1 00:00:04,240 --> 00:00:07,240 Speaker 1: Welcome to tech Stuff, a production of I Heart Radios, 2 00:00:07,320 --> 00:00:13,840 Speaker 1: How Stuff Works. Hey there, and welcome to tech Stuff. 3 00:00:13,880 --> 00:00:16,919 Speaker 1: I'm your host, Jonathan Strickland. I'm an executive producer with 4 00:00:16,960 --> 00:00:18,800 Speaker 1: How Stuff Works and iHeart Radio and I love all 5 00:00:18,880 --> 00:00:22,479 Speaker 1: things tech. And in the middle of June two thousand nineteen, 6 00:00:22,800 --> 00:00:26,160 Speaker 1: Facebook released a white paper describing a planned digital currency 7 00:00:26,280 --> 00:00:30,320 Speaker 1: called Libra, which has been described as a blockchain cryptocurrency, 8 00:00:30,800 --> 00:00:32,760 Speaker 1: though there are a lot of people who object to 9 00:00:32,960 --> 00:00:36,600 Speaker 1: one or both of those terms being used to describe Libra. 10 00:00:36,960 --> 00:00:39,240 Speaker 1: So in this episode, I figured we talked about Libra, 11 00:00:39,760 --> 00:00:42,400 Speaker 1: What is it, who is behind it? How is it 12 00:00:42,479 --> 00:00:46,159 Speaker 1: similar to and different from currencies like bitcoin and and 13 00:00:46,200 --> 00:00:49,040 Speaker 1: then fiat currencies, and and why should we even care 14 00:00:49,080 --> 00:00:51,839 Speaker 1: about it? Well, let's get that last one out of 15 00:00:51,840 --> 00:00:55,360 Speaker 1: the way first. Actually, we should care because Facebook is 16 00:00:55,480 --> 00:00:59,960 Speaker 1: an enormous freaking company with billions of users. Moreover, at 17 00:01:00,000 --> 00:01:04,160 Speaker 1: a company that purchased WhatsApp and runs Facebook Messenger, and 18 00:01:04,360 --> 00:01:08,600 Speaker 1: has an incredible incentive to incorporate a proprietary currency system 19 00:01:08,640 --> 00:01:12,000 Speaker 1: that can be fully integrated into those platforms. So we 20 00:01:12,040 --> 00:01:16,560 Speaker 1: should care because this goes beyond big business. Also, as 21 00:01:16,600 --> 00:01:20,399 Speaker 1: I record this on July three, two th nineteen. Facebook 22 00:01:20,440 --> 00:01:24,160 Speaker 1: and its services like What's Happen Instagram are all having problems, 23 00:01:24,240 --> 00:01:27,840 Speaker 1: particularly with showing photos. So that kind of thing can 24 00:01:27,920 --> 00:01:30,880 Speaker 1: shake a person's confidence in a company. Though, I think 25 00:01:30,920 --> 00:01:34,960 Speaker 1: it's unfair to judge a company on the occasional technological hiccup. 26 00:01:35,000 --> 00:01:38,040 Speaker 1: But it's also fair to say Facebook has had a recent, 27 00:01:39,240 --> 00:01:45,040 Speaker 1: let's say, troubling history. Next, while people are often referring 28 00:01:45,080 --> 00:01:50,600 Speaker 1: to Libra as Facebook's approach to currency, that's not entirely accurate. 29 00:01:50,640 --> 00:01:54,240 Speaker 1: I suppose I'm not being very helpful calling it Facebook Libra. 30 00:01:54,440 --> 00:01:57,680 Speaker 1: Facebook is actually just a co founder of a group 31 00:01:57,760 --> 00:02:05,000 Speaker 1: called the Libra Association, which also has members like Spotify, MasterCard, eBay, Uber, 32 00:02:05,160 --> 00:02:09,920 Speaker 1: and a whole bunch more. It's an quote independent, not 33 00:02:10,160 --> 00:02:16,399 Speaker 1: for profit membership organization headquartered in Geneva, Switzerland end quote Switzerland, 34 00:02:16,880 --> 00:02:21,360 Speaker 1: known for its discretion with banking. That's not snark, It 35 00:02:21,440 --> 00:02:24,480 Speaker 1: really is known for that. To be included in this 36 00:02:24,560 --> 00:02:31,000 Speaker 1: August association, the organization has to meet some pretty steep criteria, 37 00:02:31,120 --> 00:02:34,360 Speaker 1: and they also stand to benefit the most from the 38 00:02:34,440 --> 00:02:39,200 Speaker 1: adoption of Libra. But let's work our way to that point. First, 39 00:02:39,560 --> 00:02:43,200 Speaker 1: let's take a look at what was actually said. The 40 00:02:43,280 --> 00:02:47,800 Speaker 1: first phrase in the white paper is quote Libra's mission 41 00:02:48,160 --> 00:02:53,000 Speaker 1: is to enable a simple global currency and financial infrastructure 42 00:02:53,240 --> 00:02:58,959 Speaker 1: that empowers billions of people end quote. Personal commentary aside, 43 00:02:59,440 --> 00:03:03,160 Speaker 1: I think that's a phrase that should be evaluated critically 44 00:03:03,560 --> 00:03:09,400 Speaker 1: with some skepticism. Does the proposed digital currency actually align 45 00:03:09,880 --> 00:03:13,280 Speaker 1: with this stated mission? Now? I think from my tone 46 00:03:13,320 --> 00:03:16,200 Speaker 1: you can tell it's pretty clear where I stand on this, 47 00:03:16,520 --> 00:03:19,240 Speaker 1: but I am sincerely going to attempt to take an 48 00:03:19,240 --> 00:03:23,480 Speaker 1: objective approach so that people can draw their own conclusions. Also, 49 00:03:23,760 --> 00:03:26,760 Speaker 1: I highly recommend that if this is a very interesting 50 00:03:26,800 --> 00:03:29,600 Speaker 1: topic to you, you seek out multiple sources to get 51 00:03:29,639 --> 00:03:32,760 Speaker 1: a full picture of this. The white paper goes into 52 00:03:32,760 --> 00:03:37,000 Speaker 1: detail with a problem statement. This describes what LIBRA is 53 00:03:37,040 --> 00:03:42,040 Speaker 1: intended to address. Namely, quote, large swaths of the world's 54 00:03:42,080 --> 00:03:46,720 Speaker 1: population are still left behind. One point seven billion adults 55 00:03:46,800 --> 00:03:50,720 Speaker 1: globally remain outside of the financial system with no access 56 00:03:50,760 --> 00:03:54,000 Speaker 1: to a traditional bank, even though one billion have a 57 00:03:54,040 --> 00:03:57,760 Speaker 1: mobile phone and nearly half a billion have Internet access 58 00:03:57,880 --> 00:04:03,560 Speaker 1: end quote. So presumably one of libra's main purposes is 59 00:04:03,560 --> 00:04:07,640 Speaker 1: to empower people who otherwise would have no access to banks. 60 00:04:08,440 --> 00:04:11,440 Speaker 1: That's a noble cause, and one that is really needed. 61 00:04:11,600 --> 00:04:15,400 Speaker 1: In many parts of the world. Financial institutions can provide 62 00:04:15,440 --> 00:04:18,320 Speaker 1: security and protect wealth, and a lot of people have 63 00:04:18,640 --> 00:04:21,440 Speaker 1: little to no access to them, so changing that would 64 00:04:21,440 --> 00:04:25,320 Speaker 1: be a good thing. The problem statement continues and describes 65 00:04:25,480 --> 00:04:29,680 Speaker 1: some of the barriers that unbanked people face when attempting 66 00:04:29,680 --> 00:04:33,279 Speaker 1: to change their financial situation, and it also addresses some 67 00:04:33,400 --> 00:04:39,280 Speaker 1: of the issues of blockchain and cryptocurrency solutions and their limitations. Namely, 68 00:04:39,320 --> 00:04:43,039 Speaker 1: the white paper rightfully points out that these cryptocurrencies and 69 00:04:43,080 --> 00:04:48,719 Speaker 1: blockchain solutions have had some major issues with volatility and scalability. 70 00:04:48,839 --> 00:04:51,960 Speaker 1: In other words, the value of these currencies can change 71 00:04:52,080 --> 00:04:56,080 Speaker 1: dramatically and rapidly, and it's hard to get them scaled 72 00:04:56,200 --> 00:04:59,600 Speaker 1: up to enough adoption that they can become legitimate currencies 73 00:04:59,640 --> 00:05:03,480 Speaker 1: for the general public. If they aren't adopted as and 74 00:05:03,560 --> 00:05:07,279 Speaker 1: if no one is using them, then really they're not currency. 75 00:05:07,960 --> 00:05:10,400 Speaker 1: And now I think we need to talk a little 76 00:05:10,400 --> 00:05:14,120 Speaker 1: bit about the concept of currency in general and how 77 00:05:14,160 --> 00:05:17,240 Speaker 1: it works. Now, for a lot of you, this is 78 00:05:17,279 --> 00:05:20,400 Speaker 1: all gonna be super basic, but you know, I like 79 00:05:20,520 --> 00:05:23,360 Speaker 1: to start from the general and work towards the specific 80 00:05:23,560 --> 00:05:25,479 Speaker 1: so that we can have a full understanding of what's 81 00:05:25,520 --> 00:05:29,880 Speaker 1: going on? So way back when, before the invention of money, 82 00:05:30,080 --> 00:05:33,920 Speaker 1: humans relied on bartering for trade. So essentially, person one 83 00:05:33,960 --> 00:05:37,520 Speaker 1: would have something that person too wanted, and person too 84 00:05:37,680 --> 00:05:41,120 Speaker 1: had something that person one wanted. They'd have to come 85 00:05:41,120 --> 00:05:44,880 Speaker 1: to an agreement over how much of each something would 86 00:05:44,960 --> 00:05:48,520 Speaker 1: be an equitable trade, and this could change from person 87 00:05:48,560 --> 00:05:52,400 Speaker 1: to person based upon need. Supply and demand determined everything. 