The problem with cryptocurrencies is that they’re all pumped up with hot air.
Facebook’s Libra is the best example yet.
Even its name, taken from the zodiac, is based on the element of air.
Here’s what’s hot and what’s not about Libra and why it’s true to its element.
In Astrology air is the element that connects all other elements (earth, fire and water), even though it might seem less relevant, invisible as it is.
Facebook, with its constellation of 2.4 billion active users, wants Libra to be the connecting element, as in money, between buyers and sellers of everything up in cyberspace and down here on earth.
Towards that end, Facebook isn’t concocting Libra out of thin air, like, say, Bitcoin.
How Facebook Has Bitten Off More Than It Can Chew
Bitcoin, by way of example of what Facebook doesn’t want Libra to be, saw its value rise to almost $20,000 a coin back in late 2017, only to plunge to the mid $3,000 range a year later, and is now approaching $12,000 a coin.
That’s because Bitcoin is actually based on something very similar to air.
Bitcoin is “mined,” almost out of thin air, but more like out of connected computers, where it’s been “buried mathematically” by a real person, whose name isn’t Midas or God, but might be related to the Pied Piper, who magically bestows successful miners with minting powers, but not power to value their bitcoin, which, by the way, is a coin only in name.
In reality, Bitcoin is a concept that in its metaphysical form resembles air and sees its value derived by means of supply and demand.
Facebook wants the world to know it ain’t playing that silly game.
In Facebook’s world, Libra isn’t going to be mined any more than its value will be derived out of thin air.
Sure, it’s going to be “digital.” But it’s going to be directly tied to real world assets.
What Facebook’s doing is gathering a group of 100 investor-partners who will each pony up ten million dollars, for a total of $1 billion. That money will be parked in a presumably rock-steady, interest bearing, portfolio of bonds and currencies and whatever else makes the portfolio steady like a money market mutual fund kind of portfolio.
Then, since that portfolio will have an initial net asset value of $1billion, Facebook will have its “sellers” sell buyers one Libra for $1.
Because, you know, a Libra is going to be worth a $1. Because, like, it’s a real currency, with like a $1 billion backing, kind of like how gold used to back old currency regimes, you know?
That will make Libra a currency whose value only fluctuates against other currencies, like all real currencies, but otherwise be a “store of value” and a known quantity as a payment instrument.
Whether Libra takes off or not will be a matter of how its embraced, where it can be used, how it performs and what it costs as a payment means, not unlike PayPal, by the way.
Then, if it’s successful, we’ll see how it’s going to be regulated, which is another story for another time.
But not next week.
Next week I’m going to tell you what’s going to happen to that initial pile of $1 billion and why Facebook is really creating Libra.
You aren’t going to believe it, it’s that genius!