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Facebook, Libra, and the Long Game

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Re: Facebook, Libra, and the Long Game

#111

Post by ewzimm »

simias wrote: post #57
bhupy wrote: post #36

Earlier quoted context omitted.

What's the counterargument to this?

The incentives don't seem to align in that direction. What would be the point for Facebook to create a promote such a currency if they can't control it at some level? I fully expect that even if the core of the cryptocurrency might actually be decentralized and not directly controlled by Facebook (and I don't believe that either, for the record) the practical implementation of this will give Facebook more than enough…

Personally, I don't see anything suspicious about Facebook's stated intentions. They benefit by having more potential customers with frictionless access to digital purchases. They don't need to control the currency if they control the wallet. Like Gmail, they'll refuse to connect with certain groups, but if a controversial group like Infowars is banned by Calibra, you could just move money into a secondary wallet and then to Infowars if you wished. Unlike Gmail, you will know immediately if what you sent is being rejected by the platform and needs to be funneled through another channel.

Facebook has nothing to gain from decentralization when all their business depends on slurping up data? That couldn't be further from the truth. Reliance on selling personal data is a huge flaw in the business models of companies like Facebook and Google, and they're eager to diversify. Moving money around has been one of the top businesses to be in since the start of civilization, and it's an obvious target to diversify into.

Your last comment about libertarians being shortsighted is somewhat unrelated, but I have to disagree. That philosophy is all about avoiding expedient means of doing things if they have long-term consequences. Using the force of government is almost always the fastest and most effective way of accomplishing a goal, but the escalation of centralized power over time can lead to catastrophic results, and libertarian-minded people are willing to give up short-term benefits to avoid those long-term consequences. Likewise, businesses can also be short-sighted at times, but they do occasionally employ people who see that too much centralization can lead to collapse in the long-term, and the thinking behind Libra seems to reflect that mindset.

Re: Facebook, Libra, and the Long Game

#112

Post by carleverett »

bhupy wrote: post #67
simias wrote: post #57

Earlier quoted context omitted.

The incentives don't seem to align in that direction. What would be the point for Facebook to create a promote such a currency if they can't control it at some level? I fully expect that even if the core of the cryptocurrency might actually be decentralized and not directly controlled by Facebook (and I don't believe that either, for the record) the practical implementation of this will give Facebook more than enough…

But given the system laid out in the white paper, what specifically gives Facebook the ability to exert this kind of control, even in the long run? I think we all agree that Facebook is incentivized to behave in certain ways, but if self-limitation is baked into the system, how does that matter? This is a genuine question for which I would love an answer.

The white paper explicitly gives the Libra Association (i.e. Facebook and its partner validators) governance control over the cryptocurrency.

Here's an easy scenario to imagine that shows how incentives would get misaligned: Facebook and the other validating nodes of Libra are financially compensated by interest from the collateral for Libra tokens. If Libra is successful in its mission, it will become a global currency that's stronger than the assets that underly its collateral.

When this happens, suddenly Libra being a collateralized stablecoin stops making sense. Kind of like when the US Dollar no longer needed to be backed by gold since it was a strong enough currency/unit of financial measurement on its own. The US then got rid of the gold standard and has since saved itself untold money in custodial expenses they would have been paying to hold all that gold.

The Association would never do this for the Libra however since it is literally how they are funding their own operation. Even if it's in the best interest of all Libra users, the centralized governance association with all of the authority to make this improvement would choose not to because it's not in their best interest to do so.

There's no leap of imagination there - it's just how power and incentives work.

Re: Facebook, Libra, and the Long Game

#113

Post by Spearchucker »

tlb wrote: post #80
gooseus wrote: post #45

> The largest leap will come last: Libra as a genuine currency, not simply a medium for transaction. This will be function of volume in the previous two use cases, and is understandably concerning to governments all over the world. Well that's certainly an understatement. This is literally the only mention of government through-out the entire article. The only mention of banks is in the previous paragraph stating the…

Oligopolies do sometimes end when conditions change. People once thought that TV news, highly regulated by the government, would have an indefinite monopoly. Credit cards irritated incumbent banks in the 60s. It’s not inconceivable that banking’s control of money could end.

Only when (and if) the majority of places we pay accept the new form of payment. Someone was frothing at the mouth the other day about being able to send cash to family in Africa using this. Not realizing that a toll must be paid to convert back to cash. Which is about all that works in many places there.

Re: Facebook, Libra, and the Long Game

#114

Post by jshowa3 »

Here is the important thing to understand about the Libra Association: while its members — who again, are the validators — do control the Libra protocol, Facebook does not control the validators. Which, by extension, means that Facebook will not control Libra.

But Facebook does control Libra just by virtue of providing infrastructure. They're also part of the consortium. So again, why is the author trying to make it seem like Facebook has no control?