88 00:05:52,680 --> 00:05:54,960 Speaker 1: So if you had a whole bunch of stuff that 89 00:05:55,040 --> 00:05:58,760 Speaker 1: was plentiful in general in your region, chances are it 90 00:05:58,760 --> 00:06:00,840 Speaker 1: wouldn't do you much good because as everyone had enough 91 00:06:00,880 --> 00:06:03,400 Speaker 1: of it at their fingertips. But if you traveled to 92 00:06:03,440 --> 00:06:07,040 Speaker 1: a place that didn't have access to that same stuff, 93 00:06:07,080 --> 00:06:08,680 Speaker 1: you'd be in a good position to come back with 94 00:06:08,720 --> 00:06:11,520 Speaker 1: a bunch of things you needed. That's basic bartering. One 95 00:06:11,520 --> 00:06:15,680 Speaker 1: oh one. Now, sometime around six hundred b c E. 96 00:06:16,440 --> 00:06:20,120 Speaker 1: A king of a region called Lydia which now is 97 00:06:20,120 --> 00:06:24,719 Speaker 1: in modern day Turkey created a currency, the first recorded 98 00:06:24,800 --> 00:06:29,240 Speaker 1: instance we have of an official currency. It was a 99 00:06:29,279 --> 00:06:32,600 Speaker 1: form of coins, and the coins were made from electrum, 100 00:06:32,839 --> 00:06:37,479 Speaker 1: which is an alloy of gold and silver. Uh The 101 00:06:37,600 --> 00:06:42,520 Speaker 1: king's son Creases, would issue the first gold coins, and 102 00:06:42,560 --> 00:06:45,279 Speaker 1: in fact he would amass an enormous amount of wealth, 103 00:06:45,760 --> 00:06:49,480 Speaker 1: and today you can still hear people say rich as creases. 104 00:06:50,040 --> 00:06:53,160 Speaker 1: This is the creases to whom they are referring. These 105 00:06:53,600 --> 00:06:57,880 Speaker 1: kings of Lydia would later be connected with the the 106 00:06:58,000 --> 00:07:01,240 Speaker 1: myth of King Midas and the Golden Touch. Now, the 107 00:07:01,279 --> 00:07:06,360 Speaker 1: important concept here was one of standardization. The coins represented 108 00:07:06,400 --> 00:07:11,320 Speaker 1: distinct units of wealth and value, so rather than bartering 109 00:07:11,360 --> 00:07:14,560 Speaker 1: with physical goods, you can buy and sell with coins. 110 00:07:14,800 --> 00:07:17,320 Speaker 1: Now you can still haggle to come to an agreement 111 00:07:17,480 --> 00:07:20,800 Speaker 1: on the value of any particular good or service, but 112 00:07:20,880 --> 00:07:23,720 Speaker 1: now payment could be exchanged with coins rather than with 113 00:07:23,800 --> 00:07:27,000 Speaker 1: other physical things. So if you had a bunch of sheep, 114 00:07:27,240 --> 00:07:29,640 Speaker 1: then you needed some grain, but the guy who had 115 00:07:29,640 --> 00:07:32,360 Speaker 1: the grain didn't have any need for wool or for sheep. 116 00:07:32,800 --> 00:07:35,320 Speaker 1: You could sell some of your stuff for coins at 117 00:07:35,360 --> 00:07:38,120 Speaker 1: a market. Then you can use those coins to buy 118 00:07:38,120 --> 00:07:41,520 Speaker 1: the stuff you needed. So far, so good. Right now, 119 00:07:41,560 --> 00:07:46,080 Speaker 1: for currency to work, that standardized approach was really necessary. 120 00:07:46,160 --> 00:07:49,920 Speaker 1: Everyone has to agree upon the actual value of the 121 00:07:49,960 --> 00:07:53,800 Speaker 1: currency itself, and in the old days, this was partly 122 00:07:53,840 --> 00:07:57,920 Speaker 1: determined by what the coins were made out of. Making 123 00:07:57,960 --> 00:08:02,280 Speaker 1: coins from precious metals seemed to make total sense, but 124 00:08:02,400 --> 00:08:05,680 Speaker 1: you know not sense if you catch my drift. The 125 00:08:05,800 --> 00:08:10,200 Speaker 1: value was intrinsic in the coins themselves because of the 126 00:08:10,280 --> 00:08:12,960 Speaker 1: material they were made out of, was already seen as 127 00:08:13,000 --> 00:08:17,400 Speaker 1: being valuable gold and silver, for example, as for paper 128 00:08:17,400 --> 00:08:21,520 Speaker 1: money that dates back to around eight hundred CE. In 129 00:08:21,720 --> 00:08:26,880 Speaker 1: China during the Tang dynasty, the Tang government issued certificates 130 00:08:26,920 --> 00:08:31,360 Speaker 1: that represented a certain number of metal coins. The certificates 131 00:08:31,360 --> 00:08:35,360 Speaker 1: could be redeemed for those metal coins at the Chinese capital, 132 00:08:35,880 --> 00:08:38,439 Speaker 1: and the government would issue these certificates when it needed 133 00:08:38,440 --> 00:08:41,480 Speaker 1: to purchase goods that were from the further reaches of 134 00:08:41,520 --> 00:08:45,040 Speaker 1: the empire. Because transporting large amounts of metal currency was 135 00:08:45,160 --> 00:08:49,160 Speaker 1: difficult and dangerous, the certificates were much easier to carry 136 00:08:49,280 --> 00:08:52,840 Speaker 1: and they were transferable, meaning you could trade a certificate 137 00:08:52,840 --> 00:08:56,040 Speaker 1: to someone else and that person could then redeem that 138 00:08:56,080 --> 00:08:58,960 Speaker 1: certificate for its value in coins if they were to 139 00:08:58,960 --> 00:09:01,679 Speaker 1: travel to the Chinese opital. And so people on the 140 00:09:01,720 --> 00:09:05,720 Speaker 1: outer regions of China would use these certificates as currency 141 00:09:05,760 --> 00:09:09,640 Speaker 1: itself when making trades, never bothering to actually cash them 142 00:09:09,640 --> 00:09:12,679 Speaker 1: in for any metal coins. The certificates and that cells 143 00:09:12,679 --> 00:09:16,320 Speaker 1: were good enough. When Marco Polo traveled to China he 144 00:09:16,440 --> 00:09:19,160 Speaker 1: learned of the paper currency. They brought that knowledge back 145 00:09:19,160 --> 00:09:22,160 Speaker 1: to Europe. That was in the late thirteenth century, but 146 00:09:22,200 --> 00:09:25,520 Speaker 1: it wouldn't be until the mid seventeenth century then the 147 00:09:25,559 --> 00:09:29,199 Speaker 1: first bank notes would be issued in Europe, specifically in Sweden. 148 00:09:29,920 --> 00:09:32,679 Speaker 1: For a long time, currencies were either made of precious 149 00:09:32,800 --> 00:09:37,000 Speaker 1: materials or stood in representation of a fixed amount of 150 00:09:37,040 --> 00:09:41,680 Speaker 1: those precious materials, so a silver standard or a gold standard. 151 00:09:42,160 --> 00:09:45,040 Speaker 1: So in a country that used the gold standard, you 152 00:09:45,080 --> 00:09:47,960 Speaker 1: could theoretically take your paper currency to a bank and 153 00:09:48,040 --> 00:09:50,840 Speaker 1: exchange it for an amount of gold that was equal 154 00:09:50,960 --> 00:09:54,840 Speaker 1: to the value of that currency. Now, in theory, this 155 00:09:54,880 --> 00:09:57,680 Speaker 1: would mean that a country on the gold standard would 156 00:09:57,720 --> 00:10:01,440 Speaker 1: automatically have some checks and balance is in place. Because 157 00:10:01,480 --> 00:10:05,880 Speaker 1: of that limitation, the issuing government couldn't circulate more currency 158 00:10:06,080 --> 00:10:10,719 Speaker 1: than what it's gold reserves contained. At least ethically, they 159 00:10:10,760 --> 00:10:13,800 Speaker 1: couldn't do that. You could only issue as many bank 160 00:10:13,920 --> 00:10:17,120 Speaker 1: notes as would reflect the total amount of gold you 161 00:10:17,240 --> 00:10:21,480 Speaker 1: had on hand, since in theory, everyone holding those notes 162 00:10:21,840 --> 00:10:25,240 Speaker 1: could demand their gold at any time, and based on 163 00:10:25,360 --> 00:10:27,960 Speaker 1: the system, you should be able to hand it over, 164 00:10:28,440 --> 00:10:31,400 Speaker 1: So you shouldn't have more notes available than you have gold. 165 00:10:31,480 --> 00:10:34,200 Speaker 1: In your supply, but the United States and much of 166 00:10:34,240 --> 00:10:36,880 Speaker 1: the rest of the world abandoned that standard in the 167 00:10:36,880 --> 00:10:41,800 Speaker 1: twentieth century. During the Great Depression, President Franklin Delano Roosevelt 168 00:10:41,920 --> 00:10:46,160 Speaker 1: chose to sever the US paper currencies relationship with gold. 169 00:10:46,400 --> 00:10:50,120 Speaker 1: This allowed the government to issue more currency, which obviously 170 00:10:50,160 --> 00:10:52,840 Speaker 1: they couldn't if they had to rely on just how 171 00:10:52,920 --> 00:10:55,360 Speaker 1: much gold was in the reserves. But this allowed them 172 00:10:55,400 --> 00:10:58,880 Speaker 1: to lower the interest rates and thus stimulate the economy. 