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Facebook, Libra, and the Long Game

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Re: Facebook, Libra, and the Long Game

#131

Post by kyshoc »

svd4anything wrote: post #103
yingw787 wrote: post #94

Earlier quoted context omitted.

When you're talking about using a different currency, you're not replacing Bank of America or JPMorgan Chase. You're replacing the Federal Reserve, Bretton Woods, and the U.S. government. Government's grasp on what money should mean is one of the primary ways democratic governments exercise power.

> Government's grasp on what money should mean is one of the primary ways democratic governments exercise power. Could you explain that statement? I can’t help but counter that isn’t often the government’s control of money that enables the rise of authoritarian governments! Perhaps privatization of currency might strengthen democracy not undermine it.

You're not wrong, but here's the problem: government can become autocratic, and private companies will become autocratic.

At least with a government you have a shot at being ruled by something other than a private entity's self-interest.

Re: Facebook, Libra, and the Long Game

#132

Post by pavlov »

drcode wrote: post #15
pavlov wrote: post #8

Earlier quoted context omitted.

It's not entirely free: those companies are paying $10M to run a Libra node. That's still pocket change as a hedge in case it actually takes off. So maybe they're happy to shut up for now, let Zuck take the regulatory flack, and if it seems like Libra will take off on FB's efforts, they're positioned to benefit from adoption.

> those companies are paying $10M to run a Libra node Please show me a citation of where is says concretely that Visa/Uber/etc have handed $10M to this project. The Libra project so far is just wishful thinking about things that maybe, might possibly happen sometime.

What kind of proof do you expect? Even if I somehow had the wire transfer receipt in hand, Facebook could simply be giving Visa and Uber a $10M rebate on their advertisement bill in return. This is not a material sum for these companies when it comes to such a major partnership.

However, since these rules are supposed to apply to everyone who wants a seat at the Libra Association, I do assume that Uber and Visa are paying the fee.

Re: Facebook, Libra, and the Long Game

#133

Post by mgraczyk »

boh wrote: post #120

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 cus…

When was the last time you used an ETF to pay for Uber Eats?

Libra is not an ETF. Clearly it has different functionality and will be used differently by both Facebook and users. It would be more accurate to say that the risk profile should look to account holders like an ETF rather than a bank.

Re: Facebook, Libra, and the Long Game

#134

Post by godson_drafty »

wan23 wrote: post #125
sonnyblarney wrote: post #76

Earlier quoted context omitted.

Actually, the US used to have any number of currencies in the 19th centuries and it was a mess. Having a centralized currency is a reasonable thing, though the Fed is a private entity, it operates ultimately like other central banks. The banks don't have any special power - if you want to open one, you can do that right now. If they did have some special sauce, VC would be pouring it, and mostly, it's not. Banks don'…

> Banks don't make their money or derive their power through the 'creation of money'. A bank just opened and has $0 in the vault You give the bank $1000 The bank lends me $800 Your current bank balance = $1000 My current bank balance = $800 Total money in the bank = $1800 You might say that the money wasn't created because they can't afford to pay out $1800, but if for some reason at this point they need to pay back…

Not sure that's correct though. For banks, deposits are liabilities, while assets are loans and cash-on-hand, which they are required to hold fractionally against the total amount of their deposits. In this example, the bank is holding $200, has assets of $800, and liabilities of $1000. Adding it up, you have ($200 + $800) - $1000 == $0.

Re: Facebook, Libra, and the Long Game

#135

Post by mountainofdeath »

thatfrenchguy wrote: post #126
boh wrote: post #120

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 cus…

> Libra is essentially an ETF But what they invest in will be interesting: what happens when the next financial crisis comes ? When the dollar plunges ?

These sorts of "currency" are typically invested in short term, low-risk deposits. Think bank certificates of deposit, US treasuries and the equivalents in foreign currencies.

Re: Facebook, Libra, and the Long Game

#136

Post by panarky »

sprafa wrote: post #101
simias wrote: post #74

Earlier quoted context omitted.

