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To celebrate the beginning of Q3, our 10,000+ subscriber milestone, and the imminent launch of Messari Pro next week, we’re providing free editions of these Unqualified Opinions all week long. Thanks for your support to date. It’s going to be a wild ride the rest of this year. :)
Starting with the top five narratives you need to follow re Facebook’s Libra, including a first-party breakdown from one of the core team members at Calibra.
Enjoy! (And tell your friends and colleagues to subscribe!)
Libra vs. The World
Libra, Libra, Libra.
It’s all anyone has been talking about these past few weeks, and for good reason: depending on how you look at the new Facebook-incubated creation, it’s either a boon for the industry or sign of the end times.
There are five takes I wanted to share with you today that are the most interesting to me personally. Many of which trickled in over the weekend.
1) Big Government: Important because crypto is now up top on the regulatory agenda. China doesn’t like it because it’s a threat to the RMB’s rising dominance, and might be too tethered to the US dollar. India doesn’t like it because it’s “a private cryptocurrency and that’s not something we have been comfortable with.” France said that Libra’s status as a reserve currency was “out of the question.” And the clown car that is the US Congress even weighed in with a request that Facebook “immediately agree to a moratorium on any movement forward on Libra—its proposed cryptocurrency and Calibra—its proposed digital wallet” given its “intention to rival U.S. monetary policy and the dollar.” We’ll keep tabs on these government actions and saber rattling because it’s going to be a forerunner to the coming battles against bitcoin.
2) Peter (Coin Center): Important because this is the gist of what power brokers in DC are going to be hearing from the folks at the industry’s top think tank...a lot. “Cryptocurrencies are defined by their lack of reliance on trusted intermediaries. While none of these terms are official or uncontroversial, 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. Libra is still part of the broader category of digital currencies along with airline miles, World of Warcraft gold, or Liberty Reserve Dollars.”
3) Ben Hunt (Epsilon Theory): Important because it’s a callout of an alleged wolf in sheep’s clothing. Facebook and its Libra counterparts are no friend to bitcoin. “What’s the Big Idea? Why it’s banking the unbanked. It’s facilitating cross-border remittances. It’s bringing the benefits of crypto to the global masses. ALL OF THIS IS TRUE. So far as it goes. And if it facilitates e-commerce along the way? if it’s possible to make a few bucks or enjoy some greater conveniences as part of Facebook and its partners executing on this Big Idea? Well, what’s wrong with that? What’s wrong is that this is how Bitcoin dies. This is how a censorship-embracing coin replaces a censorship-resistant coin. This is how the State and the Oligarchy co-opt crypto. Not with the heel of a jackboot. But with the glamour of convenience and narrative.”
4) Flashback to the DAO (Read original Pastebin): Important because…just for fun. Imagine the conversation that would happen in the event of a proposed emergency hard fork / transaction rollback amidst the consortium of Libra partners. Who would be the Dino? (“ALL EXCHANGES EMERGENCY PAUSE TRADING RIGHT NOW“) Who would be the Phil Potter? (“fuck this coin”) Good thought exercise if you want to giggle a bit, and even better if you know any of the characters in the original thread (or want to imagine what they are like based only on how they handled the DAO crisis).
5) Morgan (Head of Strategy, Calibra): Important because I’ve known Morgan only for a couple of years, but she’s always struck me as genuine, earnest, and transparent. She sent this email to some of her peeps along with the Libra announcement a couple of weeks ago, and it’s worth reading the first-hand account before diving into the deep end of Facebook-runs-the-world hysteria.
It’s me. Saying hi from a state of shock, nostalgia, and enthusiasm (and exhaustion). We made it! (...to the starting line). Today we are excited to introduce Libra: a blockchain, a cryptocurrency, and an independent association. There is a lot to read, but I want you to hear some things directly from me.
If you are receiving this email, you have been there for me from day zero, when we were first dreaming of how/if Facebook should play in this decentralized world. My gut was always yes — that, despite Facebook being Facebook, it has a lot to bring to this movement. For all of us, it’s not a question of if the future will be more decentralized than the present, it’s a question of when. We are hoping that Facebook’s scale and resources can help the crypto community get further faster.