173 00:10:59,080 --> 00:11:02,520 Speaker 1: People could take out loans with lower interest, and interest 174 00:11:02,559 --> 00:11:05,959 Speaker 1: is really how more wealth is generated. Because let's say 175 00:11:06,000 --> 00:11:07,719 Speaker 1: you take a loan for a certain amount, Let's say 176 00:11:07,720 --> 00:11:11,320 Speaker 1: it's a hundred dollars, and then there's interest on top 177 00:11:11,360 --> 00:11:14,079 Speaker 1: of that loan. So you've taken out a hundred dollar loan. 178 00:11:14,160 --> 00:11:16,360 Speaker 1: But when you're finished paying it off, you've paid out 179 00:11:16,400 --> 00:11:19,480 Speaker 1: a hundred and twenty dollars For that hundred dollar loan. 180 00:11:19,720 --> 00:11:24,200 Speaker 1: You've generated twenty more dollars of wealth there. But now 181 00:11:24,240 --> 00:11:28,720 Speaker 1: the currency wasn't rooted on a specific commodity. This is 182 00:11:28,760 --> 00:11:32,760 Speaker 1: what we would call a fiat currency, which depends upon 183 00:11:32,920 --> 00:11:37,040 Speaker 1: supply and demand of the currency itself as well as 184 00:11:37,080 --> 00:11:40,760 Speaker 1: the stability of the financial institution. Or government that issues 185 00:11:40,800 --> 00:11:43,200 Speaker 1: the currency in the first place. This is also what 186 00:11:43,360 --> 00:11:46,000 Speaker 1: makes it not a big deal when governments change the 187 00:11:46,040 --> 00:11:49,880 Speaker 1: materials they use to mint coins. There have been times 188 00:11:49,880 --> 00:11:53,559 Speaker 1: when shortages and precious metals have forced governments to change 189 00:11:53,600 --> 00:11:57,480 Speaker 1: to less rare and therefore less valuable materials to make 190 00:11:57,520 --> 00:12:01,120 Speaker 1: their coins, But fiat currency gets around that. The government 191 00:12:01,160 --> 00:12:04,800 Speaker 1: ultimately determines how much of the currency should enter circulation. 192 00:12:05,520 --> 00:12:08,640 Speaker 1: If a government was to create too much currency, it 193 00:12:08,679 --> 00:12:12,320 Speaker 1: would risk triggering hyperinflation, in which the value of the 194 00:12:12,320 --> 00:12:17,640 Speaker 1: currency decreases dramatically. Fiat essentially means let it be done, 195 00:12:18,120 --> 00:12:20,480 Speaker 1: so that kind of tells you how it's meant to 196 00:12:20,559 --> 00:12:23,440 Speaker 1: stand on its own. As long as people have confidence 197 00:12:23,520 --> 00:12:26,559 Speaker 1: in the issuing body and there's not a sudden flood 198 00:12:26,600 --> 00:12:30,400 Speaker 1: of currency, the value remains pretty stable day to day. 199 00:12:30,800 --> 00:12:33,880 Speaker 1: I could do a whole episode about how currency gets 200 00:12:33,920 --> 00:12:37,680 Speaker 1: into circulation, mostly through loans and banks and stuff, but 201 00:12:37,760 --> 00:12:40,320 Speaker 1: that's kind of outside the realm of tech stuff. I 202 00:12:40,360 --> 00:12:45,640 Speaker 1: explain fiat currency mostly because Librick sort of straddles a 203 00:12:45,720 --> 00:12:50,320 Speaker 1: category and it dips its toe in fiat currency. It's 204 00:12:50,360 --> 00:12:53,440 Speaker 1: not being issued by a government, however, but it is 205 00:12:53,520 --> 00:12:56,800 Speaker 1: being issued by a centralized group. More on that in 206 00:12:56,800 --> 00:13:01,400 Speaker 1: a bit Now, the literature around the Labor Association calls 207 00:13:01,400 --> 00:13:05,280 Speaker 1: it decentralized, but I think that really just depends on 208 00:13:05,360 --> 00:13:09,199 Speaker 1: your point of view. To quote Obi Wan Kenobi, because 209 00:13:09,559 --> 00:13:13,520 Speaker 1: it's really a group of very large companies that are 210 00:13:14,080 --> 00:13:16,679 Speaker 1: in charge of this. So to me, it is centralized. 211 00:13:16,760 --> 00:13:22,400 Speaker 1: It's just centralized and distributed amongst a relatively small number 212 00:13:22,679 --> 00:13:27,840 Speaker 1: of companies. Cryptocurrency then would refer to a group of 213 00:13:27,880 --> 00:13:32,040 Speaker 1: digital currencies that are meant to be decentralized and global. 214 00:13:32,520 --> 00:13:36,240 Speaker 1: With a cryptocurrency, there is no authority that ultimately issues 215 00:13:36,280 --> 00:13:40,280 Speaker 1: more currency. Rather, you typically have an algorithm that dictates 216 00:13:40,360 --> 00:13:44,480 Speaker 1: the supply of currency going into circulation. Cryptocurrency is like 217 00:13:44,520 --> 00:13:48,280 Speaker 1: the famous bitcoin have a limited supply. There's only so 218 00:13:48,320 --> 00:13:53,480 Speaker 1: many bitcoins that will ever exist. They will only enter 219 00:13:53,840 --> 00:13:56,440 Speaker 1: the circulation once, and then once all the bitcoins are 220 00:13:56,480 --> 00:13:59,760 Speaker 1: in circulation, that is it. Once all bitcoins are my 221 00:14:00,679 --> 00:14:04,120 Speaker 1: that's all there ever will be. There will remain in circulation, 222 00:14:04,280 --> 00:14:08,160 Speaker 1: but you won't generate new bitcoins. Now, in this sense, 223 00:14:08,800 --> 00:14:11,080 Speaker 1: they are closer to one of the currencies that are 224 00:14:11,120 --> 00:14:14,320 Speaker 1: based on a commodity, like gold, because there is a 225 00:14:14,360 --> 00:14:17,720 Speaker 1: finite amount of gold on earth, So if everyone still 226 00:14:17,760 --> 00:14:20,960 Speaker 1: had currencies that were tied to gold, eventually we would 227 00:14:21,000 --> 00:14:24,040 Speaker 1: have to stop issuing currency because we would have covered 228 00:14:24,160 --> 00:14:28,280 Speaker 1: all the gold available. But how do you assign actual 229 00:14:28,440 --> 00:14:33,160 Speaker 1: value to something that is purely digital? A bitcoin or 230 00:14:33,200 --> 00:14:39,760 Speaker 1: any other cryptocurrency is just some code. Well, here's the trick. 231 00:14:40,240 --> 00:14:43,760 Speaker 1: It has value if people treat it as having value. 232 00:14:44,360 --> 00:14:47,960 Speaker 1: If someone has something and you want it, then that's 233 00:14:47,960 --> 00:14:51,240 Speaker 1: something they have has a value to you. How much 234 00:14:51,320 --> 00:14:55,440 Speaker 1: value is up for discussion, obviously, so a bitcoin's value 235 00:14:55,480 --> 00:14:58,400 Speaker 1: is dependent upon how much people want it and how 236 00:14:58,480 --> 00:15:01,000 Speaker 1: much they'd be willing to pay for it, or how 237 00:15:01,080 --> 00:15:03,440 Speaker 1: much they would be willing to accept for it. If 238 00:15:03,480 --> 00:15:07,280 Speaker 1: they happen to own some Libra is a slightly different beast. 239 00:15:07,720 --> 00:15:10,680 Speaker 1: I'll explain more in a second, but first let's take 240 00:15:10,760 --> 00:15:20,880 Speaker 1: a quick break. Now, one other thing I should mention 241 00:15:20,920 --> 00:15:25,440 Speaker 1: about bitcoin is that it is truly decentralized. There is 242 00:15:25,480 --> 00:15:29,920 Speaker 1: no financial institution in charge of overseeing or regulating the currency. Now, 243 00:15:29,960 --> 00:15:32,600 Speaker 1: on the one hand, that means that a government can't 244 00:15:32,640 --> 00:15:36,520 Speaker 1: influence the value of the currency or interfere with fiat 245 00:15:36,560 --> 00:15:40,160 Speaker 1: currencies or sovereign currencies. The whole concept behind them points 246 00:15:40,200 --> 00:15:43,600 Speaker 1: back to how a government can exert influence over the 247 00:15:43,640 --> 00:15:47,920 Speaker 1: financial system through supply and demand of currency, not necessarily 248 00:15:48,200 --> 00:15:50,920 Speaker 1: in a malevolent way, but certainly in a way that 249 00:15:51,040 --> 00:15:55,480 Speaker 1: is beyond the control of the people relying on that currency. Now, 250 00:15:55,480 --> 00:16:00,800 Speaker 1: a downside of this, with bitcoin being so decentral is 251 00:16:00,800 --> 00:16:04,720 Speaker 1: that it's value is incredibly volatile, so it changes rapidly 252 00:16:04,840 --> 00:16:07,960 Speaker 1: and dramatically. In fact, it can change so quickly they 253 00:16:08,040 --> 00:16:12,400 Speaker 1: can cause people to be averse to spending bitcoin once 254 00:16:12,440 --> 00:16:15,080 Speaker 1: they get some. So think of it this way. Let's 255 00:16:15,080 --> 00:16:17,480 Speaker 1: say you have a dollar bell and you go to 256 00:16:17,560 --> 00:16:20,560 Speaker 1: the store, and based on the value of that dollar 257 00:16:20,720 --> 00:16:23,000 Speaker 1: at that time, you're able to buy a loaf of bread. 