Facebook Libra coin as an investment instrument

We receive a number of questions regarding Facebook Libra and whether it can be considered for investment purposes and/or how it is different from Bitcoin and Ethereum. While we focus on technology and cryptocurrency investments certainly is not an area of focus for Dappros, we have studied the key principles of Libra project and happy to provide a short explanation below. This is not an investment advice but hopefully will help with overall understanding.

First of all, Libra coin is not available for purchase yet. We assume the place to go will be the Calibra wallet developed by Facebook subsidiary and you may subscribe to their newsletter at official website https://www.calibra.com/ to be notified when it becomes available for purchase. This isn’t likely to happen until 2020 according to public communications so far.

Second thing which is important to understand is that Libra will operate a kind of stable coin. Stable coin is a cryptocurrency that is pegged to some real-world asset, for example an ounce of gold, or a “fiat” currency such as US dollar. To be precise, Libra is not pegged to a single currency or asset, but it’s actually linked to a basket of stable currencies. It is reported that the basket will consist of US dollar, Euro, British Pound and Japanese Yen in the beginning. Libra Association might adjust the basket composition over time. Main idea here is to keep it stable and avoid high volatility. All these currencies are historically stable.
This makes Libra convenient for international payments and all sorts of e-commerce operations. For the same reasons however there isn’t much point in accumulating Libra coin for investment purposes. Unless you were looking for a digital equivalent of a Swiss Franc that is.

Third important point to make is that Libra isn’t even designed to be accumulated. At least it doesn’t look like that from what’s described in project documentation and official announcements. When you purchase Libra (once this is available, presumably via Calibra wallet), what happens is basically you exchange your local currency into digital money that is designed to make it easy for you to transact online. You will be able to send payments to friends and family, or some merchants using Messenger, WhatsApp or Facebook Marketplace. This will be followed by other 3rd party applications and more sophisticated uses such as financial services, smart contract based applications etc. However the main purpose for Libra will remain in transactions. Even their programming language is called Move 🙂 Moreover, you won’t even earn interest on your Libra holdings, at the same time Libra Association will keep the interest made from reserves held in the basket including the funds you’ve put in there when purchasing Libra coins for your local currency.

In conclusion, there isn’t much point in holding Libra coin for investment purposes. It is not supposed to grow in value over time, there is no notion of scarcity and it is simply not designed for such purpose.

We will dive deeper into technical, business and blockchain aspects of project Libra in our next post.
Taras Filatov
Taras Filatov
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