Facebook has made headlines of late with its plans to create a cryptocurrency. The social media company has been forced to defend the project on Capitol Hill, amid regulatory concerns around data privacy and potential illegal usage, while the G-7 has warned it poses “serious” legal risks.
One of the biggest differences lies in the underlying technology behind both currencies. With bitcoin, transactions are recorded anonymously on a public ledger known as the blockchain. Unlike bitcoin, Libra’s blockchain is permissioned — at least for now — meaning that transactions can only be added to it by a group of trusted parties. That’s where the Libra Association, a Switzerland-based consortium of companies including Visa and Uber, comes in. Each of the nonprofit organization’s members have invested a minimum of $10 million into the project.
Different use cases
Bitcoin’s white paper describes the virtual currency as a peer-to-peer payment system, allowing people to exchange money without going through a bank. Libra’s primary purpose is to be used in cross-border payments and money transfers. The currency is tied to a basket of government-backed currencies and other assets, to avoid the volatile swings often seen in cryptocurrencies like bitcoin and ether. “Bitcoin supply is fixed and cannot react to the market’s demand,” the Saga Foundation’s Sadeh Man said. “Libras are created or burned when one of Libra’s authorized resellers deposit or withdraw money from its reserve.”
Different regulatory questions
Facebook’s currency has taken the spotlight when it comes to talk of regulating cryptocurrencies. But some worry the company’s blockchain project could be lumped in with other digital assets by regulators. That would be problematic given the difference between Libra and a digital currency like bitcoin. Whereas bitcoin rules out the need for financial intermediaries, Libra’s model is reliant on the entities which form the Libra Association, Coin Center’s Van Valkenburgh said.
Bitcoin vs Libra: Here are the key differences between the two cryptocurrencies, CNBC, Jul 19