258 00:16:23,240 --> 00:16:26,400 Speaker 1: So you buy your loaf of bread and your feeling package. 259 00:16:27,240 --> 00:16:29,640 Speaker 1: You go home and you make yourself a sandwich, and 260 00:16:29,640 --> 00:16:32,640 Speaker 1: you're enjoying your sandwich. And then there's a sudden shift 261 00:16:33,000 --> 00:16:35,840 Speaker 1: in the value of a dollar, and suddenly a dollar's 262 00:16:35,920 --> 00:16:40,440 Speaker 1: value is much higher. Now you could buy let's say, 263 00:16:40,720 --> 00:16:45,200 Speaker 1: ten loaves of bread with that single dollar. The value 264 00:16:45,240 --> 00:16:47,440 Speaker 1: of the dollar dollar has increased, the value of the 265 00:16:47,480 --> 00:16:51,240 Speaker 1: loaf of bread has remained the same. Fiat currency rarely 266 00:16:51,320 --> 00:16:54,560 Speaker 1: experiences that sort of rapid change in value, but it 267 00:16:54,680 --> 00:16:59,640 Speaker 1: can and does happen with some decentralized digital currencies like bitcoin. 268 00:17:00,680 --> 00:17:03,600 Speaker 1: So that's a problem. You might be afraid to spend 269 00:17:03,640 --> 00:17:05,280 Speaker 1: something because you have no idea how much it's going 270 00:17:05,320 --> 00:17:07,399 Speaker 1: to be worth from moment to moment. In fact, you 271 00:17:07,440 --> 00:17:10,880 Speaker 1: don't know if the value of your bitcoin is going 272 00:17:10,920 --> 00:17:15,199 Speaker 1: to change in mid transaction. To avoid that problem, the 273 00:17:15,280 --> 00:17:21,520 Speaker 1: Libra Association has anchored or pegged the Libra currency. This 274 00:17:21,680 --> 00:17:25,640 Speaker 1: is a way of tying the value of a currency 275 00:17:25,960 --> 00:17:28,440 Speaker 1: to the value of something else, in this case low 276 00:17:28,560 --> 00:17:33,920 Speaker 1: volatile commodities, including several different currencies including the US dollar, 277 00:17:34,240 --> 00:17:38,080 Speaker 1: the Euro, etcetera. So even as one currency might change, 278 00:17:38,200 --> 00:17:41,880 Speaker 1: the fact that Libra's value is spread across numerous commodities 279 00:17:42,240 --> 00:17:45,760 Speaker 1: means that its value won't change much unless we're talking 280 00:17:45,760 --> 00:17:48,920 Speaker 1: about like a global financial crisis or something, in which 281 00:17:48,920 --> 00:17:53,600 Speaker 1: case Libra's value would also change. The Libra Association effectively 282 00:17:53,920 --> 00:17:58,040 Speaker 1: has a reserve like the old gold reserves during the 283 00:17:58,080 --> 00:18:02,040 Speaker 1: Gold Standard, except this reserve is not filled with precious metals. 284 00:18:02,080 --> 00:18:06,800 Speaker 1: It's filled with low volatility investments and currencies. So Libra 285 00:18:06,920 --> 00:18:10,440 Speaker 1: is sort of like a commodity based currency, but since 286 00:18:10,480 --> 00:18:15,159 Speaker 1: those commodities themselves are largely fiat currencies, it's kind of 287 00:18:15,200 --> 00:18:19,439 Speaker 1: like a fiat currency once removed. The Libra Association refers 288 00:18:19,480 --> 00:18:22,040 Speaker 1: to this as a stable coin approach. That's not just 289 00:18:22,160 --> 00:18:25,480 Speaker 1: their term. It is a term for a digital coin 290 00:18:26,080 --> 00:18:30,080 Speaker 1: that is tied to something that's more stable. It's a 291 00:18:30,119 --> 00:18:33,399 Speaker 1: digital currency anchored in real world assets to provide that 292 00:18:33,440 --> 00:18:36,720 Speaker 1: stability and encourage liquidity, in other words, to encourage people 293 00:18:36,720 --> 00:18:40,880 Speaker 1: to actually spend it instead of just sitting on it. Okay, So, 294 00:18:40,960 --> 00:18:45,119 Speaker 1: a cryptocurrency is a digital currency that uses cryptography for security, 295 00:18:45,200 --> 00:18:48,320 Speaker 1: both to protect the people who possess the digital currency 296 00:18:48,720 --> 00:18:52,800 Speaker 1: and to protect the actual transaction process made with that currency. 297 00:18:53,160 --> 00:18:58,480 Speaker 1: Bitcoin fits that description. Bitcoin is also a blockchain cryptocurrency, 298 00:18:58,800 --> 00:19:01,879 Speaker 1: and there are a lot of articles talking about Libra blockchain. 299 00:19:02,359 --> 00:19:06,080 Speaker 1: But personally, I think that that term is misleading or 300 00:19:06,119 --> 00:19:09,000 Speaker 1: in the words of in Ingo Montoya, you'll keep using 301 00:19:09,040 --> 00:19:11,080 Speaker 1: that word. I do not think it means what you 302 00:19:11,119 --> 00:19:15,720 Speaker 1: think it means. So, a block chain, simply put, is 303 00:19:15,720 --> 00:19:19,240 Speaker 1: a chain of data grouped together in blocks of data. 304 00:19:19,400 --> 00:19:23,120 Speaker 1: You can think of it as a chronological record of transactions, 305 00:19:23,160 --> 00:19:27,320 Speaker 1: a chain of blocks future calculations all depend upon the 306 00:19:27,400 --> 00:19:31,040 Speaker 1: previous ones made in the chain, and a community of 307 00:19:31,119 --> 00:19:36,199 Speaker 1: users work to verify transactions and those verified transactions are 308 00:19:36,240 --> 00:19:40,639 Speaker 1: codified into blocks, and then they join the chain with bitcoin. 309 00:19:41,080 --> 00:19:45,720 Speaker 1: The blockchain is the ledger of all blockchain transactions, all 310 00:19:45,760 --> 00:19:48,600 Speaker 1: of them. So if you want to spend or transfer 311 00:19:48,640 --> 00:19:52,400 Speaker 1: a bitcoin, it goes through this process. This blockchain process, 312 00:19:52,760 --> 00:19:56,919 Speaker 1: the community of bitcoin users verify the transactions in a 313 00:19:57,000 --> 00:20:01,040 Speaker 1: process called mining. This is a computation sational problem of 314 00:20:01,240 --> 00:20:06,320 Speaker 1: arbitrary difficulty. The overall bitcoin system sets that difficulty for 315 00:20:06,359 --> 00:20:10,159 Speaker 1: the computational problem, and the more people, or rather the 316 00:20:10,200 --> 00:20:13,840 Speaker 1: more computational power that is trying to solve the problems, 317 00:20:14,200 --> 00:20:18,480 Speaker 1: the harder the problems become. This way, they meter out 318 00:20:18,880 --> 00:20:23,480 Speaker 1: the release of new bitcoins, because solving the problem verifies 319 00:20:23,560 --> 00:20:25,720 Speaker 1: the transactions for a block, which then goes to the 320 00:20:25,720 --> 00:20:29,600 Speaker 1: rest of the community to essentially check the work and 321 00:20:29,640 --> 00:20:34,080 Speaker 1: make certain that it's valid, and then the computer system 322 00:20:34,240 --> 00:20:40,439 Speaker 1: that made that correct transaction verification first gets rewarded with 323 00:20:40,640 --> 00:20:44,800 Speaker 1: a certain number of bitcoins or portions of bitcoin. That 324 00:20:44,920 --> 00:20:49,320 Speaker 1: number changes over time. The number of bitcoins rewarded decreases 325 00:20:49,600 --> 00:20:53,000 Speaker 1: in a steady predictable pattern, and it will do so 326 00:20:53,160 --> 00:20:56,720 Speaker 1: until all bitcoins are in circulation, which will happen sometime 327 00:20:56,840 --> 00:20:58,880 Speaker 1: in the middle of the twenty second century. I think 328 00:21:00,040 --> 00:21:02,800 Speaker 1: think it's when it will all be in circulation. Now 329 00:21:02,840 --> 00:21:05,920 Speaker 1: everyone can see the blockchain, and everyone can see this 330 00:21:06,040 --> 00:21:10,000 Speaker 1: chain of transactions. This shared ledger means that no one 331 00:21:10,080 --> 00:21:14,280 Speaker 1: can spend the same bitcoin twice. There's no double spending 332 00:21:14,400 --> 00:21:17,960 Speaker 1: of