Challenging the global order - Facebook establishes the blockchain-based 'Libra' network

The libra may actually become one big superstate. A kind of cloud-empire, of the kind I described in my book "The Rulers of the Future" which was published already three years ago

There are inventions that completely change the course of history. The atomic bomb, for example, or the steam engine. In recent days, a new invention of this kind has appeared in the world arena. My friends and I who read about her are still stunned and mumbling - "We thought it would happen, but not so fast!", Or "It devours all the cards. What will the world look like now? ”

We are not the only ones asking this question. In a rarity, representatives from both sides of the fence in the US Congress - Republicans and Democrats - It was already agreed that an emergency debate should be held regarding the new situation, and that this invention should not be moved forward before Congress understood its full implications. In other words, never.

But perhaps the most interesting response I heard to the new development came from one of my friends, an innovation expert, who told me - “What kind of Zuckerberg bastard, huh? Whoever did not want him as President of the United States will now receive him as Emperor of the World. "

And all this, thanks to Facebook's announcement last week that it's setting up its own blockchain platform, in a way that your faithful servant (I) had already predicted two years ago would happen, in the books "Dominating the Future". Sometimes I succeed.

But what does Facebook's blockchain platform really mean? Why are its implications about changing the economy and geopolitics as we know them? Here are some answers.

What is a blockchain anyway?
Blockchain is a method that makes it possible to distribute - that is, to spread - the computing power required to protect a certain network, among millions of different computers. The first example of the success of blockchain technologies is in Bitcoin: a currency that is protected from hacking and fraud in a decentralized manner, when millions of user computers around the world check every action that is done in Bitcoin, and make sure that there is no attempt to cheat.

If you want a broader explanation of the blockchain network and its meanings, Here is a post I wrote on the subject (originally as an article in the Technion magazine) and received many shares on Facebook as well -

Bitcoin has been so successful (relative to a completely experimental currency, set up by a group of lunatics) because it is not controlled by anyone. This is not a digital currency made in America, China, or Germany, which these countries can control and manipulate the operations that take place in it. Instead, it was the first 'neutral' currency in the world, unmanaged. But despite these advantages, he never really succeeded. The fact that he relied on personal computers all over the world for security purposes made it possible to perform only seven operations per second in this currency. By comparison, Visa performs 2,400 operations every second.

Then came Facebook, announcing the opening of the Libra network, along with another huge 27 membership, including Visa itself.

Libera
Libra is the new blockchain platform that Facebook announced its establishment last week. The platform is supposed to provide all users with a new digital currency called "libra" - a word that is carefully chosen, and comes from the Roman unit of measure and word-play on the 'liberty', ie "freedom" in French. Anyone can use this currency: you can purchase it through a dedicated app or website, and then use it.

Which begs the question, how exactly will you use it?

This is where the other 27 companies with which Facebook founded the new platform come into play. These include the financial giants: Visa (which is responsible for remittances worth almost seven trillion dollars a year) MasterCard, PayPal and Stripe. It is not an exaggeration to say that together, these companies oversee almost ten percent of all financial operations in the world. So through Libra, you can pay anywhere that accepts Visa and Mastercard. I mean, everywhere. Even to banks.

But what if you want to use Libra to take a taxi? You will surely be happy to hear that the two giants of public transportation - Uber and Lyft - are also members of the Libra network. Maybe you want to book a hotel room, a flight or rent a car? Greetings - Bockings-Holdings Company (Through it, 670 million nights in hotels were purchased per year, and seven million airline tickets) is also a partner in the Libra network. Would you like to buy an item on eBay? She is also on the Libra network! Would you like to pay for a Spotify subscription? She is there too. Would you like to connect to the Internet through your smartphone? Talk to Vodafone - the largest mobile communications provider in the world (by profits) - which she also joined..

And this is just the opening shot. The Libera network will not open until next year, and it is expected that by then dozens of companies will join. Facebook has already made it clear that they will be happy to join even competing companies, allegedly, as Google and other social networks.

But why should all of these go online? What will they gain from it?

