Cryptocurrency purists said that Facebook’s plans to launch a new digital coin would not create a true cryptocurrency, though they are holding out hope that the effort might nonetheless bring digital money into the mainstream.
Critics said the plans for Libra, backed by a consortium of 28 groups including Uber, Spotify, Visa and Mastercard, did not represent a genuinely decentralised digital currency.
While Facebook intends for Libra to eventually become decentralised, transactions will initially be validated by the founding consortium. This structure allows the currency to operate and scale up faster, but is anathema to those who see cryptocurrencies as an anonymous alternative to the central banking system.
“This project is the antithesis of bitcoin and is another step towards total control of data and users,” said Phil Chen, decentralised chief officer at phonemaker HTC’s blockchain-driven Exodus project. “This global coin is the most invasive and dangerous form of surveillance they have devised thus far.”
On the online forum Reddit, one commenter described Libra as a “Silicon Valley surveillance paradise” but acknowledged that it was still a “pretty significant development in crypto”.
The price of bitcoin, which has been volatile over the past 12 months and passed $9,000 at the weekend for the first time in more than a year, has been flat since the announcement. Other major cryptocurrencies were also unmoved or only slightly down on the news.
“Instead of a monopoly it’s an oligopoly,” said Gavin Brown, associate professor in financial economics at Manchester Metropolitan University and director of cryptocurrency hedge fund Blockchain Capital.
But the structure might be sensible, he added: “There needs to be some level of institutionalisation in order for adoption to happen and regulators to get comfortable.”
Facebook also chose not to use the “proof of work” mechanism that underpins cryptocurrencies such as bitcoin, under which computers solve problems to create a block chain and be rewarded with newly-minted currency, because of its “poor performance” and “high energy (and environmental) costs”.
“At the end of the day, Libra is not a true blockchain,” said HTC’s Mr Chen.
Richard Dennis, founder of crypto network Temtum, said the proof of work model had been shown to be inefficient, and that bitcoin would be “out of date” soon.
But he added, along with others, that Facebook’s project had “rejuvenated” the crypto community. “I was told it’s crypto Spring,” he said. “This is starting to feel like 2017 again.”
Many crypto enthusiasts hope that Facebook’s ambitious plan will attract new people to what has remained a relatively fringe world, and improve the general public’s understanding of cryptocurrencies and blockchain technology.
“It’s definitely going to push it further into the mainstream. I think it closes the door on cryptocurrency just being a ‘Dutch tulips’ kind of thing,” said Jim Migdal at Coinbase, one of Libra’s founding members. “With this, I think there’s some clear opportunities to show how you can use crypto every day.”
Under the proposed system, users will be able to convert US dollars and other international currencies into Libra, which will facilitate rapid money transfers and online transactions with almost no transaction fees. This will be especially valuable to the 1.7bn people worldwide without bank accounts, who will be able to carry out payments via their phones, said Facebook, which is leading the project.
However, Marcus Swanepoel, cofounder of bitcoin company Luno, said being too “intellectually pure” in choosing which crypto systems to endorse was not pragmatic. The consortium’s plan “is an important interim step,” he said, which demonstrates how people’s thinking about crypto — and its potential for mainstream adoption — has changed.
Many were also hopeful that Libra would have long term benefits for rivals in the crypto space — though acknowledged it could wipe out other stablecoins.
One Reddit user said Facebook’s coin would “draw a huge amount of free publicity to the king of cryptocurrency, bitcoin”.
Mr Swanepoel said Libra was not a direct competitor to bitcoin, which “might be more store of value” than a currency for daily transactions. The widespread adoption of Libra would “lift the entire sector”, he added, although other stablecoins could “become redundant overnight”.
Others said they hoped the consortium of big names would lend credibility to crypto, which has been plagued by concerns that it is insufficiently regulated and often used by criminals on the dark web.
“I think the general sentiment from folks in the crypto/blockchain space is positive,” said Joe Lallouz, chief executive of Bison Trails, another of Libra’s members. “I think, from the outside looking in, it’s natural to have that scepticism. But as it goes live, I think that will fade away.
“The project signals the potential to have real reach and change that a lot of blockchain projects have tried to achieve but haven’t managed.”