We still dont know how much of Libra Facebook owns TechCrunch

We still dont know how much of Libra Facebook owns TechCrunch The dollar 10 million entry fee to join the is merely a minimum. Members wholl verify transactions can opt to invest more in exchange for more Libra Investment Tokens that will earn them dividends from the interest earned by the Libra Reserve after it pays for infrastructure and operations costs. If regulators it to launch after today , and the cryptocurrency grows popular with tons of people cashing in local currencies for Libra, the Reserve that holds those assets could grow huge and generate meaningful returns via interest especially for members willing to sink a ton of money in early. But therein lies potential disalignment of incentives. If youre confused, read our guide to everything about Libra Each Libra Association member only gets one vote on the council, including . But if Facebook puts in dollar 500 million and another member like eBay antes up just the dollar 10 million minimum, Facebook has a much bigger incentive to get people cashing into Libra and holding onto the cryptocurrency so the Reserve earns interest on those dollars or other fiat, rather than just getting people to transact with it regardless of whether they hold on to Libra permanently. That could lead Facebook and its Calibra subsidiary representing it to push governance decisions that would disproportionately benefit it. Ahead of the Libra announcement two weeks ago, Facebooks head of blockchain and now Calibra David Marcus told me, The reserve earns interest on some of those treasuries. Its a small amount and its variable, but if the reserve becomes big it could become a substantial way to fund the association but also return capital to investors. Yet Facebook, for all its talk about transparency with Libra, refused to tell me how much its invested into the Libra project as a whole or the Libra Investment Token. That should be a core question raised by Congress when Marcus testifies before the Senate Banking Chair on and the House Financial Services Committee on . Facebook did not respond to requests for comment on this article. Congress should also be sure to ask how Libra will avoid a Cambridge Analytica style crypto disaster given that . The proportion of the total Libra Investment Tokens that Facebook owns in part determines how decentralized Libra really is. If Facebook owns the lions share or a majority, that could give it too much financial impetus to bend the rules in its favor even if it only has one vote on the council. Heres how. Facebook has led development of Libra to date. In fact, the Libra Association has yet to draw up and ratify a charter or formally admit members. Technically its just Facebooks project right now. So far weve been funding it all, Marcus told . Its also been coding it all, organizing it all and communicating it all. As such, for now the project cant survive without Facebook, and may not be able to for quite a while. That means that if at any time Facebook disagrees so strongly with the Libra Association that it threatens to pull out, it jeopardizes the investment of all the other members. That could coerce them to vote in support of its governance policy suggestions. Facebook thereby wouldnt need more than one vote to have a much larger influence on the direction of the project. Today in a not a Libra.org blog post , Marcus wrote, The levels of investments of each of the partners will most likely be public as well when thats actually live. But thats far from a guarantee, and could come too late for regulators to intercede or other members to truly understand the asymmetry. Meanwhile, Marcus also said that Weve been basically lending money to the association that will be at some point repaid back. That raises another question of how much Facebook has already sunk into the Libra project, how much it expects to be repaid and on what schedule. Members might be more skittish to join if they learn much of their dollar 10 million investment might just go to paying back Facebook.  Thats not to mention the other ways Facebook will earn money from Libra. Marcus wrote today that If Libra is successful, Facebook will first benefit from it by enabling more commerce across its family of apps. More commerce means ads will be more effective, and advertisers will buy more of them to grow their businesses. Additionally, if we earn peoples trust with the Calibra wallet over time, we will also be in a position to start offering more financial services, and generate other revenue streams for the company. The fact that Facebook oversees development and has a massive head start on building its wallet that will be baked into its billion plus user Messenger and WhatsApp products sure doesnt hurt its prospects for offering other financial services. It will be first to market, instantly at scale, with an insiders role in defining the rule book. Im not discounting the potential Libra has to aid the unbanked who cant pay fees for having too little money in their accounts, or make commerce cheaper for small businesses. But if Facebook stands to earn outsized returns directly and indirectly from Libra, while expecting other members to foot its R D bill, and these numbers arent made public soon, its reasonable to question how decentralized and altruistic this project really is.

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