The carrot

The immediate benefit - which is almost marginal, on a broader view - is that the joining companies must invest a sum of at least ten million dollars in the platform. In return, they will receive 'interest' on their initial investment, depending on the success of the platform. If Libra is popular enough, and a large number of people use it and buy Libra coins, then the founding companies will make a nice profit on their original investment.

The more important reason is that the Libra network is actually developing a new kind of money that can be used all over the world to pay for services of all kinds. You can land in Africa's most remote country, and still subscribe to the wireless network, pay for public transport services or take out loans using the digital currency you have in your digital wallet. You don't need the local banks at all to do this, and this is a critical point for 1.7 of the one billion bank accountless people today, but still want to enjoy all the services the world can provide. This is a particularly important aspect for refugees, who find themselves without legal access to the most basic services in the countries they have come to. In short, the Libra platform opens a global marketplace for companies that have had to submit themselves so far to slow, faltering and paralyzing regulations.

Say now - but what about the local governments? Will they really agree that the giant companies will use foreign currency to carry out payment operations on their territory? And here you start to see why people are so excited about Libra. To date, countries could have outstripped companies that did not behave well. If Facebook did not, for example, agree to play by the laws in Germany and share information with the authorities, it would have been kicked out of the country, or would have suffered significant fines. But all of a sudden, Germany doesn't have to deal with Facebook alone; it has to deal with dozens of companies that currently control more than 10 percent of the global economy. If Germany does not want Libra services, then all of these companies will collectively shrug their shoulders. Together, they are bigger than Germany, or even the EU. They are the ones who dictate the rules - and the German public will have to align with their tune.

Okay, let's face it: It's a vanity statement, and of course things aren't that simple. The states are not losing power entirely, and the Libra network will have to negotiate with each state to decide the rules by which the citizens of the states are granted access to the network. And yet, it is not about law and things with every company in itself, but with dozens of the world's largest companies. Countries will have to agree to Libra's intrusion into their territory, or risk civil disobedience from outraged residents, who will not understand why they are the only people in the world who are excluded from the best, most efficient and cheapest services in all areas. Good luck to the government trying to perpetuate this situation over time.

And here, in fact, is one of the key seduction factors for the giant companies: they are getting stronger at the expense of the states, and in this way they should be able to bring their services to more users worldwide, while under less regulation.

Starting to worry you? Starting to sound like a shadow government coming out of our eyes right?

Well, you are right, but the question is whether it really could be worse than things today.

Governments, governments everywhere

The world today is in an intermediate stage. On the one hand, we have created the global, embracing world wide web, through which anyone can talk to anyone else anywhere, anytime. At the same time, we are still divided into 195 different countries, each with its own passport, with its own money, with its own laws and procedures, with its own language and so on. In each country we must use a different currency, pass long and tedious border checks and passports, issue a visa in advance and so on.

All these are not trivial problems. This is the reason, for example, that many entities require a commission of seven percent for transferring money between countries - A cost that reaches fifty billion dollars a year. This is also the reason why we have to be stuck in an airport for days, just because we forgot (for example) the passport with the visa on the plane that has already taken off, and we are unable to move forward or return without first getting permission from the embassy, ​​which will arrive in just a few days because the key to the form warehouse is at the Jing who just now went on a tea holiday in the Maldives.

The Libra system is supposed to bypass all the irregularities and frictions between these 195 separate countries, and establish a single system that will allow everyone to enjoy the best identity verification services (courtesy of Facebook), the best money management services (Visa, Mastercard, PayPal), public transportation in every country , And so on. And this is just the situation today, when there are only 28 companies in the Libra network! In a year, there will be many more. In five years, it is quite possible that even governments and municipalities will be begging to join the Libra network, thus making the lives of citizens and residents easier, and along the way - to actually become one big super-state. A kind of cloud-empire, of the kind I described in my book "The Rulers of the Future" which was published already three years ago.

Well, let me show off. I am also allowed to be right now and then.

But you have to admit: there's a chance the whole thing will go down in flames.

