When Facebook finally released the Libra white paper this week, the world stopped and gasped. The largest social media company of the world is set on transitioning and starting a new cryptocurrency. However, some people are criticizing the commitment and the ability of the company of really making Libra decentralized.
Decentralization is one of the most key aspects of blockchain technology. However, several cases in which the blockchain technology is used are not really decentralized at all, so many people are wondering if Facebook will eventually follow this path.
Some have even wondered if you can really call Libra a cryptocurrency because it is so centralized. Libra is set to be a stablecoin that will be “centralized to a certain extent” at first. Initially, the members of the Libra Association (which has companies such as Uber, Visa, Mastercard and others) will act as the node operators.
The node operators, in case you are not familiar with the blockchain technology, are the individuals or companies that maintain the decentralized network. However, as they are all a part of the same entity, they are not really very decentralized at all.
In order to really make the project be a real currency rather than a simple token on a permissioned ledger, Facebook wants to decentralize. Jerry Brito, however, the executive director of Coin Center, has his doubts about the whole situation.
Brito does not believe that Libra will be able to be completely permissionless at all. This would, in his view, provide several legal, technical and governance challenges for the company. He also affirmed that he really doubts the sincerity behind the allegations that Libra will change.
According to him, if you really want to have a permissionless ledger, you would need to not be focused on a single group of people and that is exactly what Facebook and the Libra Association are. A limited group of people.
Another major point here is that if Libra is really successful, there is actually very little incentive to make it a permissionless system. If you have a limited number of owners and, therefore, centralization, you have full ownership and full profits. Why would Facebook just decide to not have more profit? It is a private company, after all.
He affirmed that there is actually no mechanism at all to prevent Facebook and the Libra Association to simply continue being the owners of the network.
Similarities With Coinbase’s CENTRE Network
Another fact that was touched by Brito was to point out similarities between Facebook’s Libra and Coinbase and Circle’s CENTRE Network, which developed USD Coin (USDC), another stablecoin pegged to the USD.
In both cases, the centralized entities hold some currency that will back the stablecoin. USDC is based on USD, obviously, and Libra is set to be pegged to a basket of global currencies and securities. This poses one of the major challenges for Libra right now in order to decentralize.
Why? Because these funds will continue to be managed by these companies which are the current node validators. They will simply never decentralize this part because it will be too dangerous since the prices might not remain stable if they are not being controlled tightly.
No concrete measures were taken in order to explain how the decentralization will actually happen, so Brito affirmed that he has no reason to believe it ever would.
A centralized network cannot be permissionless, so you should not trust Facebook too much in this case. Also, you should remember that Mark Zuckerberg does not even share some of his power in the company, so he is very unlikely to simply let others profit from Libra.
- Source: First Appeared Here
- Published Time: 2019-06-19 19:28:16
The views and opinions expressed in the article Libra’s Path of Permissionless Is Flawed, Decentralized Token is Unlikely: Coin Center Director do not reflect that of 48coins, nor of its originally published source. Article does not constitute financial advice. Kindly proceed with caution and always do your own research.
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