>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…

This is one of the reasons I dropped out of crypto for years, most of its supporters were completely delusional and tragically uninformed about actual banks. I always considered two datapoints to be fulcral A) ease of use, which Bitcoin has never had and B) potential to be overtaken by an actual bank and twisted into whatever purposes it wanted due to the 51% error. That is, how hard would be it for JPMorgan or Deust…

> This is one of the reasons I dropped out of crypto for years, most of its supporters were completely delusional and tragically uninformed about actual banks.

The reason I stayed in is because Bitcoin solved a seemingly intractable problem, it works in the real world, and it's survived and even thrived in the face of fierce attacks for a decade.

Yes, there are many shills who are delusional and ignorant. Yes, speculators and fraudsters are running wild.

None of that changes the fundamental characteristics that make this a fascinating and promising technology, network and social movement.

Re: Facebook, Libra, and the Long Game

#137

Post by boh »

thatfrenchguy wrote: post #126
boh wrote: post #120

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 cus…

> Libra is essentially an ETF But what they invest in will be interesting: what happens when the next financial crisis comes ? When the dollar plunges ?

Then Libra will also plunge. It's tied to USD/EUR.

Re: Facebook, Libra, and the Long Game

#138

Post by jpkiser »

carleverett wrote: post #112
bhupy wrote: post #67

Earlier quoted context omitted.

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 curre…

> 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.

Your basing this argument on the fractional reserve monetary policy that the libra association is hedging against. I believe we are moving towards a world in which global currencies become the norm. There will be 2 types of global currencies, corporate currencies and decentralized currencies, aka Libra and Bitcoin. Both forms will have to have a mechanism that prevents inflation, Libra will do that by being fully backed, Bitcoin does that through Nakamoto consensus. With digital currencies it becomes possible to move your entire "cash" holdings in a matter of minutes, so a fixed supply currency like Bitcoin insures that Libra will never dilute it's supply because the barrier to exit the currency is so low. In democratic countries like the US the mechanic that prevents massive inflation is mostly voters' influence over the federal reserve. Of course it isn't perfect the dollar has been inflated ~300% since leaving the gold standard. With corporate global currencies we don't have such voting powers.

Re: Facebook, Libra, and the Long Game

#139

Post by yingw787 »

svd4anything wrote: post #103
yingw787 wrote: post #94

Earlier quoted context omitted.

When you're talking about using a different currency, you're not replacing Bank of America or JPMorgan Chase. You're replacing the Federal Reserve, Bretton Woods, and the U.S. government. Government's grasp on what money should mean is one of the primary ways democratic governments exercise power.

> Government's grasp on what money should mean is one of the primary ways democratic governments exercise power. Could you explain that statement? I can’t help but counter that isn’t often the government’s control of money that enables the rise of authoritarian governments! Perhaps privatization of currency might strengthen democracy not undermine it.

...I really don’t agree with that counter. Many, and probably most, governments on this earth today have divergent understandings of money and power. You can be rich in Russia, but that money can be easily rendered worthless by somebody pointing a gun at you or your family. There is no comfort in being rich if you are not politically connected, and even then you have to be more connected than the other guy otherwise you are dead. Stalin didn’t even carry a wallet; why bother when you can just say “see that rich guy? Kill him and bring me his money, I want to buy a bagel”.

In the U.S., there’s corruption and racism sure, but by and large money and power are congruent. The business community opposed Trumps’s response to Charlottesville because a rich black man stood up and said that’s not okay. That’s because democratic governments follow rules. You have green paper; here’s a coffee. Oh you’re black and it’s 1960? Let’s change the written rules so you can get coffee in any shop. Authoritarian governments have “rules” and rules. You have green paper? Too bad, you said something in newspaper and I am afraid of the government, so no coffee for you.

That’s what really grinds my gears about people breaking a societal paradigm like currency. Not just a fundamental misunderstanding of micro and macroeconomics (one guy on another thread said stealing money from a crypto exchange reduces the money supply and can be monetary policy), but also increasing the amount of societal chaos. How do you advance in life when common law will not protect your property?

Re: Facebook, Libra, and the Long Game

#140

Post by [deleted] »

boh wrote: post #120

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 cus…

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