When Smart Community Technologies (SCT) released Parts I & II of ‘A CMO, CFO & CEO Guide to Facebook’s Libra Coin’ late last year, our objective was to share with you the increasing global acceptance of digital currencies and technologies, and what they mean to people and governments around the world.
“Give me control of a nation’s economy and I care not who makes its laws.” -Mayer Amschel Bauer Rothschild
The Big Tech companies in the United States and abroad have realized this power of controlling a nation’s monetary system faster than the U.S. Congress and many other governments around the world. Like a game of high stakes chess, Big Tech is ready to dominate the world.
In This Chess Game:
Zuckerberg moves his Queen Pawn up two spaces with the launch of Libra. Republicans and Democrats see the gameboard, make the rules, but don’t have the strategies. Democrats know we need something different, but socialism is not the answer. Wrong move. President Trump ran a campaign and won on ‘draining the political swamp’ in Washington D.C. Both political parties are corrupted and part of the swamp. Republicans and Democrats are corrupt, lobbying is still legal in the U.S. Our entire monetary system is corrupt and ripe to be taken over. Whomever or whatever can master this ‘Chess Game’ will control the world.
Will that be Mark Zuckerberg? How about Google with Quantum Supremacy? What about Apple with more money than the U.S. Government and immediate access to citizens through their device infrastructure? How about Jeff Bezos and Amazon? The one common denominator among them all: Technology.
New Technology is so powerful, it can bring governments to their knees. We are held captive by connectivity and devices. Our world is moving to 100% digital, who is controlling the connections?
What Is the Answer?
Digital Revolution is the answer which is why Blockchain Technology is taking off like the ‘electric rocket ship’ built in the Chinese Headquarters of Tesla. Most people don’t realize Elon Musk’s Tesla is an Artificial Intelligence (AI) company using vehicles as a means to an end.
Mr. Musk is not anti U.S. or pro socialist. He wants to keep the U.S. as the dominant country of technological choice. China sees Mr. Musk as an AI innovator and welcomed Mr. Musk. AI is about to be connected to Quantum Computing and China is the HQ of Quantum with the first quantum satellite. Google is HQ in Beijing as well; the stage is set. We are in a technology war and many don’t understand the game.
Could the Proper Understanding of Digital Technologies ‘Checkmate’ The U.S.?
Yes! It could do so with its AI driven facial recognition eyes closed, with one digital arm tied behind its quantum infused back.
What Is the Real Problem for The U.S. Government?
Simply, apathy and ignorance. This is the AI dominating today. In other words, this new blockchain stuff with consensus algorithms, hashing, code, and quantum physics tied to AI is way above the pay grade of any member of Congress. Just ask Representative Maxine Watters about Machine Learning and study her expression.
Who Really Understands This Stuff Anyway?
Tech companies do! And we do at Smart Community Technologies (SCT). But we understand it much differently since we are also theologians. Technology and Theology are two big trains racing towards each other yet very few understand what is occurring.
A challenge we face as voters and citizens is most all of our elected officials have no real experience in the technology industry, they just use technology.
Refining Facebook’s Libra
Here are some of the primary issues Libra is facing, in Part IV, we will lay out the solutions:
Is Libra a Crypto Currency? Simply, yes. Crypto is an abbreviation for encryption not decentralization. Currency can be defined as any means of exchanging value. All kinds of things have been used as currency in the past such as rabbit pelts or bear skins. Since we did not have encrypted numbers protecting the validity of the rabbit pelts, we did not call the rabbit pelts a crypto currency. The rabbit pelts were currency, but they were not crypto currency due to the lack of encryption.
If rabbit pelts were verified or protected with encryption, then rabbit skins would be a crypto currency. Do you understand now the importance of protecting our economy? Encryption is protection, it’s not a hooded hacker in a Dark Room somewhere.
We are so filled our confirmation bias and pre-conceptions that we don’t understand the real use of the words.
Encryption is a good idea and helps protect users from fraud and can be used to protect people around the world with innovative strategies. We can deliver messages to people who are being persecuted, we can deliver aid to those who need it faster and quicker. We can use technology to create an irresistible message and help people see what they could not see previous.
