Bitcoin Fans Spy Opportunity in Facebook Libra Launch
June 18 2019 - 8:27AM
Dow Jones News
By Paul Vigna
Bitcoin's backers are adamant that Facebook Inc.'s coming
digital currency, Libra, won't spell the demise of other
cryptocurrencies. To the contrary, many believe the launch of Libra
spells opportunity.
On Tuesday, Facebook released the details on Libra, which the
social-media giant is building and will manage through a consortium
that includes Visa Inc., Uber Technologies Inc. and more than two
dozen other companies. The corporate element marks a contrast with
bitcoin, which was created a decade ago by an anonymous coder and
has been developed by a loosely aligned, sometimes fractious, group
of programmers and entrepreneurs.
That is one of the reasons that supporters of bitcoin and other
cryptocurrencies believe the introduction of Libra is likely to be
good for their currencies. Many think the Facebook initiative will
raise awareness about a concept that is still hazy for a lot of
people around the world without seriously diluting the elements
that make cryptocurrencies appealing to their users. Others say
Facebook will struggle to overcome privacy concerns that are at the
heart of bitcoin's appeal.
"Facebook is about to introduce hundreds of millions, maybe
billions, of people to the concept of cryptocurrencies," said Andy
Bromberg, the founder of CoinList, a platform for startups raising
capital via token offerings. "It's hard to think of a better
accelerant."
Bitcoin, unveiled 10 years ago, reset a trend in private
currencies that had died out after the 19th century. Bitcoin was
designed to create a currency where trust was based on the validity
of the software itself. No bank or government controls bitcoin, and
anybody can use it or contribute to its development. Today, there
are about 2,000 independent cryptocurrencies, and companies as
large as JPMorgan Chase & Co. have been developing their own
versions.
Libra is technically a cryptocurrency, but a very different one.
Its development was a closely guarded secret inside Facebook's
offices. Its value will be guaranteed by Facebook and its partners,
a closed network where membership costs $10 million. One thing
neither bitcoin nor its crypto peers have though: a user base that
numbers in the billions.
"They're in a great place to stimulate demand for the coin in a
way we haven't seen anybody do," said Jalak Jobanputra, founder of
venture-capital firm FuturePerfect Ventures. "This could be the
first broad-based use of a digital coin as a payments
mechanism."
Bitcoin has extended its 2019 gains since The Wall Street
Journal reported on Libra's details. Tuesday morning, bitcoin was
trading at around $9,190, up about 12% since Thursday.
The gains reflect many factors, possibly including the belief by
bitcoin's backers that the exposure for Libra will outweigh any
competitive battles. Mati Greenspan, a crypto analyst at brokerage
firm eToro, ran a poll on Twitter, and most respondents said they
thought Libra would be good for the crypto industry. "People felt
like it'd be bullish," he said.
It is possible bitcoin's backers are being naive about the new
competitor. "The crypto market likes to take all news as good
news," Mr. Greenspan said. Facebook will cast a large shadow over
the sector. The total market value of the more than 2,000
cryptocurrencies trading is about $286 billion, according to
CoinMarketCap. Facebook's market capitalization is $539
billion.
Bitcoin versus Libra could be a fight over privacy too. Bitcoin,
by design, doesn't require any identification to use it; in that
respect, it is the digital equivalent of physical cash. Facebook,
meanwhile, collects a tremendous amount of information about its
users, and has a checkered history of protecting it. For
bitcoiners, it is a clear line of demarcation between their
currency and Libra.
"Does this keep giving more power to a company that has abused
our data?" Ms. Jobanputra said.
Facebook didn't reply to a request for comment.
Write to Paul Vigna at paul.vigna@wsj.com
(END) Dow Jones Newswires
June 18, 2019 08:12 ET (12:12 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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