Facebook’s announcement of its new Libra cryptocurrency set the world on fire. Suddenly, everyone was talking about cryptocurrencies again and though Bitcoin was already on a bull run resurgence, it might have helped boost the original cryptocurrency’s value, too. But Bitcoin and Libra are two very different animals, even if they maintain some similarities.
So, how does Facebook Libra compare to Bitcoin? Why might you want to use one over the other? This isn’t financial advice on which to invest in, but we’ll be seeing how the two differ in this Facebook Libra versus Bitcoin head-to-head.
Perhaps the starkest difference between Bitcoin and Libra is where you can use the two cryptocurrencies. At this point in time, Libra hasn’t been officially released, so it’s not able to be used at all. When it is released, though, perhaps in 2020, it will be a digital currency that can be used for purchases and trades on Facebook, WhatsApp, and other Facebook properties. Other supporting websites will potentially come on board at that time, most likely members of the Libra Association, but that’s yet to be confirmed.
Bitcoin, on the other hand, can be used by anyone, anywhere in the world, entirely independently of any organization or platform. If two people have Bitcoin in their respective wallets, they can send the cryptocurrency to one another with impunity, as long as someone is there to validate the transaction through mining. Trades can happen on exchanges, through direct trade websites, or even in large quantities with entire wallets in a practice that’s typically known as over the counter.
Where Facebook will ultimately control where and how Libra is used, Bitcoin is almost entirely deregulated. That’s what makes it useful for ransomware blackmail and buying drugs on the dark web, among a myriad of more legitimate uses.
Facebook was the sole developer of Libra for more than a year but following the cryptocurrency’s announcement, Facebook opened up the underlying technology behind it, the Libra Blockchain, to the world, making it entirely open source. You can have a look at the code now on GitHub. Facebook claims that it hopes many developers will expand Libra’s capabilities over the coming years.
Bitcoin’s development wasn’t entirely dissimilar. It was first developed by the pseudonymous Satoshi Nakamoto, before being handed off to the Bitcoin Foundation. Its code is open source also, with any number of independent developers working on it at any time, helping to work on its issues with scalability, security, and privacy.
While these are relatively similar paths to this point, Facebook will continue to develop Libra and since it controls the major platforms that it’s used on, we would expect it to have a major say in how any Libra enhancements are utilized on them. As a driving member of the group that will manage Libra’s further development, too (see below), it seems likely that it will have a greater say in how it evolves than any one organization has with Bitcoin.
LIBRA ASSOCIATION AND NODES
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A core tenet of Bitcoin from its inception has been that it’s decentralized. No one organization or individual can change Bitcoin transactions, nor can they alter wallets or block anyone from using it. That’s because the Bitcoin blockchain is entirely decentralized, with thousands of nodes spread all over the world helping to validate transactions. There is no prerequisite to become a node, save for having the PC hardware required to store the blockchain and a network connection to update it.
To alter the Bitcoin blockchain you would need to control more than 51% of all the computing power on the blockchain. Considering entire datacenters of specific Bitcoin mining equipment exist all over the world, you’d need billions of dollars worth of computing equipment to even try.
Libra is far more centralized. While it isn’t quite as controlled as something like Ripple and its XRP token, Libra will be managed by the Libra Association, a collection of companies from a variety of industries, who will all have a say in its ongoing development and operation. They’ve paid $10 million a piece to be there and Facebook has said that they’ll all get a vote in matters pertaining to Libra’s evolution. It plans to have 100 members by the end of the year.
Those members can also run nodes if they wish, though to start with Facebook is expected to run the majority of them. That means that with a simple vote, the members of the association could block trades, rewrite the blockchain, or even stop it temporarily if they gained a majority within the Association.
That’s great for helping to block criminal activity on the Libra network and could help return any stolen Libra to the original owner, but it gives Facebook and the Association far greater powers over the cryptocurrency than anything any Bitcoin node can have.
WHAT THEY’RE WORTH
No one quite knows what Libra will be worth just yet. It could be a billion dollars per token, or a couple of cents. It doesn’t particularly matter until it starts to be distributed, but when it does become public, the value should remain relatively constant. Like fiat currencies, Libra will be backed by something to help prevent its value from being too volatile. Facebook has chosen a selection of real-world currencies to base Libra’s value on, so even if one crashes, it shouldn’t take Libra too far with it.
There has been some concern over which currencies will be chosen, however, and whether the addition of new currencies as backing in the future could affect the price of the tokens — raising questions over the monopolistic power of Facebook and the Libra Association.
In comparison, there is nothing backing Bitcoin other than what people are willing to pay for it. That’s why it can experience such huge swings in the value, and why the next halving event in 2020 could cause such disruption as miners temporarily hold on to their Bitcoin rather than selling, to help inflate the value to make the process profitable again.
TRUST AND PRIVACY
As much as some might tout Bitcoin as a private, anonymous cryptocurrency, it isn’t. It’s semi-anonymous, with no way to prove someone owns an unaffiliated account or wallet, but transactions can be tracked on the very public blockchain. That’s why those seeking extra privacy and anonymity use tumblers to further obfuscate their activity.
Altcoins like Monero offer much more robust security for the privacy-conscious.
Libra, however, is an unknown in this field. It’s not yet clear whether transactions can be publicly tracked, or whether that’s something that only Facebook and the Association will have access to. Facebook has stated publicly that it plans to separate church and state and keep the Facebook social network entirely separate from Libra, despite it acting as the main platform for its usage. But with Facebook’s repeated privacy gaffs over the years and its often hostile stance toward the sanctity of personal data, there are concerns that Facebook could leverage Libra purchases and transactions to further its revenue from selling personal data of users, or to make advertisements even more targeted.
While Bitcoin might not be perfect in its privacy protections, its lack of a singular point of oversight does make it far easier to trust for many.
Bitcoin is very hard to regulate. Companies and governments could make the in and off ramps for Bitcoin investment and divestment difficult, but as long as nodes exist somewhere in the world, Bitcoin can be transacted. It could be traded for cash, for goods, services, and all manner of commodities that aren’t held by centralized banking organizations. It would be practically impossible to stop Bitcoin from being used entirely or to even regulate it effectively.
Libra, on the other hand, caused a huge stir in global governments the day it was announced and its white paper revealed. Although no regulations have yet been placed on it, governments are already keen to investigate it and have warned they may regulate it in the future. There may also be attempts at taxation, if possible.
Since Libra is a relatively centralized cryptocurrency, it’s perfectly viable to regulate in these manners. While it would still be a technological hurdle, governments can throw their weight against Facebook if they don’t like what’s happening. Not so with Bitcoin.