Should You Use Libra? – Understanding the True Intentions behind Facebook’s Cryptocurrency

Facebook Libra

Facebook has made it official, confirming suspicions about a blockchain project they’ve been working on for more than a year. Libra is Facebook’s next step to becoming a dominant force in FinTech sector.

Crypto-users saw this as a nod to cryptocurrency as an established payment option, but for some, it’s just a way to lure people away from traditional banks and payment services.

One Currency for Everyone

Throughout history world currencies has been associated with the most powerful countries like the British pound sterling and the US dollar. Whoever has control of the globally accepted currency has the potential of affecting the world’s economy.

Facebook’s announcement cannot be taken lightly. With roughly 30% of the world’s population currently on Facebook, it’s not hard to see why Libra can cause massive disruption in the financial sector. Crypto users estimated to be around 25 million pales in comparison to the sheer volume of would-be Libra users including the unbanked and the underserved.

This could lead to the rise of a “supercurrency” where only one currency exists for cashless, online, and cross-border transactions. As technology improves and more people gain access to free internet, digital currency and cashless transactions will become the norm, and fiat currency as we know it will cease to exist.

How Libra Works in a Nutshell

We’ve seen some attempts to create a borderless currency in the late 20th century like the gold-backed dollar, or more recently cryptocurrencies like Bitcoin and Ethereum. Facebook decides to do things differently.

Libra aims to be the first borderless currency with the stability of state-backed fiat and the security features of blockchain technology. It’s a stable coin like Tether and TrueUSD, but with some level of decentralization that employs validator nodes (a total of 100 nodes) to process transactions. There are currently 28 which includes Visa, Mastercard, Coinbase, Paypal, Ebay, and Facebook.

Libra will also address the problem of slow transaction throughputs encountered by decentralized currencies like Bitcoin and Ethereum. Whereas Bitcoin could only make seven transactions per second (TPS), Libra can process up to a thousand. That’s five times faster than PayPal, although much slower compared to Visa’s 1700 to 4000 TPS. Still, Libra is a significant improvement to many large cap cryptocurrencies in terms of transaction speed.

Unlike most coins listed on Coinmarketcap, Libra isn’t meant to be traded but is a way to store wealth outside of banks and financial institutions and making cashless transactions. Facebook, along with Libra’s founding members will put together a “Libra reserve” where all of people’s money will be pooled together creating an immense repository of all the world’s currencies. It’s like Facebook having its own “superbank.” This can have severe consequences on traditional banking and, if successful, could lead to closures.

Calibra – Facebook’s Wallet &Payment Processor

Facebook will have its own wallet and payment processing app known as “Calibra” which is distinct from the social media platform and the messaging app. Hence, all transactions made by users on the app are not mingled with user activity on social media. Facebook assures data will be stored anonymously for research purposes and will not be used to market goods and services to people on social media. Thus, if you buy a new pair of sports shoes with Libra through your Calibra wallet, you won’t be bombarded with ads of sports items on social media. Whatever shows up on your newsfeed still depends on your browsing activity.

This, in a way, prevents another Cambridge Analytica type of situation where tech giants and corporations could take advantage of user information for their own good. Meanwhile, this would encourage a lot of businesses to advertise on Facebook as more people get attracted to the idea of using instant,cashless, borderless transactions much cheaper than traditional bank transfers and payment services. Question is, can we trust Facebook with our money and spending habits?

A Friend or Foe of the Government

By allowing Facebook to gain access to the financial sector, governments can achieve what it failed to do with permission-less, decentralized, censorship-resistant currencies like Bitcoin, Ethereum, or the untraceable privacy coin like Monero. Unlike Bitcoin, Libra is a “permissioned” coin in which validator nodes (the founding members of Libra Association), have been selected based on a given criteria. These are usually multinational companies with at least $10 million staked on the Libra project.

This puts every node under the radar, and governments could very easily knock on their doors and make demands of them. Think of what this could mean to your privacy. Would it be worth the risk in exchange for a much cheaper and faster way to use money? For the 1.7 billion unbanked, and the rest of the world’s population suffering from high fees, it is a much better alternative to being denied from or being constantly ripped off with fees that are considered discriminatory. They just want to use money the way it supposed to work.

On the other hand, Facebook Libra could turn into a “mono-bank” where all of the world’s currency is sucked into. Facebook can turn the table on traditional financial institutions by depriving them of customers on the payments side. Furthermore, if Facebook succeeds in holding the majority of people’s wealth in Libra reserve, banks will slowly lose their ability as informed lenders while Libra gains the upper hand by becoming a lender itself.