About a year ago, a small group started thinking about how Facebook should play in this world. Lately, I’ve been walking down memory lane, and I found the first proposal we put together (in italics below).
We had clear beliefs:
We believe that the great majority of people are good.
We believe that people have an inherent right to control the fruit of their labor.
We believe that global, open, instant, and virtually free movement of money will create immense economic opportunity.
We believe that people will increasingly trust decentralized systems more than centralized ones.
We had clear intentions:
Our intention is to empower people to store their assets in a completely decentralized, safe, and trusted way. To enable people to move value to one another in near realtime, for free (or almost free), as long as the other party is part of the same network.
Our intention is for this new currency and network to create economic opportunity by enabling trade and removing structural barriers of access to the global economy for billions of people.
And, we had clear goals:
To create a stable, secure, and scalable global currency.
To turn every Facebook, WhatsApp, and Instagram account into a wallet and savings account.
To facilitate more meaningful connections by enabling a universal transaction layer.
Fast forward to today. If you read our “white paper” you will see those original beliefs, intentions, and goals infused throughout. While reading, you will also have some questions. 1. You know where to find me. 2. I tried to get ahead of some of them below.
Now let’s take it from the top:
Why did we (Facebook) kick this project off? Facebook's mission is to “connect the world” - and transactions are yet another communication form. From there, we plan to provide financial services to people and businesses, especially those who don't currently have access to them.
Why did we do this in a decentralized way? Punch line: we are hoping to build an asset that people everywhere can access. Next question: How?
Option 1: Centralized. This would have been easier, faster, and cheaper. But it would not have worked. You’ve likely seen a few erroneous media stories referencing “GlobalCoin” or “Zuckbucks,” but the reality is that a centralized global currency — owned and controlled by one company — wouldn’t work. [Insert your favorite reason why here.]
Option 2: Decentralized. “To enable a simple, global currency and financial infrastructure that empowers billions of people,” the base layer has to be decentralized. So that no one single entity can control it and no one party can unilaterally change it. (Yes, Libra is permissioned...for now. More on this below.)
Where are we now? We (Facebook) have been building Libra (the blockchain) and Calibra (the wallet). We have assembled a coalition of like-minded organizations (which will hopefully continue to grow) that will hold us (and each other) accountable to deliver on the mission. These Founding Members are coordinated by an independent, Swiss not-for-profit entity that, as of today, controls Libra. We have released Libra as open source technology. Calibra will remain a wholly owned subsidiary of Facebook.
With that, I know:
We started from scratch, but Libra builds upon years of established research and projects in the space (thank you to all who came before us): Starting from scratch was not our default instinct. We recognize the risk of building something new instead of adopting something that is accepted — and pressure tested. The challenge is that, as of today, we do not believe that there is a proven solution that can deliver the scale, reliability, and security needed to support billions of people and transactions across the globe through a permissionless network. So ultimately, we decided that our requirements were unique enough to warrant our own design.
Libra is starting as permissioned: I know, I know, I know. Similarly, this was not our default instinct. We are optimizing to a) limit Facebook’s power and b) decentralize the network from the start. But we have to bootstrap decentralization. To do that, we came up with the idea of having one hundred validating nodes. Facebook will be one of the hundred, with no special power or privilege. We have explicitly designed the association to reduce the power of any one organization, including our own. With that, we have dreams of — and are committed to — starting the transition to permissionless within five years.
Libra is designed to preserve value: Libra is not a traditional “stablecoin” because it is not pegged to a single currency, and because a global currency cannot be stable relative to the local prices of every country. That said, Libra is an asset that is designed to preserve its value over time, as it is backed by a reserve of low-volatility assets. We believe that this approach will add utility to people’s lives.
Libra has Bitcoin- and Ethereum-like privacy: Aka, pseudonymity. I personally lost a lot of sleep over this one. Where I landed: there is no right answer. This is our starting point, and we plan to follow privacy research and regulation closely and adapt accordingly.
We have many open technical and economic questions: How will gas be distributed? How will we change the validator set? A laundry list of other open questions. We get it. We have work to do (hopefully together). We have decided to build out in the open rather than present a finished product. Please follow along, and join in!
