Facebook’s Libra Highlights Crypto’s Most Compelling Use Case

Describing itself as “A simple global currency and financial infrastructure that empowers billions of people,” Libra is attracting significant attention from crypto enthusiasts, mainstream financers, and curious onlookers alike. While some are debating Libra’s role in the cryptocurrency ecosystem, others are intrigued by its intended use case. Libra is targeting the 1.7 billion people around the world who are unbanked, meaning that they don’t have access to the financial institutions that have defined the modern banking movement. In this way, Facebook is highlighting one of crypto’s most compelling use cases.

Crypto as Currency

Despite Bitcoin’s unparalleled popularity and initial intention to serve as a borderless, trustless p2p currency, it’s really a speculative asset that is more akin to digital gold than modern currency. Sure, Starbucks’ customers can purchase a latte using Bitcoin, but that’s hardly a sign that it’s an ideal form of digital money. To put it simply, just because you can make a purchase in Bitcoin, doesn’t mean that you should. As the annual Bitcoin pizza day celebrations remind us, spending a speculative asset can be incredibly costly. Perhaps most importantly, Bitcoin and other like-minded cryptocurrencies are extremely volatile. While their well-document price fluctuations can significantly dampen buying processes, it’s even more devastating in places where users are relying on the currency’s store of value to provide for critical goods and services. At the same time, things like varying transaction fees, somewhat slow settlement times, and a general blasé approach to facilitating commerce make Bitcoin unsuitable as currency, especially in developing countries or for those without access to traditional financial resources. Unfortunately, many people in economically-crippled countries are currently relying on Bitcoin to serve this purpose. As Venezuelan economist, Carlos Hernández, proclaimed in the opinion pages of The New York Times, “Bitcoin has saved my family.” Desperate times may call for desperate measures, but Facebook’s Libra announcement makes it clear that people in developing economies will have better options going forward.

The Stablecoin Alternative

Bitcoin and other similar currencies may be best suited as speculative assets, but they do not represent the full expression of the crypto ecosystem. Stablecoins, a specific type of cryptocurrency that, as the name indicates, prioritize stability by aligning their value with another asset like dollars, gold, or other resources, offer a more practical option for the unbanked. Libra eschews each of these categories, choosing instead to base its value off of a basket of global currencies and low-volatility securities that will give the currency both a unique valuation and a reliable price. Of course, Libra isn’t carving out its own niche in the crypto space. The stablecoin market already features several players that are creating unique takes on the stablecoin initaitve, all in an effort to bolster the usability of digital currencies around the world. For example, diamDEXX, a stablecoin that supports truly valuable digital money, aligns its token price with U.S. dollars, and it backs those finances with diamonds. Offering both a stablecoin and a wallet service, diamDEXX acts as a store of value and a medium of exchange for unbanked mobile users around the world, Africa especially. Other projects, like MakerDAO, are taking a different approach to creating stable digital assets. The platforms DAI token is pegged to the U.S. dollar, giving it a stable value that mimics one of the world’s most popular fiat currencies. Its value is backed by a number of collateral assets that underpin the token’s validity. With a decentralized governing authority, MakerDAO aims to solve for the crypto’s biggest problems while capitalizing on its biggest strengths. Both of these assets take a radically different approach to their stablecoin projects, and they reflect the breadth of the market that could significantly impact the unbanked. By giving the unbanked access to usable digital assets, they are equipping them with the financial tools necessary to thrive in every facet of their lives. The future of Facebook’s cryptocurrency is still being written, but their target audience is right, and they are undoubtedly ready. At the very least, the project at will at least spread the message about crypto’s role in the modern economy. As diamDEXX CEO, Jeremy Dahan, said, “Facebook has billions of users who can, in a single day, become aware of digital currencies and their benefits. True, most of them won’t immediately begin learning about other cryptocurrencies, but it could definitely be the trigger for a wider adoption of cryptocurrencies.” Equipping the unbanked with the financial resources that they need and deserve is undoubtedly one of the most compelling use cases of any cryptocurrency, and stablecoins are positioned to provide that service. They can be the financial resource of the future, bringing together the banked and the unbanked into a cohesive and collaborative global economy, and the crypto ecosystem has the resources to make it happen.

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Editor’s Note: This article is a guest submission and was not authored by BeInCrypto. We have chosen to publish it because we believe it may be of interest to our readers.