With Facebook announcing the launch of Libra, a new cryptocurrency, we can no longer turn a blind eye to this economic revolution.
What is a cryptocurrency?
Cryptocurrency is electronic money store in e-wallets. You can transfer this currency using Blockchain technology, which allows people to see the transactions without having the ability to change the data. It has, and will, revolutionize the way we store money, pay for goods and services, and do business.
So what’s new with Facebook’s cryptocurrency?
While Bitcoin is a popular currency that has been spoken about, Facebook has launched a currency called Libra. Facebook does this with 27 other companies like PayPal, MasterCard, Spotify, PayU, eBay, etc. Facebook will not have complete control over the currency, but instead get just a single vote in its governance like other founding members of the Libra Association, including Visa, Uber and Andreessen Horowitz, which have invested at least $10 million each into the project’s operations. (source: Techcrunch)
What is Libra?
Libra is a digital currency that is aimed at breaking class barriers by making money accessible to everyone.
“Moving money around the world should be as easy and cheap as sending a text message. No matter where you live, what you do, or how much you earn.” – This is what they believe.
How Does Libra Work?
Facebook will also launch a wallet called “Calibra”, which will be available on WhatsApp and Messenger. Along with this, the other companies that are collaborating to make Libra will develop and design their own means to make this currency more easily available and accessible to add. There will be more than 100 companies associated with making this effort successful, including Venture firms, technology companies as well as eCommerce companies.
Existing digital currencies like Bitcoin and Ethereum weren’t engineered to scale. Using no control mechanism to anchor their prices, the currency was susceptible to huge and unpredictable swings, making it difficult for merchants to accept money. But with Facebook’s relationship with 7 million advertisers and 90 million small businesses plus its user experience prowess, it is well-poised to tackle this juggernaut of a problem.
How will Libra make money?
Libra Association will earn interest out of the money that users cash in, in order to maintain the stability of the currency. “If more commerce happens, then more small businesses will sell more on and off the platform, and they’ll want to buy more ads on the platform so it will be good for our ads business,” says David Marcus, Facebook’s VP Blockchain
How does Libra affect consumers?
There are more than 1.7 billion people in the world who do not have access to the traditional banking system. Cryptocurrencies take digital transactions to the next level. Currently, even with so much digitization efforts in India, we are required to have bank accounts to enable digital transactions through apps like PayTM or Google Pay or PhonePe. Cryptocurrencies help eliminate the traditional banking system completely by allowing you to have an online account and transact through that. With cryptocurrencies, they can go to the nearest store, buy Libra pseudonymously or exchange it for cash online and spend it using the interoperable wallets. Your real identity won’t be tied to your publicly visible transactions. This means that you do not need to worry about hackers using your personally identifiable information and hacking your bank account during online transactions.
With almost 0 transaction fees, it enables digital payment across smaller amounts (even a few paisa/cents worth), which was earlier not possible with credit & debit cards.
How will Libra affect brands and marketers?
Here is how, we at Wolfzhowl, decode the impact of cryptocurrency on marketers:
- Cryptocurrency will make eCommerce stronger: Security of paying online a major deterrent for consumers to shop online. With a transparent and secure method like Blockchain, consumers will find it easier and safer to pay via digital currencies. Also, with no “exchange rates” in the picture (theoretically speaking), markets open up globally.
- Pay-to-Play Model: Individual marketers would be able to pay the end-consumer for their personal information instead of relying on platforms like Facebook and Google for the same. Customers could opt-in to programs that collect their personal data in exchange for rewards or exclusive deals. While it may seem like an expensive proposition, it may help brands accurately target audiences instead of working on assumptions.
- Elimination of 3rd party media houses: Blockchain enables the elimination of middle-men in digital advertising. For example, a brand wants to place an ad on a website ABC. In order to buy inventory on ABC, it needs to go through a 3rd party like XYZ. XYZ then verifies the genuineness of the advertiser and ensures that the ad content is not malicious. In order to do this, XYZ charges ABC a certain fee. Blockchain eliminates this process. Blockchain users can be verified through the network, where people can know what they are getting and what they are paying for.
- Libra will not store information for ad targeting: While Libra is an offering by Facebook (and other brands), none of them will use the data of the users for advertising. The launch of Calibra that handles the crypto dealings and users’ privacy will not allow the data to be used for ad targeting.
- Incentives to early adopters: Initially, early adopters will be incentivized to start using Libra. Wallets that pull users through the Know Your Customer anti-fraud and money laundering processes or that keep users sufficiently active for over a year will be rewarded. For each transaction they process, merchants will also receive a percentage of the transaction back.
Instigations for brands to use Cryptocurrency:
- Coffee shops like Starbucks can create add the cryptocurrency option to their existing apps and offer discounted prices for those paying via digital currency
- Brands like Seniority.in which cater to senior citizens can set up digital payments through WhatsApp, enabling the seniors to buy directly through the WhatsApp portal instead of going to the website
- Money Transfer & Forex companies like Western Union can issue cryptocurrencies which can be cashed out in the local currency at the destination in order to avoid loss and theft of money. If the country uses cryptocurrency for transit, most of the travelers will not even need to change the currency
So far, this is all we know about Libra. It’ll be interesting to keep an eye on its development. What are your views on Cryptocurrencies? Share them with us in the comments below.