bitcoin, as the first transaction will already be a 333 00:21:17,960 --> 00:21:20,920 Speaker 1: matter of record and any secondary attempt will fail during 334 00:21:20,920 --> 00:21:24,600 Speaker 1: this verification process. Now, one down downside to all of 335 00:21:24,640 --> 00:21:29,400 Speaker 1: this is that transactions take longer to verify than traditional 336 00:21:29,960 --> 00:21:33,320 Speaker 1: payment transactions, and that can be an issue when you're 337 00:21:33,359 --> 00:21:36,239 Speaker 1: trying to buy something unless you're not in a hurry. So, 338 00:21:36,280 --> 00:21:37,880 Speaker 1: to give you a sense for this, like how slow 339 00:21:37,880 --> 00:21:41,200 Speaker 1: am I talking about? Bitcoin transactions happen at a rate 340 00:21:41,240 --> 00:21:45,080 Speaker 1: of around seven transactions per second, which sounds pretty fast, 341 00:21:45,320 --> 00:21:48,960 Speaker 1: except then you learned that a more traditional payment transaction 342 00:21:49,040 --> 00:21:53,880 Speaker 1: service like Visa can process closer to three thousand transactions 343 00:21:53,880 --> 00:21:56,959 Speaker 1: per second. So that's a big disparity. It shows a 344 00:21:57,040 --> 00:22:03,880 Speaker 1: huge gap. Now, Facebook, Libra will not follow bitcoins methodology. Instead, 345 00:22:04,160 --> 00:22:09,439 Speaker 1: there will be a somewhat centralized though not localized database 346 00:22:09,560 --> 00:22:14,560 Speaker 1: of transactions cryptographically protected database. So you have a database, 347 00:22:14,600 --> 00:22:19,280 Speaker 1: not a blockchain. Uh. It is not fully decentralized. In 348 00:22:19,280 --> 00:22:24,760 Speaker 1: other words, you've got a group of companies that are 349 00:22:24,840 --> 00:22:28,360 Speaker 1: in charge of the governance and verification of transactions. It's 350 00:22:28,400 --> 00:22:31,840 Speaker 1: not open to a whole community. UH. The community using 351 00:22:31,840 --> 00:22:34,680 Speaker 1: the currency are not the ones providing the computational work 352 00:22:34,720 --> 00:22:38,600 Speaker 1: to verify those transactions. Instead, members of the Libra Association 353 00:22:38,720 --> 00:22:41,399 Speaker 1: more on them in a bit. UH. Specifically, members that 354 00:22:41,400 --> 00:22:44,880 Speaker 1: have coughed up ten million dollars for this privilege will 355 00:22:44,920 --> 00:22:49,400 Speaker 1: act as validation nodes to validate those transactions. If at 356 00:22:49,480 --> 00:22:53,879 Speaker 1: least two thirds of the validation nodes verified transaction, it 357 00:22:54,000 --> 00:22:57,080 Speaker 1: is considered to be verified and it goes through. Because 358 00:22:57,160 --> 00:23:00,199 Speaker 1: Libra will use a limited number of validation nodes by 359 00:23:00,200 --> 00:23:03,600 Speaker 1: an elite few members of the Libra Association, it's what 360 00:23:03,720 --> 00:23:06,720 Speaker 1: we would call a permissioned system. You have to be 361 00:23:06,800 --> 00:23:11,760 Speaker 1: granted authority to validate transactions. That's in contrast with systems 362 00:23:11,800 --> 00:23:15,359 Speaker 1: like Bitcoin, which are permission less, meaning you simply have 363 00:23:15,440 --> 00:23:17,520 Speaker 1: to download the software and be part of the network 364 00:23:17,680 --> 00:23:20,679 Speaker 1: and you're part of the community. Facebook has said the 365 00:23:20,720 --> 00:23:23,639 Speaker 1: reason I went with the permissioned approach was that the 366 00:23:23,680 --> 00:23:28,359 Speaker 1: alternative just doesn't scale, as illustrated by Bitcoin's painfully slow 367 00:23:28,440 --> 00:23:33,080 Speaker 1: transaction verification process. According to Facebook, the Libra approach will 368 00:23:33,080 --> 00:23:37,119 Speaker 1: allow for as many as one thousand transaction verifications per second, 369 00:23:37,520 --> 00:23:41,159 Speaker 1: still not as fast as more traditional financial institutions like Visa, 370 00:23:41,440 --> 00:23:46,560 Speaker 1: but loads faster than the permission less cryptocurrencies. The long 371 00:23:46,680 --> 00:23:50,080 Speaker 1: term goal, Facebook says is to transition to a permission 372 00:23:50,160 --> 00:23:55,760 Speaker 1: less system somehow. At some point, the Libra association will 373 00:23:55,760 --> 00:23:59,160 Speaker 1: oversee the governance of the currency and verify the transactions, 374 00:23:59,200 --> 00:24:02,600 Speaker 1: and in addition, they will profit from the use of Libra. 375 00:24:03,000 --> 00:24:06,960 Speaker 1: So Libre transactions will include a small transaction fee. So 376 00:24:07,000 --> 00:24:09,639 Speaker 1: when you buy something with Libra, there'll be a small 377 00:24:09,760 --> 00:24:13,240 Speaker 1: percentage of that h purchase that will end up being 378 00:24:13,240 --> 00:24:16,320 Speaker 1: a transaction fee, sometimes called a gas fee. It's meant 379 00:24:16,320 --> 00:24:19,040 Speaker 1: to pay for the cost of doing business in general. Now, 380 00:24:19,080 --> 00:24:23,280 Speaker 1: on individual transactions, it will look really small, like minuscule 381 00:24:23,359 --> 00:24:25,960 Speaker 1: you maybe you won't even notice it, but at scale 382 00:24:26,359 --> 00:24:29,159 Speaker 1: with a service that could potentially reach billions of people, 383 00:24:30,240 --> 00:24:33,240 Speaker 1: you're talking some serious freaking money there. You know. If 384 00:24:33,240 --> 00:24:35,840 Speaker 1: you're doing numerous purchases, a day, Even if they are 385 00:24:35,920 --> 00:24:38,840 Speaker 1: small amounts, if billions of people are doing that, that 386 00:24:38,960 --> 00:24:42,359 Speaker 1: racks up pretty fast. In addition, remember when I said 387 00:24:42,359 --> 00:24:45,360 Speaker 1: that the value of Libra will be pegged or anchored 388 00:24:45,440 --> 00:24:48,280 Speaker 1: to a collection of low volatility commodities such as fee 389 00:24:48,320 --> 00:24:52,040 Speaker 1: out currencies. Well, the expectation is that those will slowly 390 00:24:52,240 --> 00:24:57,359 Speaker 1: pay off. Those will earn money themselves, and in a bank, 391 00:24:58,359 --> 00:25:00,119 Speaker 1: as a customer of a bank, if you have add 392 00:25:00,800 --> 00:25:05,600 Speaker 1: money in their their accounts, then you would earn interest 393 00:25:05,800 --> 00:25:09,000 Speaker 1: off that money, depending upon the type of account you have, 394 00:25:10,000 --> 00:25:12,879 Speaker 1: and that's not gonna happen with Libra. You will not 395 00:25:13,040 --> 00:25:17,480 Speaker 1: earn interest in Libra. Instead, all that money that comes 396 00:25:17,520 --> 00:25:20,240 Speaker 1: from these investments and through these transaction fees are going 397 00:25:20,280 --> 00:25:23,000 Speaker 1: to go to the members of the Libra Association, not 398 00:25:23,080 --> 00:25:25,359 Speaker 1: the people using Libra, So it's going to go to 399 00:25:25,400 --> 00:25:30,000 Speaker 1: these big companies. The ledger of transactions for Libra is public, 400 00:25:30,160 --> 00:25:32,879 Speaker 1: just like with bitcoin. Uh. That could also raise a 401 00:25:32,880 --> 00:25:35,120 Speaker 1: lot of tough questions about privacy and security. I mean, 402 00:25:35,119 --> 00:25:38,359 Speaker 1: after all, Facebook has access to an incredible amount of 403 00:25:38,359 --> 00:25:41,320 Speaker 1: personal information. Even if you have an account but you 404 00:25:41,320 --> 00:25:43,879 Speaker 1: aren't very active, or even if you don't have an 405 00:25:43,880 --> 00:25:47,120 Speaker 1: account at all, people who do have accounts and who 406 00:25:47,160 --> 00:25:49,760 Speaker 1: know you may have already shared information about you, so 407 00:25:49,800 --> 00:25:52,600 Speaker 1: it's already out there. But the more you use Facebook, 408 00:25:52,680 --> 00:25:55,680 Speaker 1: the more data the company has about you, what you like, 409 00:25:56,480 --> 00:25:59,440 Speaker 1: what sort of browsing habits you have. So clearly there's 410 00:25:59,480 --> 00:26:02,439 Speaker 1: concern about a currency system tied to a company that 411 00:26:02,520 --> 00:26:06,560 Speaker 1: already knows a ton about us. To address that concern, 412 00:26:06,880 --> 00:26:11,439 Speaker 1: Facebook assures us that Libra users will be issued pseudonyms, 413 00:26:11,440 --> 00:26:16,120 Speaker 1: so it's a pseudonymous system and their true