent that indicates Alexa will learn how to pick up not only a variety of emotions, but also audible indicators of sickness from your voice. A very possible scenario is that Alexa will be able to tell if you have a sore throat or a runny nose and use that information to send you an ad for medication, or suggest a recipe for chicken soup.
Amazon’s recent joint venture with Berkshire Hathaway and J.P. Morgan is further working on providing cost-effective health care plans to their combined 1.2 million employees. And the acquisition of online pharmacy PillPack has fuelled the idea that Amazon may roll out its own pharmacy services.
Why Amazon Wants Your Health
It’s time we let go of the idea that Amazon is an online marketplace. Amazon has long branched out into a number of sectors, because that’s what you do when you have the resources and the power: you try to enter more markets, win more customers, and become more powerful.
If Amazon is able to establish its position in health care, that would mean the ultimate door-opener to an industry of several trillion dollars and an increased group of potential customers. It would also connect the company to older consumers that it has been less successful in targeting so far.
And let’s not lie to ourselves: the more user data a provider has, the better. But what does that mean for us?
What that Means for You in Real Life
Right now, unless you read a lot of news or search for this specific kind of information, there really is no noticeable effect on your everyday life. And maybe you will never really notice a shift at all. In fact, Amazon’s homemade brand AmazonBasics has been selling products of all kinds of industries for years, from tech gadgets over furniture to motor oil (yes, motor oil). Amazon also owns Whole Foods, a leading American grocery store chain. At some point, it might simply be your most convenient option to ask Alexa to order dinner and your prescription drugs.
But that’s not the entire story. When you look at what Amazon has been doing, you will see a number of possible (some of which are very likely) future developments.
A little, maybe slightly over-the-top thought experiment: how far could this go?
The Best Case: Health Made Easy, Convenient, and Affordable
CHEAPER MEDICATION
Amazon’s extensive infrastructure that spans a global network and various industries significantly helps improve logistics and administrative tasks. By cutting out redundant middlemen in the distribution of medication and supplies and shifting these processes to its own systems, Amazon is able to lower the prices for both health care providers and end consumers.
ALEXA AS YOUR HOME DOCTOR
“Alexa, I’m feeling sick” — no problem, Alexa is happy to help. With a couple of targeted questions and a quick test with your home medical kit, your virtual doctor not only gives you your diagnosis in minutes, but also a prescription for the appropriate medication which, of course, Alexa has delivered to your doorstep. And you didn’t even have to leave the house — if that’s not good news, then what is?
AFFORDABLE INSURANCE
The test run to optimise health care plans for Amazon’s, J.P. Morgan’s, and Berkshire Hathaway’s proves successful and leads the joint venture to roll out a commercial option that immensely relieves employers of the steadily increasing health care benefit costs. Amazon is now a serious contender in insurance.
EAT YOURSELF INVINCIBLE
Bio-hacking made easy! Thanks to its medical data-mining software and partnership with your local hospital, Amazon knows exactly what you need to be healthy and can suggest you some of its Whole Food products, together with recipes that match your cooking skills. As an Amazon Prime member, you’ll even get your dinner at a discount.
TEST YOURSELF AT HOME
Staying healthy has never been more comfortable. Gone are the hours of waiting at a clinic squeezed into a small room next to strangers that you know have some medical issues — that’s why they’re there, right? — but you just can’t figure out how dangerous they are to you. Or you can, because at least one of them coughs right in your face. The option of taking a variety of tests in the comfort of your four walls sounds much nicer. And it is becoming a reality, with Amazon releasing a number of medical appliances to make available for consumer use. Checking your medical condition becomes easier and cheaper. As a result, you do it more often, stream your data straight to your doctor, and effectively increase your chances of catching any diseases early-on.
AMAZON HEALTH CENTRES
Amazon opens its own health centres, private clinics that can leverage all of Amazon’s efforts in health care. As a patient, not only do you benefit from lower cost for treatment and medication, you are also in a constant exchange with your doctor. With your home kit, you can share regular updates on your condition with the clinic, and Amazon’s software will recognise abnormalities and notify your physician whenever necessary.