Here’s A Use Case Using the History of Money & Value – Using Today’s Technology
FACT: Rabbit Pelts (Skins) Were Exchanged as A Form of Value
- If the rabbit pelt transactions/exchanges were grouped into ‘blocks’ or groups of purchases (such as 10 different orders of rabbit pelts as one ‘block’ of a transaction).
- And…then…all the transactions/exchanges of people who used and accepted rabbit pelts, as payment, were verified by computers using a consensus algorithm designed to determine which type of rabbit the pelt came from.
- Then each group of 10 purchases of rabbit pelts were packaged in a ‘block’ and sent out on the ‘chain’ to all the other registered hunters/trappers to verify accuracy.
- Then, all the blocks of rabbit pelt transactions were connected with SHA256 hashing (a modern security technology) to make the transactions immutable and hack proof so that any change to one rabbit pelt order would affect all the other rabbit pelt transactions worldwide.
- Then, we do not need a fur trader to verify which kind of rabbit pelt we purchased due to our consensus algorithm which goes the entire length of the ‘chain’ from the hunter/trapper to the buyer of the rabbit pelt, which will use the pelt to make a coat to stay warm in the Winter.
- Now, anyone around the world as a new hunter/trapper or a woman wanting real rabbit pelts and not squirrel pelts could download the software to verify the validity of the rabbit pelts, so that we all had complete permissionless decentralization.
- Then, a mechanism was put in place which rewarded validators with rabbit pelts for verifying the transactions were true.
- Now, each of the block of transactions was linked together through the hash so we had an immutable record of who bought what from the beginning of time which could never be changed by any human, until the end of time.
If all of the above did not take place, the rabbit skins would still be crypto currency. Who would have thought the rabbit pelt business was so innovative? It’s not, but neither was money until 2008.
This is blockchain technology not crypto currency. The reason the two are linked together (pardon the pun) is that the first use of this type of currency was by using blockchain technology.
Crypto currency is one thing…Blockchain technology is another. Remember that, please.
C-Suite Tip: Only until recently did we realize that blockchain technology could be applied to things other than money…this is how Ethereum was birthed. Read on, please. Bitcoin is not the definition of crypto. Encryption is the definition of crypto. Facebook’s Libra uses encryption and it’s a form of currency. So, guess what? Libra is indeed a crypto currency.
It’s All About the Protocol. Forget the word crypto, it’s all about the protocol and the consensus algorithm inside that protocol which determines the rules of how things operate. Encryption is a great way to protect things although we need to up the encryption game due to quantum computers, but that’s another subject for later. (See Part IV).
Encryption Is Good…Crypto Is Encryption…So Crypto Is Good. But that does not mean the protocol behind the encryption is good. This is where good vs. bad plays the ‘Game of Chess’. Don’t worry, even Mark Zuckerberg failed to differentiate the two on his first go round with Congress, so you are good. Since many people get tied up in knots when the word crypto is used today, and immediately think of dark hooded hackers in a room with one window and no light. This has nothing to do with reality.
Remember the Problem…Apathy & Ignorance…The Real ‘AI’ Of Today. And we have not added quantum physics and computing to the mix. No wonder there is confusion in the technology world today. The users don’t understand the developers. And the developers don’t understand the users. It takes two hands to clap, and that’s what SCT is for.
We have a lot of people running around the world who don’t know what they are talking about, when it comes to what people want out of today’s technologies. Let alone what users of devices deserve. We have many others who don’t even understand what protocol or algorithm means, (like most of the U.S. Congress). Libra is facing strong headwinds of apathy, ignorance and corruption in order to get accepted and adopted.
What Mark Zuckerberg has failed to do in front of Congress on numerous occasions is explain the protocol. Facebook is trying to play well in the sandbox of corruption and that does not work. When we launch a new currency, we either have to ‘drain the swamp’ of existing currencies or support the existing swamp. We can’t straddle the proverbial swamp and add a little ‘pond’ with a little better idea, that just won’t work. Especially if this idea comes from a company, we don’t trust in the first place. But then again who can we trust?
Crypto Currency Is A Great Idea, But What Is the Protocol Behind It?
Facebook’s Libra has presented itself as a modernization of a traditional fiat currency like the US Dollar. You may ask, why is this? Well, it’s the protocol. Libra has decided to back Libra with fiat currencies from around the world so the value of Libra can be more stable. This is another new invention called Stable Coins, since the value is backed by assets which don’t fluctuate in value as much as stocks, commodities or Bitcoin.