identities will 414 00:26:16,200 --> 00:26:21,359 Speaker 1: not be publicly tied to transactions. That's good bitcoins the 415 00:26:21,400 --> 00:26:25,160 Speaker 1: same way. Moreover, the company promises to keep the user 416 00:26:25,280 --> 00:26:29,280 Speaker 1: data from things like Facebook and its various services separate 417 00:26:29,640 --> 00:26:33,440 Speaker 1: from Libra and its digital wallet. Also, the company promises 418 00:26:33,520 --> 00:26:37,200 Speaker 1: that activity using Libra would never be used for data 419 00:26:37,280 --> 00:26:41,640 Speaker 1: for targeted advertising. Whether or not you believe this claim 420 00:26:41,840 --> 00:26:44,760 Speaker 1: is up to you. Facebook has had a very public, 421 00:26:45,320 --> 00:26:50,440 Speaker 1: very messy series of pr disasters and controversies surrounding user 422 00:26:50,520 --> 00:26:54,480 Speaker 1: privacy and security. Zuckerberg himself has had to appear in 423 00:26:54,520 --> 00:26:56,520 Speaker 1: front of the the United States government to talk about some 424 00:26:56,640 --> 00:27:00,360 Speaker 1: pretty serious problems. So there are many people out there 425 00:27:00,400 --> 00:27:04,040 Speaker 1: who remains skeptical at best. About Facebook's pledge to keep 426 00:27:04,080 --> 00:27:10,280 Speaker 1: these things truly separate. The pseudonym approach is another way 427 00:27:10,320 --> 00:27:13,080 Speaker 1: Libra is trying to have the best of both worlds 428 00:27:13,119 --> 00:27:16,600 Speaker 1: and cryptocurrency and the more traditional currencies overseen by a 429 00:27:16,640 --> 00:27:21,920 Speaker 1: centralized authority. In a cryptocurrency like Bitcoin, the transactions are public, 430 00:27:21,960 --> 00:27:25,680 Speaker 1: but the identities of the parties involved are protected. That 431 00:27:26,040 --> 00:27:29,159 Speaker 1: manages to protect the individuals, but it also raises the 432 00:27:29,200 --> 00:27:33,280 Speaker 1: possibility that the cryptocurrency could be used for shady or 433 00:27:33,400 --> 00:27:40,000 Speaker 1: outright illegal activities like money laundering or purchasing illegal goods. 434 00:27:40,760 --> 00:27:43,679 Speaker 1: For Libra to get widespread acceptance, it needs to be 435 00:27:43,720 --> 00:27:48,639 Speaker 1: seen as legitimate and lawful. Most financial institutions follow up 436 00:27:48,640 --> 00:27:52,800 Speaker 1: policy generally called No Your Customer or k y C. 437 00:27:53,600 --> 00:27:56,960 Speaker 1: This is all about verifying a customer's identity and being 438 00:27:57,000 --> 00:28:01,000 Speaker 1: reasonably certain that the customer or potential customer doesn't pose 439 00:28:01,040 --> 00:28:03,639 Speaker 1: a risk. In other words, making sure the customer is 440 00:28:03,640 --> 00:28:05,159 Speaker 1: on the up and up and not trying to do 441 00:28:05,280 --> 00:28:10,640 Speaker 1: something like money laundering. Libra intends to follow that general approach, 442 00:28:11,000 --> 00:28:14,080 Speaker 1: so the system would allow people to make purchases using 443 00:28:14,119 --> 00:28:18,080 Speaker 1: pseudonyms uh automatically by the system, they wouldn't have to 444 00:28:18,160 --> 00:28:21,560 Speaker 1: choose them or anything, ideally protecting their personal identities from 445 00:28:21,560 --> 00:28:24,600 Speaker 1: the general public. But at the same time, the LIBRA 446 00:28:24,640 --> 00:28:28,200 Speaker 1: Association would be able to verify identities. So we're starting 447 00:28:28,200 --> 00:28:31,240 Speaker 1: to see how from a conceptual level, this is getting 448 00:28:31,280 --> 00:28:36,159 Speaker 1: pretty complicated and it does pose a big security concern. 449 00:28:36,800 --> 00:28:39,360 Speaker 1: It's not that it's impossible to do, but it does 450 00:28:39,480 --> 00:28:42,600 Speaker 1: mean that you have to be super careful with all 451 00:28:42,680 --> 00:28:45,960 Speaker 1: that privacy and security. When we come back, i'll talk 452 00:28:45,960 --> 00:28:49,520 Speaker 1: about a few other complications as well as some trivia 453 00:28:49,760 --> 00:29:00,440 Speaker 1: about LIBRA, but first let's take another quick break. One 454 00:29:00,600 --> 00:29:04,960 Speaker 1: other big complication with LIBRA is that the organizations that 455 00:29:05,080 --> 00:29:08,720 Speaker 1: make up the Libra Association so far are a mix 456 00:29:09,080 --> 00:29:13,400 Speaker 1: of financial institutions like banks and commerce companies, you know, 457 00:29:13,440 --> 00:29:16,680 Speaker 1: companies that sell goods and services. And that's a huge 458 00:29:16,760 --> 00:29:21,560 Speaker 1: warning flag for certain countries, specifically the United States of America, 459 00:29:21,840 --> 00:29:25,640 Speaker 1: which has traditionally sought to keep banking and commerce as 460 00:29:25,800 --> 00:29:29,360 Speaker 1: separate entities. This has been the case since the mid 461 00:29:29,480 --> 00:29:33,600 Speaker 1: nineteenth century in the United States. It turns out that 462 00:29:33,800 --> 00:29:37,480 Speaker 1: US citizens aren't crazy about the idea of banks owning 463 00:29:37,800 --> 00:29:41,720 Speaker 1: non banking businesses because it could potentially mean that a 464 00:29:41,760 --> 00:29:45,400 Speaker 1: bank might operate a business that runs in direct competition 465 00:29:45,800 --> 00:29:48,920 Speaker 1: with the business of one of that bank's customers, and 466 00:29:48,960 --> 00:29:52,480 Speaker 1: banks get a lot of insight into the financial transactions 467 00:29:52,560 --> 00:29:56,720 Speaker 1: of their customers. They see everything. So let's say you 468 00:29:56,840 --> 00:30:00,880 Speaker 1: own a small business. Chances are you do not want 469 00:30:00,960 --> 00:30:04,560 Speaker 1: the entity that can see all of your financial transactions 470 00:30:04,880 --> 00:30:09,000 Speaker 1: to be operating a competing business against you. If nothing else, 471 00:30:09,280 --> 00:30:12,960 Speaker 1: you would be handing over leads to that bank because 472 00:30:13,000 --> 00:30:15,240 Speaker 1: the bank could see who your most loyal customers are 473 00:30:15,320 --> 00:30:20,960 Speaker 1: based on your various financial transactions, And to the bank 474 00:30:21,200 --> 00:30:24,080 Speaker 1: that's operating a competing business, they could say, huh, you 475 00:30:24,080 --> 00:30:26,640 Speaker 1: know what this is. It's a lead sheet for me 476 00:30:26,720 --> 00:30:29,640 Speaker 1: to give to the sales team. Will target all of 477 00:30:29,680 --> 00:30:32,320 Speaker 1: this person's customers because we see how loyal they are, 478 00:30:32,360 --> 00:30:34,200 Speaker 1: and if we can win them over to our service, 479 00:30:34,640 --> 00:30:37,880 Speaker 1: will win. So in other words, banks have an incredibly 480 00:30:38,040 --> 00:30:41,600 Speaker 1: unfair advantage when they enter into the commerce world. So 481 00:30:41,640 --> 00:30:46,240 Speaker 1: that could potentially be a really big barrier for Libra 482 00:30:46,720 --> 00:30:49,760 Speaker 1: in the near future in the United States, as the 483 00:30:49,800 --> 00:30:55,720 Speaker 1: Open Marks Institute spokesman Matt Staller wrote, imagine Facebook's subsidiary 484 00:30:55,960 --> 00:31:00,520 Speaker 1: Calibra knowing your account balance and you're spending and offering 485 00:31:00,520 --> 00:31:03,680 Speaker 1: to sell a retailer an algorithm that will maximize the 486 00:31:03,800 --> 00:31:07,360 Speaker 1: price for what you can afford to pay for a product. 487 00:31:07,680 --> 00:31:11,960 Speaker 1: Imagine this cartel having this kind of financial visibility into 488 00:31:12,040 --> 00:31:16,040 Speaker 1: not only many consumers, but into businesses across the economy. 