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Why use Libra instead of traditional currencies?

December 19, 2019 By Susan Paige Leave a Comment

According to Facebook, a digital currency based on blockchain technology offers advantages over traditional financial services. “The technology on which it is based will be of the open source type, so that businesses and developers around the world can manufacture tailored services that meet their needs,” explains the technology company.

Since the blockchain minimizes the number of intermediaries, it will allow the costs associated with sending money “to be kept as little as possible”.

What similarities and differences does Libra have compared to other cryptocurrencies, such as bitcoin?

Unlike the most popular cryptocurrency in the market, Libra will be backed by a basket of underlying assets (for example, other currencies such as the euro and the dollar). It will have a reserve made up of bank deposits and debt of several countries that will set its value. 

On the other hand, Libra technology is designed to support a large number of transactions with very low latency, unlike bitcoin. In addition, Facebook plans to return the money to those who were victims of fraud or theft of cryptocurrency. With this he wants to mitigate one of the main fears of investors about virtual currencies, that of wallet theft.

On the side of the similarities, Facebook presumes that the currency will be decentralized (it will not be regulated by any agency such as the ECB or the Fed), resistant to censorship and that it will also offer exchanges without intermediaries.

How much will Libra be worth?

The Libra Association has set the value of the currency in one US dollar per unit, “being able to fluctuate within a narrow band. 

How are pounds generated?

The amount of pounds in circulation will depend at all times on your demand. To coin the new cryptocurrencies, the Association of the Pound will authorize resellers who must deposit in the reserve an equivalent value in other currencies to the amount they want to create, the opposite process occurring in the event that coins are withdrawn from circulation.  So browse thelibrasoftware.com and get more detail about bitcoin.

How does the Libra reserve work?

The reserve will be distributed geographically through a network of custodians with investment grade (which implies little risk in the image and similarity of debt issues) to limit the counterparty risk. 

Where does the money from the reservation come from?

The money in the reserve will come from two different sources. On the one hand, investors who buy the currency and on the other users of Libra. The main source of money for the reservation would be the purchases made by the users. Whenever someone buys a Pound, the currency with which he has made the acquisition is automatically stored in the reserve.

– What type of assets make up the reserve?

As detailed by the Pound Association, the assets will be of low volatility, including bank deposits, sovereign debt and currencies issued by the world’s leading central banks. The Association is committed to only buying debt from countries with stable governments with a low probability of bankruptcy and who are not likely to experience high inflation. Above all, purchases would focus on short-term debt, which would allow “to easily adjusting the size of the reserve”.

What impact will it have on SMEs?

The first benefit that is seen with Libra is the accessibility of economic transactions for everyone, it is enough to have a personal page on Facebook, it does not even have a bank account. 

Everything indicates that Libra can become the most widely used form of payment in the world to acquire all kinds of products and hire different services.

Until now, cryptocurrencies are something that was far from the general public, but Libra seems to be available to everyone, and the first SMEs that manage to offer products and services charging with this currency will undoubtedly have a competitive advantage.

It also allows any freelancer to quickly and easily offer their services on the Internet worldwide, without problems to charge.

International transactions acquire a value of immediacy and low cost, by avoiding or minimizing commissions, something that for companies that adapt to these transactions, will allow them easy access to the global market.

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