What if Libra Was Built on Ethereum?
Hello defiers! The biggest thing in crypto these past two days has arguably been the hearing on Facebook’s cryptocurrency Libra in the U.S. Congress. Here’s a DeFi take.
Maybe Libra Should Have Launched on Ethereum
U.S. lawmakers spent that last two days grilling the creator of Facebook’s digital currency Libra, and the Internet is awash with hot takes, but I’ll focus on the one that’s most pertinent to this DeFi audience: Maybe Facebook would have been better off doing this experiment on Ethereum?
This is what Earn.com co-founder and Coinbase’s former CTO Balaji Srinivasan said on CNBC. He added on Twitter that launching on Ethereum or on another decentralized chain would only solve half the problem (having the chain get shut down), but the company could still face penalties.
Still, removing the need to build an entire new chain, and even a new token if they had chosen to use an existing one, would have made the process easier for them and potentially also easier for regulators to swallow.
Throughout the hearing, it became clear U.S. Congress really dislikes Facebook. They questioned, and rightly so, whether a company which has consistently violated users’ privacy, helped legitimize “fake news” and potentially compromised the U.S. 2016 election, should be able to also handle billions of people’s financial information on top of the data they already control and profit from.
For all these reasons they pressured David Marcus to commit to holding off from launching Libra until the social media giant is able to ease regulators’ concerns and get all the necessary approvals. This is happening in just one, albeit large, country. Facebook will face similar questions from jurisdictions all over the world. Suddenly Libra’s launch date looks less clear and so does its scope. Maybe it will have to make some compromises.
But what would have happened if Facebook had launched a global payments network on top of a permissionless blockchain, like Bitcoin or Ethereum? Well, it’s right there in the name: They wouldn’t have had to ask for permission. Or at least at lot less than what they’re having to do now.
Maybe they could have integrated a digital wallet onto their different messaging platforms, with a good user interface that would have put digital currency in people’s hands in no time and they would already be on their way to achieve the stated goal of enabling people to move money around the world “as easy and cheap as sending a text message.” This is what crypto already does.
True, regulators would still be able to shut down the digital wallet in their jurisdictions, especially if it connects with fiat money and bank accounts. But if Facebook had launched Libra as an ERC20 token (maybe under Regulation A+ in the U.S.), it would be a lot harder to shut that down.
They could also just have used an existing stablecoin, and for that matter, integrated with existing applications for transferring and spending digital currency –but then they wouldn’t have been able to make as much money from the whole thing.
From the line of questioning (will Facebook gather users’ data? will Facebook control who can become a validator? why aren’t regular users able to form part of the network?) it seemed that regulators who hadn’t already looked closely at blockchain technology before, were forced to understand the virtues of truly decentralized systems. Many of those who had, took the chance to expose their largely positive views.
By the end of the hearing, I couldn’t help but smile as men and women in ties and pearls extolled cypherpunk ideals, while bashing what is now a cornerstone of the U.S. corporate establishment.
Facebook might have missed its chance, but real crypto is still here for everyone else.
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