489 00:31:16,360 --> 00:31:19,600 Speaker 1: Such conflicts of interest are why payments and banking are 490 00:31:19,640 --> 00:31:22,120 Speaker 1: separated from the rest of the economy in the United 491 00:31:22,160 --> 00:31:25,800 Speaker 1: States end quote. So in other words, if you can 492 00:31:25,840 --> 00:31:29,200 Speaker 1: see what all the transactions are, then you can get 493 00:31:29,200 --> 00:31:31,400 Speaker 1: a good idea of how much money a person has. 494 00:31:31,800 --> 00:31:33,480 Speaker 1: And if you have an idea of how much money 495 00:31:33,560 --> 00:31:37,040 Speaker 1: they have, you can adjust your prices so that they 496 00:31:37,040 --> 00:31:40,160 Speaker 1: are more expensive for people who have more money. People 497 00:31:40,160 --> 00:31:42,920 Speaker 1: who have less money, it will be less expensive because 498 00:31:42,960 --> 00:31:45,080 Speaker 1: the alternative is you don't make a sale at all. 499 00:31:46,080 --> 00:31:49,680 Speaker 1: Seems a little shady. Then again, all of this might 500 00:31:49,720 --> 00:31:53,720 Speaker 1: be moot. As I record this, the Libre platform isn't 501 00:31:53,760 --> 00:31:57,280 Speaker 1: fully fleshed out. Facebook has introduced a digital wallet that 502 00:31:57,360 --> 00:32:00,320 Speaker 1: exists as a subsidiary company. That would be the Libra 503 00:32:00,520 --> 00:32:03,560 Speaker 1: that I mentioned just a moment ago, and this is 504 00:32:03,560 --> 00:32:07,440 Speaker 1: the interface through which users can interact with Libra in 505 00:32:07,520 --> 00:32:11,440 Speaker 1: order to make transactions or send money or purchase Libra. 506 00:32:12,240 --> 00:32:15,680 Speaker 1: That's the actual name of the currency itself. The idea 507 00:32:15,720 --> 00:32:18,400 Speaker 1: is that third parties will be allowed to create their 508 00:32:18,440 --> 00:32:21,880 Speaker 1: own digital wallet solutions. But for now, Calbra is it, 509 00:32:22,360 --> 00:32:26,840 Speaker 1: and that's Facebook's contribution, and it's only it in a 510 00:32:26,920 --> 00:32:30,480 Speaker 1: largely hypothetical sense as of the recording of this podcast, 511 00:32:30,680 --> 00:32:34,680 Speaker 1: because at the moment there's very little functionality available in 512 00:32:34,720 --> 00:32:38,320 Speaker 1: the wallet. You can put fake Libra coins in there, 513 00:32:38,560 --> 00:32:41,400 Speaker 1: and that's about it. According to an article in Bloomberg, 514 00:32:41,880 --> 00:32:44,600 Speaker 1: there's not a lot to show for Libra just yet, 515 00:32:44,920 --> 00:32:47,840 Speaker 1: and the piece also criticizes the white paper for being 516 00:32:47,960 --> 00:32:51,440 Speaker 1: vague in spots. In fact, the article titled I tried 517 00:32:51,600 --> 00:32:55,560 Speaker 1: using Facebook's Libra blockchain. It didn't work goes on to 518 00:32:55,720 --> 00:32:58,320 Speaker 1: guess that the purpose of the white paper and the 519 00:32:58,320 --> 00:33:01,960 Speaker 1: announcement isn't so to prepare the way for the emergence 520 00:33:01,960 --> 00:33:05,880 Speaker 1: of a fully fleshed out digital currency. Rather, it's to 521 00:33:06,000 --> 00:33:09,600 Speaker 1: prompt a reaction from regulatory agencies to sort of test 522 00:33:09,680 --> 00:33:12,360 Speaker 1: the waters. So, in other words, it's not a sincere 523 00:33:12,440 --> 00:33:15,560 Speaker 1: effort to get a digital currency off the ground. It's 524 00:33:15,560 --> 00:33:18,480 Speaker 1: to check and see what sort of obstacles are going 525 00:33:18,520 --> 00:33:20,560 Speaker 1: to be in the way when they finally get their 526 00:33:20,600 --> 00:33:25,320 Speaker 1: act together, and indeed the regulatory bodies have responded. In 527 00:33:25,360 --> 00:33:28,800 Speaker 1: the United States, the House of Representatives Committee on Financial 528 00:33:28,840 --> 00:33:32,120 Speaker 1: Services has urged Facebook to hold off on any more 529 00:33:32,160 --> 00:33:36,480 Speaker 1: developments with Libra and Calibra. The committee states, quote, it 530 00:33:36,560 --> 00:33:39,800 Speaker 1: appears that these products may lend themselves to an entirely 531 00:33:39,880 --> 00:33:43,720 Speaker 1: new global financial system that is based out of Switzerland 532 00:33:43,960 --> 00:33:47,640 Speaker 1: and intended to rival US monetary policy and the dollar. 533 00:33:48,080 --> 00:33:53,720 Speaker 1: This raises serious privacy, trading, national security, and monetary policy 534 00:33:53,760 --> 00:33:57,920 Speaker 1: concerns for not only Facebook's over two billion users, but 535 00:33:58,040 --> 00:34:02,120 Speaker 1: also for investors, consume mers, and the broader general economy 536 00:34:02,320 --> 00:34:06,479 Speaker 1: end quote. Yikes. The committee goes on to express concern 537 00:34:06,520 --> 00:34:10,759 Speaker 1: about oversight and regulations, how a sovereign currency without these 538 00:34:10,800 --> 00:34:14,920 Speaker 1: faculties in place could cause financial instability around the world, 539 00:34:15,280 --> 00:34:17,840 Speaker 1: and they are also quick to point out that Facebook 540 00:34:17,880 --> 00:34:21,120 Speaker 1: doesn't exactly have a stellar track record in the eyes 541 00:34:21,200 --> 00:34:24,640 Speaker 1: of the US government. Just now, and just to show 542 00:34:24,680 --> 00:34:28,520 Speaker 1: that the Americans aren't the only ones concerned, let's hop 543 00:34:28,640 --> 00:34:33,000 Speaker 1: across the pond. In the UK, Christopher Woollard, the Financial 544 00:34:33,080 --> 00:34:39,239 Speaker 1: Conduct Authorities Executive director of Strategy Competition, stated quote, Historically 545 00:34:39,560 --> 00:34:42,319 Speaker 1: this may have been a sector that has lived by 546 00:34:42,320 --> 00:34:46,040 Speaker 1: the mantra of move fast and break things, but the 547 00:34:46,080 --> 00:34:51,320 Speaker 1: issues raised here require deep thought and detail end quote. Meanwhile, 548 00:34:51,360 --> 00:34:54,200 Speaker 1: in France, the Bank of France as governor has stated 549 00:34:54,239 --> 00:34:57,160 Speaker 1: that the Libra currency will have to comply with anti 550 00:34:57,239 --> 00:35:01,560 Speaker 1: money laundering regulations and also attain a banking license if 551 00:35:01,600 --> 00:35:06,040 Speaker 1: it offers any banking services. And the concern is understandable 552 00:35:06,080 --> 00:35:10,359 Speaker 1: because if Libra doesn't work properly, it could cause frustration 553 00:35:10,480 --> 00:35:13,600 Speaker 1: and economic hardships for many people around the world. But 554 00:35:13,680 --> 00:35:16,840 Speaker 1: if it works really well, it might mean hard times 555 00:35:16,840 --> 00:35:21,360 Speaker 1: for entrenched traditional financial institutions. And while I'm not gonna 556 00:35:21,360 --> 00:35:24,799 Speaker 1: lose sleep about how the CEOs of massive banks are 557 00:35:24,840 --> 00:35:27,240 Speaker 1: going to be able to afford their next private plane, 558 00:35:27,680 --> 00:35:31,239 Speaker 1: I'm not exactly looking to a company like Facebook to 559 00:35:31,480 --> 00:35:36,480 Speaker 1: act like robin Hood, because they're just as huge as 560 00:35:36,520 --> 00:35:41,040 Speaker 1: some of these financial institutions. One thing Libra is trying 561 00:35:41,080 --> 00:35:45,800 Speaker 1: to do is make cross border transactions easier. The idea 562 00:35:45,920 --> 00:35:49,680 Speaker 1: is attractive. Rather than converting money from one sovereign currency 563 00:35:49,840 --> 00:35:52,200 Speaker 1: to another and going through the process of doing a 564 00:35:52,200 --> 00:35:56,240 Speaker 1: wire transfer, you could use a digital currency like Libra 565 00:35:56,400 --> 00:35:59,720 Speaker 1: and do it all much more quickly without as much fuss, 566 00:36:00,000 --> 00:36:03,680 Speaker 1: maybe with even lower transaction fees. But some critics have 567 00:36:03,719 --> 00:36:06,880 Speaker 1: said there are already many alternatives to the more traditional 568 00:36:06,960 --> 00:36:09,920 Speaker 1: routes in place, and they are either ready to go 569 00:36:10,120 --> 00:36:13,040 Speaker 1: right now, or they're further along in development than Libra 570 00:36:13,160 --> 00:36:16,640 Speaker 1: seems to be. The Financial Times also called into question 571 00:36:16,680 --> 00:36:20,560 Speaker 1: whether Libra would actually benefit the unbanked as its mission 572 00:36:20,600 --> 00:36:23,839 Speaker 1: sets out to do, asking how could someone actually enter 573 00:36:24,000 --> 00:36:27,280 Speaker 1: into that world if they don't already have a bank account, 574 00:36:27,680 --> 00:36:30,480 Speaker 1: which is a decent question to ask. On top of 575 00:36:30,520 --> 00:36:35,160 Speaker 1: all that, Libra wouldn't magically become a ubiquitous currency overnight. 