Libra Has Promise, Says Virtual Currency Expert/Blockchain Skeptic Adam Frisby, But Faces Adoption, Trust & Storage Challenges

Everyone in tech is talking today about Libra, the new blockchain-related cryptocurrency initiative led by Facebook in association with many major companies and organizations. (Read this detailed summary from Josh Constine on TechCrunch.) Assuming it isn't regulated to death by concerned government officials, can it live up to the utopian promises made in its promotional video (see above), while becoming a functional alternative to existing currency system?

"Biggest hole is just whether or not people trust it," virtual currency expert Adam Frisby tells me, in a chat today. "I think some will. Honestly, if it was anyone but Facebook pitching this (even if their stake is a minority one), it'd be way more likely to succeed."

As longtime New World Notes readers know, Adam has been involved as an entrepreneur in virtual world economies for over 15 years, and recently wrote a much-shared VentureBeat essay detailing his skepticism for blockchain. Libra, however, has promise, because (in his words) "it [s]olves a lot of the issues with blockchain, by not really being one."

One interesting point he raises: The industries with the greatest incentive to use Libra now are on the edge of the mainstream economy -- for instance, gambling, online gaming, porn, and the burgeoning legal pot industry in some US states. In my view, their rapid embrace will likely turn Libra into "Vice Coin" -- a brand association which might hamper Libra's adoption by the wider mainstream. (Which is probably not what Facebook and its partners were going for.)

On a technical front, Adam me, the heavy storage requirements may prevent Libra from becoming decentralized. Other challenges remain. For more detail, here's our lightly edited transcript:

Adam: Has promise. Solves a lot of the issues with blockchain, by not really being one. Frankly, a low-fee Internet cash-replacement is a good thing, minimum transaction charges by credit card companies mean a $1 transaction costs 25% in fees. And the fact Facebook is only a minor partner in the overall makeup of the mix is also a good thing if they want it adopted — presence of Visa, Mastercard and PayPal don’t hurt either.

WJA: 1000 transactions per second doesn't seems scalable to me. [That's Libra's reported goal at launch.] At peak periods, there's probably 1000s of transactions every second in the US alone. So there'd be delays, yeah?

Adam: 1700 TPS for Visa, peak is probably about 3000. 1000 is fine for a nascent currency As long as Libra doesn't actually decentralize like they're claiming they intend to, they could scale it way beyond 1000 if needed.

Plus, I'll wager most people end up just using the Facebook-hosted wallet service, which means 90% of these transactions probably wont ever actually have to hit the blockchain.

Scaling-wise, the proposal isn't bad. Tech is about as good as you can get from my reading of the white paper.

By keeping the number of validation nodes small - the amount of telephone that goes on is small, so it's much closer to a normal database, which laugh at a mere 1000 updates/sec.

WJA: So you don't see any potential holes to this?

Adam: Only further questions. What will the transaction fees look like, who makes up the remaining 70 or so launch partners, how they intend to handle things like fraud, what happens when the adult industry jumps onboard and drives the first adoption. (Adult equals normally huge risk of chargebacks, [but there’s] no chargebacks in Libra.)

And gaming, gambling and adult industries will very much like it to work due to the short stick they currently get from credit card and bank processors.

They'll be very big adopters if they can get onboard, and I can't really see how they can be stopped.

Adult will love it though - I think there's only like one or two payment processors who will touch adult content.

Everyone else bans [adult] due to the incredibly high chargeback rate.

WJA: So that'll be Libra's challenge -- trying to scale it to the mainstream while the early adopters are likely porn/gambling/gaming which will totally undermine all the bright and happy utopian imagery in its ads.

Adam: Likely yes. Didn't stop the Internet/VHS/etc though.

WJA: True. The thing there is, there wasn't an existing Good Enough alternative to the Internet/VHS/etc. [In other words, the current financial system is good enough for most people, whereas there was no viable alternative to the Internet/VHS/etc, which is probably why its early associations with porn and gambling weren’t a limiting factor.]

Adam:  The side question is, hypothetically, assume this takes off, what the heck central banks do if they lose control of monetary policy. Also interplay of governance - e.g. India is currently in the middle of legislating a ban on cryptocurrency.

Actually the other question I saw from a technical aspect was storage. It’s gonna be expensive for anyone smaller than Facebook/Google/Twitter/etc to run nodes - which again might be a stake in the heart of the “we'll decentralize it one day…”

Probably ways of clipping data though. I think it's solvable.

Biggest hole is just whether or not people trust it. I think some will. Honestly, if it was anyone but Facebook pitching this (even if their stake is a minority one), it'd be way more likely to succeed.

Disclosure: Frisby is co-founder of the Sinespace virtual world platform, a sponsoring partner to NWN.

Comments

[Susan Wilson]

Trust challenges? "... led by Facebook in association with many major companies and organizations," so yeah, not with a 10-foot pole.

[sirhc desantis]

Even without the FBorg connection the take of ser Frisby would have given me pause. Holding my nose at the silly name, a quick flip through its twatter thing and - oh, turn off your adblocker to sign up. Agincourt salute to that. The fact that zucks is on board just reinforces my 3m and a bit pole.

(As for empowering through easier financial yaddda yadda usual BS on the site - how about empowering me in cash - real cash that is - for all the data you have scraped together on me despite doing my best to avoid yer collective POS).

[Summer Haas]

So we are going to let Facebook control our economy? A company that is constantly under investigation for data breaches and unethical behavior. A company that regularly bans people for having alternative points of views. What happens when you post a picture they deem is wrong-think, you can no longer pay for groceries? A big giant NOPE to this.

[Jackie Gleason]

I would love a company that censors my voice,expressions,ideas,thoughts, while pushing an unbendable narrow narrative to indoctrinate the masses with.. to also control my money, it makes perfect sense, drinking removes warts and pimples. not from me. but from those I look at.

Facebook,Youtube & Twitter all need broken, pass the laws or let a civil war do it for them!

Does God have a sense of humor?
He must have if He created us.

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