As I wrote about cloud empires and future cloud states, I envisioned a blockchain network run by the general public. Similar to Bitcoin, computing power was supposed to come from each and every one of us. Although Facebook aims to achieve this - a situation in which the Libra network will not be run by the giant companies, but by the public - and explicitly states this in the project documents. However, existing technology is not yet able to support such a network. For now, we need to settle for a network run by the big companies, and rely on Facebook's statement that the ultimate goal is ultimately to make the Libra network permissionless - that is, one that the general public will participate in managing.

But until then, the network will be run by the giant companies.

Trust them? No? good party. You should not trust any body in our world. And let’s not forget that Facebook - for its failed reputation for keeping information and privacy - is the one who pushed for the platform’s founding. The positive side is that Facebook has already made it clear that the information you collect on Facebook is not going to be shared with the other companies on the Libra network - unless you explicitly state that you want it.

And yet, who is willing to trust the giant companies? nobody. But what is the alternative? Trust 195 governments, many of which have not proven to be particularly successful - to put it mildly - in improving the lives of their citizens? That most of them spy on their citizens all the time? That fail time and time again in international coordination and cooperation? Who occasionally throw in a word at the UN in favor of cooperation, and then do as they please in their territories?

It is clear that this is a first-of-its-kind experiment, one that can only be made possible in an instantly connected world through the Internet. Any commercial company that joins (and in order to join must provide proof of value of at least $ XNUMX billion), you will be given the right to vote on the platform rules. The giant companies, for the first time, are banding together under one platform, which is supposed to compete in countries, all of them. This is the UN of commercial companies, but one that enforces its will immediately and clearly by establishing the rules by which the Libra network operates.

And the states may not like it.

So what can they do about it? Apparently, the vast majority of countries will not be able to compete economically with Libra or create their own alternative (China is probably the only exception). Will they be able to paralyze Libra by closing its servers? Maybe, but as long as the network includes enough international companies, the servers can be assumed to be located all over the world - which will require joint international action to paralyze Libra. I am still waiting for the day China, the United States, Russia and the European Union will jointly decide that there is a threat big enough to make them cooperate. Maybe this will happen, someday, as a result of the imminent threat of an asteroid about to hit Earth. But can the Libra network - a network that is supposed to work better with users' lives - really make all countries decide to cooperate, just to bring it down?

Somehow, I don't think so.

And yet, the hidden rabbi here is visible. States may decide on economic sanctions that will be imposed on companies participating in Libra to discourage them from taking part in the network. They can penalize companies for violations of the Libra network, forcing them to leave the network for fear of huge claims.

Or - Shalibra will grow fast enough, strong enough to change the world order. To ensure that if one company in the network receives an unfair fine (for the Libra network) from a local government, the wheel will be reversed: The Libra network itself is the one that will punish the offending government and inflict fines and boycotts on it for the sake of its satisfaction.

You now understand why the people who have been thinking about these issues for years, walk the streets like sleepwalkers in the last few days, and whisper to everyone around them - "The world has completely changed in the last week! How do you not understand this, my witnesses?

On the way to the future

I may be a little more excited about the potential of the Libra network. This huge experiment may not work. In fact, I'm sure it will fail in some ways, but even if it completely collapses for reasons we can not yet guess, it will resurface from Afro in the years to come. The blockchain network is supposed to allow people and companies to unite without regard to local governments and national borders, and this is a force that will be difficult for countries to stop over time.

There are thousands more issues that need to be resolved: What is the right of users to privacy on the Libra network? Are competing companies allowed to be partners in this one network and share information with each other, and are they thereby afraid of creating a cartel? Shouldn't there be basic rules - those that will be established from the beginning of the Libra network, and that can only be changed by a huge majority? And who enforces fines for breaking the rules and laws in the Libra network?

These are all questions that are important to raise, and will provide a great deal of livelihood for lawyers, and many croissants at conferences of all kinds. But for now, I want to stop here with one simple statement: This week, everything we thought we knew about the global economy and relations between international companies and governments began to falter.

And the sequel will come.

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