576 00:36:35,440 --> 00:36:38,400 Speaker 1: Merchants would still have to accept it as payment for 577 00:36:38,440 --> 00:36:41,800 Speaker 1: goods and services. First, see, a currency is no good 578 00:36:42,239 --> 00:36:45,160 Speaker 1: if no one accepts it. It doesn't matter how big 579 00:36:45,200 --> 00:36:48,319 Speaker 1: the issuing entity may or may not be. So if 580 00:36:48,360 --> 00:36:50,520 Speaker 1: I go out on the street then I hand out 581 00:36:50,560 --> 00:36:52,600 Speaker 1: pieces of paper with my face on it and I 582 00:36:52,640 --> 00:36:55,400 Speaker 1: call it strict bucks, that doesn't mean you're ever going 583 00:36:55,440 --> 00:36:58,799 Speaker 1: to be able to spend that cash. A merchant would 584 00:36:58,840 --> 00:37:01,840 Speaker 1: have to accept it for and it would be crazy 585 00:37:01,880 --> 00:37:06,720 Speaker 1: to do so. The Libra Association is proposing possible incentives 586 00:37:06,880 --> 00:37:09,640 Speaker 1: to get merchants on board and be part of this, 587 00:37:10,000 --> 00:37:12,320 Speaker 1: But to me, it seems like a pretty big endeavor, 588 00:37:12,400 --> 00:37:15,240 Speaker 1: and it feels a little like a catch twenty two 589 00:37:15,840 --> 00:37:18,279 Speaker 1: because there's no reason to sign on if there aren't 590 00:37:18,360 --> 00:37:21,359 Speaker 1: enough merchants to support the currency and turn it into 591 00:37:21,400 --> 00:37:25,280 Speaker 1: something useful. But then without signing on, then the currency 592 00:37:25,320 --> 00:37:28,280 Speaker 1: will just remain a curiosity and not be an incentive 593 00:37:28,280 --> 00:37:31,560 Speaker 1: for anybody to join. So if a yo yo manufacturer 594 00:37:31,880 --> 00:37:35,120 Speaker 1: is the only company to accept Libra's payment, it won't 595 00:37:35,200 --> 00:37:37,920 Speaker 1: do much, though I guess technically the business would still 596 00:37:37,960 --> 00:37:40,279 Speaker 1: have its ups and downs. There are a couple of 597 00:37:40,280 --> 00:37:42,359 Speaker 1: other things I'd like to touch on before I sign off. 598 00:37:43,000 --> 00:37:46,680 Speaker 1: One of them is the name Libra in the first place. Now, 599 00:37:46,880 --> 00:37:49,719 Speaker 1: in Latin libra was a term for a unit of 600 00:37:49,760 --> 00:37:53,160 Speaker 1: weight and ancient rome, and most of the stuff I've 601 00:37:53,160 --> 00:37:56,960 Speaker 1: read about in the digital currency realm has reference to this. 602 00:37:57,120 --> 00:38:02,760 Speaker 1: That's talking about scales or weights in Roman times. However, 603 00:38:03,080 --> 00:38:06,319 Speaker 1: it's also the name of an astrological sign. Now, I 604 00:38:06,360 --> 00:38:11,720 Speaker 1: don't put any stock in astrology, unlike my beloved producer Tari, 605 00:38:11,800 --> 00:38:15,440 Speaker 1: who tells me that's just like a cancer. But I 606 00:38:15,520 --> 00:38:18,600 Speaker 1: think of astrology as magical thinking. However, I do think 607 00:38:18,640 --> 00:38:22,560 Speaker 1: it is important and relevant to point out how Libra 608 00:38:22,719 --> 00:38:26,040 Speaker 1: is an astrological sign. Why, well, it all has to 609 00:38:26,080 --> 00:38:28,319 Speaker 1: do with a pair of twins who are once a 610 00:38:28,360 --> 00:38:33,799 Speaker 1: big part of Facebook, the Winklevoss Twins. These twins who 611 00:38:33,840 --> 00:38:37,720 Speaker 1: had an infamous falling out with Mark Zuckerberg. The foundation 612 00:38:37,760 --> 00:38:41,480 Speaker 1: for that falling out was that the twins alleged that 613 00:38:41,640 --> 00:38:47,080 Speaker 1: Zuckerberg had essentially ripped off the idea for Facebook from them. 614 00:38:47,120 --> 00:38:49,960 Speaker 1: They went on to found a company in two thousand fourteen. 615 00:38:50,239 --> 00:38:53,640 Speaker 1: They called it the Gemini Trust Company. It's a digital 616 00:38:53,680 --> 00:38:57,799 Speaker 1: currency exchange company. And that means that a customer of 617 00:38:57,840 --> 00:39:01,200 Speaker 1: that company, you could establish a digital wallet, you could 618 00:39:01,200 --> 00:39:03,759 Speaker 1: buy or sell digital assets, that kind of thing. And 619 00:39:03,840 --> 00:39:06,080 Speaker 1: Jim and I, I'm sure many of you know, is 620 00:39:06,080 --> 00:39:09,920 Speaker 1: also the name of an astrological sign. It's for the twins. 621 00:39:10,520 --> 00:39:13,839 Speaker 1: So could it be that when it came time to 622 00:39:13,920 --> 00:39:18,239 Speaker 1: name this new digital currency that Zuckerberg wanted something that 623 00:39:18,280 --> 00:39:22,600 Speaker 1: would stick in the craw of the Winklevoss brothers and 624 00:39:22,719 --> 00:39:27,080 Speaker 1: call it Libra and say I stole your idea again, 625 00:39:28,320 --> 00:39:31,520 Speaker 1: I have no idea. It could just be coincidence. And honestly, 626 00:39:32,040 --> 00:39:37,279 Speaker 1: we're ultimately talking about several extremely rich dudes who are 627 00:39:37,400 --> 00:39:40,439 Speaker 1: enjoying a life of privilege beyond my imagining. So really, 628 00:39:40,560 --> 00:39:46,160 Speaker 1: I don't care who is having a fit with who. 629 00:39:46,239 --> 00:39:50,120 Speaker 1: It doesn't matter to me anyway. That's the low down 630 00:39:50,480 --> 00:39:54,000 Speaker 1: on Libra. Now. It is possible that the Libra Association 631 00:39:54,400 --> 00:39:57,080 Speaker 1: will get this currency up and running they want to 632 00:39:57,280 --> 00:40:00,400 Speaker 1: launch in twenty twenty. I would argue that right now, 633 00:40:00,480 --> 00:40:04,240 Speaker 1: at least Facebook's involvement is a pretty big albatross around 634 00:40:04,320 --> 00:40:06,880 Speaker 1: the neck of the project. I think it might actually 635 00:40:06,880 --> 00:40:10,239 Speaker 1: have been a better idea to go without Facebook's name 636 00:40:10,280 --> 00:40:13,080 Speaker 1: on it at all, particularly since that's what everyone is 637 00:40:13,160 --> 00:40:16,759 Speaker 1: focusing on right now. I do want to see more 638 00:40:16,800 --> 00:40:20,680 Speaker 1: support for the unbanked, both in developing and developed countries. 639 00:40:20,760 --> 00:40:24,200 Speaker 1: I want to see those folks get access to financial stability. 640 00:40:24,680 --> 00:40:27,080 Speaker 1: I want there to be more financial security for people 641 00:40:27,080 --> 00:40:29,560 Speaker 1: in general. I wanted to be easy to make payments 642 00:40:29,600 --> 00:40:34,640 Speaker 1: without exorbitant transaction fees, and maybe it could well be 643 00:40:35,160 --> 00:40:38,759 Speaker 1: that the Libra Association will fulfill those goals as they 644 00:40:38,760 --> 00:40:43,080 Speaker 1: have stated they want to. I'm obviously really skeptical about that, 645 00:40:43,400 --> 00:40:46,680 Speaker 1: but I'll also admit these may just be my biases 646 00:40:46,880 --> 00:40:49,720 Speaker 1: coming into play. I would love to be proven wrong, 647 00:40:50,040 --> 00:40:53,160 Speaker 1: because if I'm proven wrong, it could possibly be a 648 00:40:53,239 --> 00:40:57,920 Speaker 1: huge benefit for a lot of people. I'm just not 649 00:40:58,040 --> 00:41:00,799 Speaker 1: convinced yet that this is the group to pull that off, 650 00:41:01,680 --> 00:41:04,040 Speaker 1: But I'm curious what you guys think. If you want 651 00:41:04,080 --> 00:41:05,840 Speaker 1: to share your thoughts with me, you can send me 652 00:41:05,880 --> 00:41:09,239 Speaker 1: email the addresses tech stuff at how stuff works dot com, 653 00:41:09,320 --> 00:41:11,360 Speaker 1: or drop me a line on Twitter or Facebook. The 654 00:41:11,360 --> 00:41:14,520 Speaker 1: handle for both of those is text stuff hs W. 655 00:41:15,440 --> 00:41:18,600 Speaker 1: Remember you can visit our website that's tech stuff podcast 656 00:41:18,640 --> 00:41:20,759 Speaker 1: dot com. You're gonna find the archive of all of 657 00:41:20,800 --> 00:41:23,480 Speaker 1: our past episodes there. You will also find links to 658 00:41:23,520 --> 00:41:27,040 Speaker 1: our online store, where every purchase you make goes to 659 00:41:27,120 --> 00:41:30,880 Speaker 1: help the show and we appreciate it very much, and 660 00:41:30,920 --> 00:41:39,920 Speaker 1: I will talk to you again really soon. Tex Stuff 661 00:41:39,960 --> 00:41:42,440 Speaker 1: is a production of I Heart Radio's How Stuff Works. 662 00:41:42,480 --> 00:41:45,279 Speaker 1: For more podcasts from I Heart Radio, visit the I 663 00:41:45,400 --> 00:41:48,640 Speaker 1: heart Radio app, Apple Podcasts, or wherever you listen to 664 00:41:48,680 --> 00:41:49,600 Speaker 1: your favorite shows.