The Difference Between Libra And Bitcoin
By Theresa Schempp
In June, Facebook announced that it would unveil its cryptocurrency, named Libra, in early 2020. According to Facebook, Libra would make the exchange of money online faster, cheaper, and open access to financial services without a bank. After Facebook’s announcement, people were quick to compare the service to Bitcoin, which hit the spotlight in 2017 but proved to be too volatile by many to normalize the cryptocurrency landscape for the average person. While both Bitcoin and Libra fall under the umbrella term of cryptocurrency, their stark differences have many financial analysts predicting that Libra will do significantly better on the market.
Difference 1: The Use of Blockchains
Blockchains are a network of computers which secure transactions and are virtually impossible to tamper with. Blockchains are the foundation of cryptocurrency and were used by Bitcoin to ensure transactions were anonymous and virtually untraceable.
In Libra’s case, they currently will only allow transactions to be added by trusted users. These users form the Libra Association. Some notable members are Visa and Uber, who have invested at least $10 million into Libra which support the currency. This gives the Libra Association most of the control over the cryptocurrency.
Bitcoin was founded on the idea of decentralization, where there is no trusted entity which controls the cryptocurrency. Everyone who uses Bitcoin has equal, anonymous control over transactions and freedom from “big banks”. This difference in ethos has caused many to argue that Libra is not a true cryptocurrency due to the stakeholders holding control over transactions.
Difference 2: Stability in the Market
Bitcoin’s current rise and fall was blamed primarily on its lack of stability in a market. Because Bitcoin does not answer to any currency, such as USD, the value could inflate and recess at any given moment. On December 2nd, 2017, a bitcoin was worth about $10,000. On December 15th, it was worth over $19,000. And on December 29th, it was worth $9,000. This volatile market made it difficult for Bitcoin to be used by the average person and lacked that trust to invest.
While Libra will not be fixed to any currency such as USD, it will be backed by a variety of different currencies in the world, allowing the market to remain stable. This also means that its value will differ from country to country.
Difference 3: Supply and Demand
Bitcoin created 21 million bitcoins, and only 21 million bitcoins will ever exist. For this reason, the supply and demand model cannot be applied to Bitcoin, which could’ve proved to have been its demise if it had become mainstream and used by millions of people.
Because Libra is controlled by the Libra Association and the cryptocurrency is backed by those within the association, supply and demand can be applied to this cryptocurrency. This would allow the capitalist market to run its course of supply being determined by the demand of the public.
Facebook is currently defending Libra in Washington D.C. amongst privacy and regulation concerns. However, if Libra is approved as a cryptocurrency on the market, its path could prove to take a much different course than what was seen by Bitcoin.