There are two “we's”: This was — and still is — a point of confusion. There is we, Calibra (a Facebook subsidiary). And there is we, Libra (the association). To-date, there has been one team building both and working together. Moving into the future, the two are distinct entities with separate teams.
I also know:
Facebook is not decentralized: #preach. Yes. That is why we have tried to disseminate power in every aspect of Libra: we set up an independent association, got other Founding Members on board, and decided to open source our code. Throughout this process, we have tried to limit Facebook’s influence.
This team wants to do the right thing: The haters are gonna to hate (hate, hate, hate, hate). And that's fine. But I will personally vouch for the motivation of the team, from leadership down, to build the “right” thing: a product that helps the people who need it the most - and that means a decentralized blockchain that is not controlled by Facebook. Plus, this is a team that wants to collaborate with the community rather than build in a vacuum.
Yet we still need to show, not tell: I know it’s hard to believe from the outside, but the team is truly dedicated to building a decentralized system. Before you say it, let me: some of our design decisions might seem to contradict that. Team debates are like those of any healthy family; I am on the cypherpunk end of the team spectrum, and that’s usually my starting position. Over the course of this project, I have been humbled by the back and forth. For one, everyone really cares. It turns out that balancing the desire for decentralization and the requirements of a system that can serve billions of people from day one is not easy. As you dig into the decisions we’ve made, I hope you factor in that lens.
We are not building all of the pieces: We (Libra) are building a blockchain, and we (Calibra) are building one wallet. There are many more pieces required for this thing to fly (exchanges, custodians, non-custodial wallets, you get it). Come one, come all. And with that...
We cannot do this alone — we need your help: Our team is strong, and I feel very lucky for that. But we don't know what we don't know. Open source development has a history of solving problems no organization can solve alone. And for Libra to work, following that model is essential. The association's members have skills in software and finance. But the crypto community has unique knowledge that is critical to the success of this project. We think this project will be stronger with your contributions, and we hope you'll join us.
So here's the deal:
Note: If you’re not already confused, I am adding a third “we” here. We/us below means you and me.
The shared dream: We all believe that the future should/will be more decentralized than it is today: sending value should be as easy as sending an emoji (or Telegram sticker).
Libra today: Libra — as of today — is not trying to make any cryptopigs fly. We have taken a conservative approach using technologies that we believe have been researched and tested in some places and more novel approaches in others. We closely follow — and are wildly impressed by — the new ideas and technological advancements in the crypto space.
The permissionless end-state: Libra’s genuine goal is a truly permissionless, open network. There are reasons we started here and work we need to do to get to where we want to be.
Libra can help us move further, faster: We all have that shared dream. And we all have the shared belief that it will happen. The question is: How long will it take? The hope is that the Libra Association Founding Members (including Facebook) — through their scale and resources — can help us get further, faster. At a minimum, Libra will help educate the world on blockchain technology and be the on-ramp for many new users. Today's announcement is not the finish line, but rather the starting line. Please help us do this right.
“Morgan, how can we help Libra?”: Glad you asked!
Read our docs: Please and thank you. There are many pieces of this puzzle, and I believe you need to read them all to get a full understanding — of the decisions we've made and why, the work we've done, and the work cut out for us.
Try out the testnet: I want to emphasize once more that this is a prototype. The starting line.
Pick it apart: The design, the implementation, the docs. Optimize for honest. We want your genuine feedback so that we can build the right thing.
Keep us honest: Our values haven’t wavered from day one. Please help us keep it that way.
And then, for all the details:
There is Libra.org, the home of all things Libra. Here you'll find the white paper and technical papers (general tech overview, consensus, the Move programming language, Libra Reserve, etc.). There's a lot to read, and there are a lot of open questions.
And there is also Calibra.com. This has more details, and a little sneak peek — surprise! — about “the Facebook wallet.”
Had enough for one day?
It’s too soon to tell which direction Libra is going to go. Will it take down bitcoin? Will it peter out amidst the weight of a consortium that has no real financial ties (yet)? Will it challenge international reserve currencies and best its skeptics in the highest offices world wide?
Probably somewhere in between all three. But my money’s still on BTC.
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Did I miss something?
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