Re: Facebook, Libra, and the Long Game

#115

Post by munificent »

52-6F-62 wrote: post #68
warp_factor wrote: post #11

I'm crossing my fingers that this pseudo crypto money never takes off. Having Facebook control this would be so terrible and the proof that we didn't learn anything over the last couple months. Don't fool yourself even though they released a white paper and some pseudo decentralized schemes this is no different than a casino chip. Unfortunately I feel like it might pick up and become a thing.

I've dabbled out of morbid curiosity in the space previously—but I'm in the same boat. Out of all of the good-will projects they could spearhead if they want to turn the tides of FB's reputation, they decide to try and supplant money. To me it just screams that it's one more domain they want to assert some control in. I find it depressing.

Reading between the lines in the article, I assume this is 100% Facebook just trying to enable WhatsApp to compete with WeChat.

Re: Facebook, Libra, and the Long Game

#116

Post by munificent »

simias wrote: post #57
bhupy wrote: post #36

Earlier quoted context omitted.

What's the counterargument to this?

The incentives don't seem to align in that direction. What would be the point for Facebook to create a promote such a currency if they can't control it at some level? I fully expect that even if the core of the cryptocurrency might actually be decentralized and not directly controlled by Facebook (and I don't believe that either, for the record) the practical implementation of this will give Facebook more than enough…

> What would be the point for Facebook to create a promote such a currency if they can't control it at some level?

It gives them their a payment processor they can put into WhatsApp to compete with WeChat in China. They know they can't do "Facebook Coin", so they are doing the nearest thing they can, a consortium.

Re: Facebook, Libra, and the Long Game

#117

Post by drcode »

MBCook wrote: post #52
drcode wrote: post #28

Earlier quoted context omitted.

No worries, they're just gonna take a pic of your government ID and fingerprints for KYC requirements which are securely isolated in a vault in Switzerland where they will remain 100% safe, except in that rare instance where you need to buy a cup of coffee, and they therefore need to inspect all your records to make sure you're not funding terrorism. /s

From the various articles I’ve seen it looks like they don’t think they need to follow KYC because it’s not ‘real’ money. I’m sure the government will have something to say about that.

Yeah, that's really what this is all about- Zuck probably keeps asking stuff "can't we just have a payment button right here in an FB baby shower announcement?" and his legal departments says "you can't do that for lots of regulatory reasons, including KYC" and so Libra was born.

Re: Facebook, Libra, and the Long Game

#118

Post by jpkiser »

MBCook wrote: post #48
scarface74 wrote: post #43

Earlier quoted context omitted.

The “tarnished brand” of Facebook is hugely overstated. Facebook is not losing users. Libra is already “spun off”. FB only owns a tiny share.

The fact that people are willing to trust FB with their personal photos or favorite political memes doesn’t mean they’re willing to trust them with money. And it doesn’t matter who controls Libra if everyone thinks of it as ‘the Facebook money thing’.

No, it doesn't matter if everyone thinks of it as 'the Facebook money thing' if that's not what it is. The only thing that people's perception effects is whether or not governments influenced by said perception allow Facebook to build a wallet in with their service in those regions. Libra the currency will be a thing regardless.

Re: Facebook, Libra, and the Long Game

#119

Post by holy_city »

simias wrote: post #74
gooseus wrote: post #45

> The largest leap will come last: Libra as a genuine currency, not simply a medium for transaction. This will be function of volume in the previous two use cases, and is understandably concerning to governments all over the world. Well that's certainly an understatement. This is literally the only mention of government through-out the entire article. The only mention of banks is in the previous paragraph stating the…

>I really don't know why this isn't a larger part of this conversation. That's been the elephant in the room ever since Satoshi published its paper more than a decade ago. When I discuss with cryptocurrency enthusiasts I often get the impression that they think that banks are this kind of useless parasite body that somehow appears like mosquitoes around a pond in summer. That they only serve to basically operate ATMs…

Someone once told me that U of Chicago's business school used this classic to describe banking:

https://www.youtube.com/watch?v=iPkJH6BT7dM

Re: Facebook, Libra, and the Long Game

#120

Post by boh »

Adding the words blockchain and cryptocurrency to this new Facebook initiative gives it an air of "innovation", the sort that reacts to criticism with "this is too new and innovative for you to understand", and "stogy governments don't like to innovate like we do, so they want to stop us with old timey regulation (and consumer protections)".

Libra is essentially an ETF. It's a vehicle that will take deposits from customers and invest them in interest-yielding securities and currencies. Unlike a bank, customers forfeit their right to gain interest from their deposits and it will instead service operating costs (and any money left over goes to founder members). Libra is effectively planing to receive deposits, manage money and process transactions, despite not even attempting to meet regulatory requirements (though they plan to "shape the regulatory environment"--their words). What's so innovative about this venture is its potential for further data harvesting and potential income streams. Facebook isn't going to harvest any data produced from this venture--that is unless the customer willingly gives it to them. Why would a customer willingly provide this access to Facebook? I think anyone using FB for the past decade can answer that question--those regular TOS updates are hard to follow.

Libra isn't so much a subversion of the existing order, as it as an act of financial engineering to service a social media company. What it "could be" doesn't justify what it already is.

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