Libra Vs Bitcoin

The optimist in me loves Bitcoin despite its many shortcomings. I don’t think Bitcoin will ever be as popularly used as Libra or another stablecoin payment system. Despite that, the optimist in me suggests Bitcoin is a great buy.

The realist in me recognizes how powerful Libra could be. For those of you who don’t know what Libra is, it’s a collateralized crypto-payment project by Facebook. Libra plans to offer basket of stablecoins like USD, EUR & GBP.

Here’s an intro video of the Libra Project.

There are many collateralized stablecoins already out there in the market so Libra isn’t planning to do something that isn’t done before. However the unique thing about Facebook is that whatever they do, they can plug and play that to 2.5 billion users.

Libra’s Advantages

Facebook demos that they will make sending money as simple as sending emojis with features to do so built right within the Facebook’s family of apps. Libra’s unique proposition in comparison to other available options is users and ease of use.

Libra or other stablecoins have several advantages over Bitcoin. The crypto-assets will be fully collateralized and backed by fiat currencies. The crypto-assets will be stable in value and the transactions would be really fast.

.. But Money Is Already Digital?

However, if you think about it, money is already digital. When you pay with your debit and credit cards, or you send money using your bank, or through PayPal, you’re passing value digitally. Money has been digital long before Bitcoin or any crypto-assets.

Digital is generally the opposite of anonymous and censorship-resistant. When you say digital, the information about your money is hosted on someone’s server. Who ever controls the server can see what you do with your money and can intervene, reverse or block actions that you may take with your money.

Cash in comparison is not digital but anonymous and censorship-resistant.

Bitcoin’s Advantages

Bitcoin’s # 1 strength is seldom talked about. It is the finite supply of Bitcoin which makes it deflationary in nature instead of inflationary which USD and all its digital variants including stablecoins & Libra are. The second most important feature is that Bitcoin is censorship-resistant because it is decentralized with no central control. The third one about anonymity could be argued upon. It does an OK job at being anonymous but since the ledger is out in the public, it isn’t fully anonymous.

Conclusion

The feature of stablecoins being stable like USD or EUR is not just a feature, it’s also a bug. One of the biggest disadvantages of money as we know it is that you can’t just hold on to money without losing value. You’re forced to have your money invested in real-estate, stocks & bonds for it to not lose value. Bitcoin as a money is designed to be free forever from the central bank’s control over the money’s supply and its movement. Because of this Bitcoin is designed to grow in value and hence it can not be stable.

The following table could be helpful

AssetDigitalDeflationaryCensorship-resistantStableAnonymous
BitcoinYesYesYesNoYes
CashNoNoYesYesYes
Stablecoins / LibraYesNoNoYesNo

The Open Internet That I Envision

Just yesterday, my Twitter account was suspended. It was suspended because Twitter thought I was involved in “artificial account interactions and engagements”. On appeal, my account was reinstated with a warning that “any future violations could lead to a permanent suspension”. But I didn’t engage in the above-mentioned behavior.

Despite no policy violation, my account now has what we marketers call a “strike”. Future strikes mean, I’ll lose my account permanently. And I’ve a serious problem with this kind of policing.

Twitter and other social media gained popularity because they provided a place to speak independently providing censorship-resistant platforms. But that has slowly been taken away in the name of keeping community safe from abuse and misleading information.

My Breadcrumbs

Because of the obvious problems with the internet today, I no longer feel safe hosting my thoughts on other platforms including Facebook & Twitter as I do not see them as a permanent place of storage for my thoughts and information which will eventually be governed by them, can be deleted as per their will, and removed permanently from the internet. Such web-applications pretend to provide a free and impartial place but are no longer censorship-resistant.

I’ve written 22,500 tweets so far over the period of 10 years, all of which can be deleted by the “propriety” centralized automated system removing my breadcrumbs completely.

Internet Is Broken Today

Just last week, founder of twitter Jack acknowledged these problems himself by doing a round of Tweetstorm

As mentioned by Jack, social media today no longer serves as a place to simply host content, instead it has become recommendation engine of sorts where content competes for attention also incentivizing content creators to create attention-grabbing content which can often be controversial, gruesome or simply negative.

This sort of recommendation engine is not just limited to social media. It has also taken over emails. Gmail now powers over 50% emails in existence, and controls/prohibits 97% of emails from reaching users’ primary inbox using similar recommendation engine approach.

The problem with these propriety recommendation engines is that you can’t view the hosted content in a different manner using alternatives yet as mentioned by Jack, but it could be possible if social media was a protocol, and Twitter one of the clients with one of the available recommendations engine. The consumer of content could pick and choose any recommendation engine he preferred.

The Open Internet

I read a very interesting post published by Albert Wenger, explaining why finally the time is now for open protocols. The traditional caveat with open protocols (like HTTP, SMTP etc) has been that there wasn’t a big enough financial incentive associated with creating, contributing to or maintaining an open protocol.

This can finally be solved with token-economics as mentioned by Jack as well in his tweet.

An excerpt from Albert’s blog explains how cryptographic tokens can rescue the internet

Now, however, we have a new way of providing incentives for the creation of protocols and for governing their evolution. I am talking about cryptographic tokens. You can think of these like the tokens you might buy at a fair to get on a ride: different operators can have their own rides and set their own price in terms of tokens. You only need to buy tokens once (in exchange for fiat currency) and then can use them throughout the fair. With blockchains we now have a way of issuing and redeeming these tokens digitally (the underlying blockchain can be Bitcoin or Ethereum or possibly its own as in the case of Steemit).

A for profit company can now create a new protocol and create value for itself (and its investors) by retaining some of the tokens. If the protocol becomes widely used, the value of the tokens will increase. For instance, think of a decentralized storage service (a la Amazon’s S3). Anyone can implement the storage protocol in whatever language they want to as long as they meet the protocol spec. They can then get paid in the relevant storage tokens. The original creator of the protocol will make money to the extent that it is adopted and to the degree they have retained some of the tokens (so they can sell them at a higher price later on). This is not hypothetical as there are a variety of such protocols out there, including Storj, SIA and Filecoin.

I can’t emphasize enough how radical a change this is to the past. Historically the only way to make money from a protocol was to create software that implemented it and then try to sell this software (or more recently to host it). Since the creation of this software (e.g. web server/browser) is a separate act many of the researchers who have created some of the most successful protocols in use today have had little direct financial gain. With tokens, however, the creators of a protocol can “monetize” it directly and will in fact benefit more as others build businesses on top of that protocol.

With newfound financial incentives now available to create open protocols, the stage is finally set to make pave for the open and decentralized internet.