C-Suite Tip: Today, the average age of a Representative is 57 and the average of a Senator is 61. All of these new technologies, inventions and disruptions of the status quo are met with ridicule or skepticism since whatever we don’t understand, we fear and reject. Most of our country’s representation did not grow up with technology…so why are they making decisions about it?
The leading candidates for a Democratic President are out of ideas, but they need to stand out in order to get elected. What should they do? Turn to Socialism? Wrong move on the ‘Chess Board’.
What should our current President do? As the President of the United States, he and the candidates should watch this video…and have their Staff watch it too:
https://youtu.be/e7GQvzyiaQ0 Listen to the gentleman in the white shirt in the first 5 minutes when he describes his son getting deathly sick for two years and how he had to quit his job to take care of his son. This led him to blockchain technologies where he is now so much happier since he is changing the world for the better.
Did you know, we can actually run the government without intermediaries who are corrupt? More on that in Part IV of this series.
Can Facebook’s Libra Replace the US Dollar?
Facebook has decided to back Libra with government backed fiat currencies in order to fool those governments into accepting Libra as a viable option. In other words, even though the value of our U.S. dollar has gone down a great deal, due to inflation, it takes a while for that inflation to occur. Inflation does not change the value of the U.S. dollar on a daily basis like the fluctuation of stocks or other commodities. When a company (Facebook) creates a digital currency, which can be used around the world and then plans to back that currency with multiple fiat currencies from other governments, it makes it look like the new currency wants to replace the currencies it’s using to back it. But in the definition of the words, Libra is a digital currency protected by encryption and that makes it a cryptocurrency. Libra does not have plans to print paper money or physical coins that people carry around like $100 dollar bills and quarters. Everything is tracked digitally inside a digital wallet known as Calibra. We explained the Calibra wallet in our earlier Part II of this series. We think the Stable Coin idea is a bad idea, and one that could cause Libra to abandon their original protocol and go with something else.
And we know why.
Stable Coins Are A New Concept In Crypto. The fact that Libra is designed to be backed by multiple fiat currencies is another issue that Facebook has to work through.
Libra Looks and Acts Like A Fiat Currency, but the value of their currency is based on adoption and use rather than a central government simply backing the currency with laws. This is why central banks are fighting against Libra. It’s one corrupt entity fighting another ‘supposedly’ corrupt entity or an entity that could be corrupt (and take all of the existing corrupt profits and bleach the hard drives). Central banks don’t want technology to REIGN on their parade of corruption, so they are going to fight to make sure Libra does not see the light of day. This is the first time there could be a competitor to any currency, and it scares the bile inside of the intestines out of the status quo.
Libra Is Discriminatory. Why? It’s trying to play nice in the sandbox with regulatory agencies which require verification of ID. The Libra Association states that “in the early development of the Libra Network, its Founding Members are committed to working with authorities and to address all regulatory concerns”. This means that Libra will likely be available only for people who pass a certain verification process, making it still unreachable to many unbanked and underbanked people around the world.
Borders vs. Borderless. Libra presents itself as a global solution which is open to everyone but if they have to play nice in the sandbox, they could leave a lot of people behind. Keep in mind, that over half of the 1.7 billion people in the world that are underbanked come from just seven countries: Bangladesh, China, India, Indonesia, Mexico, Nigeria, and Pakistan. In more than half of these countries, cryptocurrencies are banned. Facebook can’t freely operate freely in these countries like it may want to with heavy regulatory restrictions.
Why are cryptocurrencies banned in these countries? Ignorance. They don’t understand how to use technology to help their people; but then again, maybe they don’t want too either. Either way, there is no way to ban crypto, it will spread throughout the word as education and awareness replace apathy and ignorance.
Reliance On FIAT. Libra’s value is backed by major fiat currencies which causes concerns and confusion since this type of currency has never existed to the point where 2.4 billion users could access the currency daily. That is a lot of users and once there is a lot of users using anything as a currency, it’s too late to put the cat back in the bag and then rules can be changed slowly so that those who started out using it will never be stopped.
In other words, we become frogs in boiling water that never jump out until we are on a plate and someone is eating our legs.
