The Whitepaper
For every Libra issued, the Libra Reserve will hold assets including a basket of bank deposits and short-term government securities. The website for the digital asset, calibra.com, was briefly down around 5AM EST, about when it went live.
A Switzerland-based a not-for-profit consortium, the “Libra Association” that has Mastercard, PayPal, Visa, Stripe, eBay, Coinbase, Andreessen Horowitz and Uber as its founding members, will govern the new cryptocurrency. By the time Libra is launched in the first half of 2020, Facebook plans to expand the association to around 100 members.
The white paper notes that:
“While final decision-making authority rests with the association, Facebook is expected to maintain a leadership role through 2019. Facebook created Calibra, a regulated subsidiary, to ensure separation between social and financial data and to build and operate services on its behalf on top of the Libra network.”
The Libra Association will be governed by the Libra Association Council, that will initially be made of founding members. Each council members runs a validator node on the network and notably will require to make a minimum investment of $10 million to seal the position.
As per Facebook, the $10 million investment will secure each entity one vote on the council. Along with that, each of them will also have an entity Investment Token, a distinct token from its global user-oriented cryptocurrency libra that can be purchased or distributed as dividends to the association’s founding members and accredited investors.
Since Libra is not technically pegged to any given national fiat currency, the white paper adds that users could not redeem the token for a fixed amount of fiat. Though Facebook went on to claim that the reserve assets are chosen in a manner to minimize volatility.
The reserve assets are ostensibly held by “a geographically distributed network of custodians” so as to secure decentralization. Further, the reserve will be managed by the association itself, the only party able to mint and destroy the coin.
New Libra will be minted only when authorized resellers have purchased the coins from the association with enough fiat to fully back their value. They will be burned when authorized resellers sell the token back to the association in exchange for the underlying assets. The white paper further states:
“Since authorized resellers will always be able to sell Libra coins to the reserve at a price equal to the value of the basket, the Libra Reserve acts as a ‘buyer of last resort.’”
The social media giant further notes that the software that implements the Libra blockchain is open source, which can create an interoperable ecosystem of financial services and broaden inclusion. As per previous reports, the coin will purportedly facilitate payments across Facebook’s various platforms including WhatsApp, Messenger and Instagram, giving the new coin potential exposure to a combined 2.7 billion users each month.
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