You are now able to constantly monitor and optimise your health using affordable home devices and staying in touch with a professional without needing to drop by their clinic. You get your medication delivered home, and your insurance becomes cheaper. An ensemble that saves money, time, nerves, and probably lives.
Too good to be true?
The Worst Case: a Company on the Way to World Domination
NOBODY’S CHEAPER
Using its existing infrastructure, Amazon optimises the distribution of pharmaceuticals — nothing new so far. More and more producers use Amazon’s logistics to get their products to the consumer. Amazon’s growing share in the market puts the company in an increasingly powerful situation. Soon enough, Amazon controls the market — and with that, the price.
ALEXA AS YOUR MUM
“Alexa, where’s the next pizzeria?”
“I suggest you have some kale instead. Kale is rich in Vitamin A and C, which according to your recent health data you are insufficient in.”
Maybe it won’t sound exactly like this. But what happens if the company that controls Alexa simultaneously records your dietary habits and health data, sells you groceries, AND is the provider of your medical insurance? You essentially give them the power to pressure you into following the diet they want you to follow. In other words: Amazon suggests you Whole Foods products that suit your apparent diet plan and lures you with discounts on your insurance. But if you put yourself in danger of getting sick, you also put your insurance’s funds at risk. And why let that happen if it can be prevented? Suit yourself for premiums that adjust to how Amazon likes what you eat.
OPPRESSED BY YOUR MICROWAVE
Take it a step further — got any Amazon smart home appliances? Congratulations, you now can’t even cheat anymore. If your Amazon microwave thinks you should steam some vegetables rather than cook your mac and cheese, it can now refuse to do its job whenever it wants. If your TV thinks it’s time to go for a walk, it will turn itself off until your fitness app has tracked the necessary calories to burn.
YOUR HEALTH DATA GOES GLOBAL
Your medical data, information that used to be private to you and your doctor, lands at Amazon who then shares it with subsidiaries, affiliates, and partners. Medical data becomes increasingly profitable and attractive for commercial use. Yes, it is used for research and to monitor your health, but you have no insight into how that’s done. And one weak link in the chain can mean the exposure of your medical history. The more people get their hands on your data, the more likely this becomes.
Welcome to Amazon, market leader in eCommerce, Retail, Music and Video Streaming, Global Shipping, Payment Processing, Smart Home Appliances, Consumer Products, Tech Gadgets, and Health Care.
Welcome to Amazon, the company that slowly took over your life.
The Truth
… probably lies somewhere in between. “Amazon (or any other tech giant for that matter) is not an evil company” is a statement most of us have heard before when talking dystopian future scenarios of a corporation that runs our lives. And they (probably) aren’t evil people maliciously plotting their next step towards world domination up in the country’s highest skyscraper on a leather chair with a white cat on their lap and a personal butler as a footrest. But Amazon is a for-profit company. And as such, Amazon will always act in the best interest of Amazon in terms of revenue-generation. That’s okay — as long as it doesn’t compromise consumer autonomy.
In cases like this one, there’s a fine line between overly conservative rejection and critical examination. A commercial company entering health care can add incredible value to the industry, bring innovation, and transform the way we handle our health. But if that same company controls the majority of our daily lives, it becomes problematic. None of us can say they know what such power, if given to us, could make us do.
Putting too much knowledge and control into any one entity’s hands is always a bad idea.
And now?
Already, Amazon has made remarkable progress in the field of health care, yet it is still only at the very beginning of the journey. And it’s quite likely that it will succeed in its venture into the industry. While we shouldn’t outright dismiss that, we also shouldn’t jump straight into it just because it’s Amazon, or just because everyone seems to be doing it. We are learning the hard way that our data is in the hands of companies that oftentimes don’t do enough to protect it. And while the prospect of a company taking over world domination seems like a sci-fi movie concept to us, we do need to ask ourselves: do we want to take that risk?
Ultimately, it comes down to your personal idea of privacy, and how much you value your privacy over your everyday convenience. Your privacy is your right, and it’s in your control until you pass that control on to somebody else. It’s on you to decide who you let in on your most personal details — as long as you stay aware that an app is not just an app, Alexa is not just a fun little helper, and even your microwave might not just be a microwave, but another device that welcomes Amazon into your life.