Privacy Issues. Much like Bitcoin, Libra transactions would be pseudonymous. This means all transactions are public and visible to everyone, but you can’t tell who sent what to whom. Since Libra addresses are just random letters and numbers protected by encryption. However, when you take into account that Libra wallets will require some sort of user verification, you can easily see how financial information can be constructed by certain entities, like Facebook, and therefore possibly leaked, hacked or used for strategic business, medical and political advantage.
Centralization. Another issue is that Libra is centralized and is permissioned based. For Libra to function authentically, it needs to be permissionless and decentralized or open source. It has ‘plans’ to become permissionless and decentralized once a better understanding of how the technology works and user acceptance is understood. How long will that take and at what cost? Who knows…especially with this Congress?
There are almost a dozen major unsolved issues, clearly stated on Libra’s website that will need to be addressed in order for it to become truly decentralized. Some of the challenges include:
- How to decentralize the reserve function?
- How to scale the system so it will work fast enough with more than 100 validators?
- How to secure a decentralized network against fraud?
- How will decisions be made once there is no centralized council?
C-Suite Tip: Bitcoin proponents and other cryptocurrency experts would argue that if you want to create a decentralized coin, you should make it decentralized from the beginning, since a decentralized model is something that needs to be taken into account when building the foundations for any blockchain.
Normally, blockchain technologies look to fulfill three main functions as a foundation.
- Decentralization: Meaning anyone can participate and it’s free for all.
- Security: These are digital currencies, and we need to protect against double spending issues.
- Scalability: Blockchains desire systems to have a high rate of transaction approval so they can easily be adopted worldwide and take on the load of millions of people transferring assets to one another.
Many industry experts think that only two out of the three above can be realized. This is not true, but let’s breakdown what many people think. Currencies that are decentralized and secure like Bitcoin, aren’t really scalable for mass adoption. Currencies that are scalable and secure aren’t truly decentralized, like Ripple and its XRP currency.
Currencies that are decentralized and scalable are inherently insecure since it takes time for the data to travel between all participants in an ever-growing system, and that ‘bad actors’ can take advantage of this lag in information with mischief and unscrupulous behavior.
However, there are current algorithms in place that do make all three possible.
Governance of Libra
An article by Dmitriy Brenzon, a research partner at Zenith Ventures, says it is unclear whether the benefits of the public good, which Libra aims to serve, is a strong enough incentive for competing organizations with conflicting priorities.
For example, what happens if Calibra, the Libra wallet developer, wants to launch in the same market as Celo, a platform for stable, secure digital payments? Celo is a portfolio company of Andreessen Horowitz and Coinbase, which are part of the Libra Council.
Or what happens if Vodafone, another founding member of the Libra council, wants to launch a Calibra competitor similar to M-Pesa, a mobile phone-based money transfer system? Brenzon puts it this way, “With only 28–100 Council members, politics should be expected; after all, there will be individuals from organizations who know how to play that game.”
His final point really hits the mark: “What is the incentive for companies to participate, and will it be strong enough to stand up against regulators and governments when push comes to shove? While Libra intends to create a network that operates across any country, it’s actually creating a network that will have to comply with every country’s regulatory regime.”
Several regulators from countries around the world like France and Germany have already lashed out against Libra. Subsequently, major Libra Council members Visa, Mastercard, PayPal, Stripe, eBay, Booking.com and Mercado Pago decided to withdraw their membership, leaving Libra with no major US payment provider and with hindered momentum.
But they can also return once issues are addressed and they will if it means profit.
As you can see, there’s still a big question mark on whether Libra will actually launch and if so, how successful will it be? But there’s no doubt about it: Libra is a groundbreaking move on Facebook’s part. It shows we’re entering a new world where not only governments can create money, but also corporate entities and the rules of the status quo are clearly being disrupted and challenged.
A number of business experts believe that the world is already run by a corporatocracy (companies that dictate national interests through lobbying); and Facebook’s Libra initiative is just another step towards increasing the corporate hold over and bypass of mis-managed and under-digitized governments. No matter what happens with Libra, Libra is a statement that cryptocurrencies are a solution to the future of the global economy. We don’t need to let Libra take the limelight. We can do a better job and change the world for better using a consensus algorithm which can’t be changed by human beings and is immutable.