Editor's Note: This article comes fromBlockchain Base CampEditor's Note: This article comes from
Blockchain Base Camp
Blockchain Base Camp
Recently, Facebook has frequently been on the hot search because of its creation of the cryptocurrency—Libra. The G-7 warned of "serious" legal risks to the project amid concerns over data privacy issues and regulatory issues over potential illegal use of data. Facebook was forced to defend the project in the US Congress.
Libra is an experiment in the monetary system in the digital age, so it is inevitable that Libra will be compared with popular cryptocurrencies such as Bitcoin. However, many experts have questioned whether Libra can be called a cryptocurrency.
Both Libra and Bitcoin have white papers and are called cryptocurrencies. But other than that, there are actually quite a few differences between the two, so let's talk about the main differences between the two.
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technical difference
The biggest difference between Bitcoin and Libra lies in the underlying technology behind the two currencies.
When using Bitcoin, transactions are recorded anonymously on a public ledger called the blockchain. It is essentially a database maintained by a network of computers that secures every transaction in a way that is nearly impossible to tamper with.
Ido Sadeh Man, founder and president of the Saga Foundation, a cryptocurrency firm advised by JP Morgan chairman Jacob Frenke, said: "Libra will create a centralized structure governed by an ’ made up of large institutions that buy their voting rights.”
Unlike Bitcoin's network, anyone with sufficient hardware and an internet connection can access and maintain the Libra network. Peter VanValkenburgh (director of research at Coin Center, a cryptocurrency policy think tank) mentioned it in his latest blog.
"The nature of a cryptocurrency is such that it does not rely on any trusted intermediary, and we do not consider Libra a cryptocurrency because it uses a permissioned ledger and relies on a trusted Issuers to hold, manage and back this monetary asset."
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use case difference
The Bitcoin white paper describes the virtual currency as a peer-to-peer payment system through which people can exchange money without going through a bank. Bitcoin is often seen as an investment these days. The common industry slang term "HODL" refers to the long-term purchase and investment of cryptocurrencies. Bitcoin is also often referred to as "digital gold."
The main use of Libra is cross-border payments and transfers. It is linked to government legal tender and other assets, avoiding the common value fluctuations in cryptocurrencies such as Bitcoin and Ethereum. Libra is called a "stable currency" by many in the industry and aims to maintain a stable value.
Charles Hayter, co-founder and CEO of digital currency comparison platform CryptoCompare, told CNBC in an interview: "Bitcoin and Facebook's Libra both represent different stages of currency development, but in very different ways. Bitcoin is permissionless." , decentralized, deflationary, and volatile. Libra Coins are permissioned, centralized, subject to supply and demand, and pegged to fiat currencies.”
By "supply and demand," Hayter means that Facebook and its partner companies can effectively maintain price stability by adjusting supply to match the amount of other resources in stockpiles, thereby causing changes in demand.
Instead, Bitcoin has a fixed supply and its total supply is strictly limited to 21 million. Sadeh Man of the Saga Foundation mentioned: “Bitcoin’s supply is fixed and cannot respond to market demand accordingly. However, when Libra’s authorized dealers deposit or withdraw money from their reserves, New Libra coins are created or destroyed.”
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regulatory differences
When it comes to the regulation of cryptocurrencies, Facebook's Libra has been in the spotlight. There are some concerns that regulators may confuse the company's blockchain project with other digital assets.
Regulatory issues are further complicated by the differences between Libra coins and digital currencies like bitcoin. “While Bitcoin does not require the involvement of financial intermediaries, the Libra model still relies on the entities that make up the Libra Association,” said Coin Center’s Van Valkenburgh.
A system without intermediaries means that there is no intermediary risk, so there is no need to supervise the risks that intermediaries may bring. "
As mentioned in the Libra white paper, the Libra Association currently consists of 28 founding members and is expected to increase to 100 members before the currency is issued in the first half of 2020.
VanValkenburgh said that while there are "miners" in the Bitcoin network who record transactions, it is pointless to regulate "miners" because they are not trusted custodians of users' funds. But on the other hand, cryptocurrency exchanges and wallets do need regulation.
Questions were raised at Wednesday's hearing about how Libra would fit into existing financial regulations. Asked whether Libra could be seen as a financial security, Facebook's Marcus said no. He said Libra should be viewed more as a commodity.
