MEXICO CITY, MX / ACCESSWIRE / September 6, 2019 / The rapid expansion of alternative currencies has led to a broadening interest from larger companies to enter the market themselves, as evidenced by Facebook’s recent announcement of its own forthcoming digital currency, known as Libra. While this new endeavor shares some similarities with the pioneering cryptocurrency Bitcoin, Pablo Soria de Lachica, an internationally acclaimed forex broker, notes the two currencies have stark differences in regards to several core aspects. The prominent forex broker discuss the various ways Libra diverges from Bitcoin, as it offers a more traditional form of currency with little fluctuation in terms of value - potentially placing it in a category that is entirely separate from today’s cryptocurrencies altogether.
A key difference Pablo Soria de Lachica points out is the contrast in underlying technologies that sustain the operation of each currency. With Bitcoin, each transaction is recorded anonymously on a publicly distrubuted ledger known as the blockchain - a database supported by a network of computers that prevents any tampering. This ledger is accessible to anyone on the internet, and ensures a peer-to-peer accounting system that is fully encrypted and free from reliance on intermediaries.
Although Libra does use a form of blockchain, it requires permission to access it, restricting transactions to a select group of trusted parties. This access will be mediated by the nonprofit Libra Association, a Switzerland-based collective of companies that includes Uber, Spotify, Mastercard, eBay and Vodafone, all of which must invest a minimum of $10 million to be included. To some, this restricted ledger access is at odds with the overall purpose of cryptocurrency, a sentiment echoed by Peter Van Valkenburgh, director of research at the cryptocurrency policy think-tank Coin Center. “Cryptocurrencies are defined by their lack of reliance on trusted intermediaries,” said Van Valkenburgh. “We believe that Libra is not a cryptocurrency because of its use of a permissioned ledger, and its reliance on a trusted issuer to hold and manage a fund of assets that back the currency.”
Another crucial dissimilarity between the two virtual currencies centers on their intended uses and volatility. Bitcoin offers a decentralized platform that allows parties to exchange money without going through a bank. With a hard cap of 21 million bitcoins in place, the currency is often seen as in investment that is subject to significant market volatility in terms of value. In contrast, Libra’s main purpose is to streamline cross-border payments and money transfers conducted on Facebook’s social media platforms, while maintaining a consistent value. To ensure this, the currency is tied to a range of government-backed fiat currencies and assets, mitigating the risk for inflation or devaluation. Although Libra provides a different functionality when compared to conventional cryptocurrencies, its potential to impact the global economy is widely acknowledged, particularly in regards to offering a viable and secure way to store assets separate from fiat currency. “If that’s all that Libra achieves, I think it will be a great step forward,” says Andy Bryant, chief operating officer of cryptocurrency exchange bitFlyer’s European branch.