Conclusion

Facebook is playing the long game in its bid to become the most dominant force in cashless, borderless transactions and online advertising. This is a crucial moment which will decide the fate of many traditional financial institutions. They can either make concessions or slug it out to the bitter end. But ultimately, it will depend on us, users, from all countries across the globe whether Facebook’s vision of putting us all under one currency will come to fruition.

Facebook’s Update on Crypto-related Ads – Why Should It Matter?

Facebook hit the news when it back peddled on its decision to ban cryptocurrency ads outright from the social media platform. This has now made technology companies, cryptocurrency and blockchain communities optimistic this move will set off a precedent for other advertisers to follow, particularly Google and Twitter, who earlier warned of a similar ban on cryptocurrency ads.

What are the implications of Facebook’s reversing its view on cryptocurrency, and what are we to expect about the future of blockchain technology?

 

What Changed After the Update?

Facebook now accepts cryptocurrency ads, but only from pre-approved advertisers who filed their cryptocurrency products and services onboarding request. ICOs and promotions associated with deceptive high-yield investment programs are still banned from advertising.

The update took effect after a six-month hiatus in cryptocurrency ads on Facebook. Apparently, the tech giant have found compelling reasons for reversing some of its decision after being dismissive on anything crypto-related. (uhhh… money of course!) There are also some rumblings Facebook plans on stepping into the cryptocurrency space with their own initial coin offering.

So far, legitimate cryptocurrency businesses like Cointelegraph.com have not been able to boost their posts a day after the ban was lifted. It’s very likely that Facebook is implementing more stringent rules and are, indeed, checking on the advertiser’s credentials with painstaking effort. We’ll learn more about the specific details of the screening process as they unfold.

 

Not a Complete Turnabout

Facebook didn’t go all the way, and instead chose to “loosen” some its policy on cryptocurrency advertising. A recent post from the product management director indicates an eligibility check, which takes into account licenses and pertinent documents submitted by each applicant. Facebook wants to avoid another Bitconnect incident or turn it a breeding ground for ICO scams (70% of advertised ICOs failed to materialize).

There’s no guarantee that every cryptocurrency and blockchain businesses would receive their stamp of approval. The least they can do for now is hope they don’t get screened out or send the wrong signal to the management and mistake them for ICOs or HYIPs. Facebook is open to the idea of revising this policy as they see fit and encourages everyone to give their feedback.

 

More KYCs and Background Checks on Advertisers

All advertisers in cryptocurrency must be “pre-approved” before posting ads on Facebook. To do so, they have to disclose information about their company such as:

 

  • purpose and nature of their business
  • Facebook ad account ID
  • website domain
  • licenses and credentials
  • company name
  • business address

You can apply for your pre-approval HERE

 

 

 

 

 

 

Facebook, basically, performs due diligence on advertisers on behalf of its users, which is a good thing for cryptocurrency. Done right, this might actually boost investor confidence. With stricter regulation in place, Facebook hopes to open more opportunities which could further mass adoption for cryptocurrency, and significantly increase ad revenue to the company.

Meanwhile, cryptocurrency and ICO scams might have a hard time after the update, but that doesn’t necessarily mean Facebook won’t have any of those. In fact several cryptocurrency and ICO scams were still able to get through, ironically, even after the ban on cryptocurrency ads.

 

What Changed Their Mind?

Facebook wasn’t so clear about the reason for partially lifting the ban on crypto-related ads. People have their own views and offer some explanation as to why this is the case.

Missing Out On Revenue. At times, Facebook is more worried about optics then revenue. This isn’t necessarily a bad thing but when it comes to crypto, Facebook has constantly missed the boat. This is evident when Facebook took a massive hit in market value recently. One of the main reasons for the price dip is the lack of awareness in its underlying technology; censoring out everything crypto-related from their platform could only serve to aggravate the situation. By encouraging users to learn more about the cryptocurrency through ads and meaningful social interaction, they might as well rack up huge profits along the way.

Facebook’s Launching Its Exploratory Blockchain Group. For a tech company this huge, it’s not difficult to imagine Facebook having its own native currency in the near future. Their announcement about the launching of an exploratory blockchain group has led to some rumours about their future involvement in the cryptocurrency space. If true, then this could mean adoption on a massive scale with its two billion plus users worldwide.

 

Conclusion

Facebook’s decision to lift the ban on crypto-related ads is a statement on cryptocurrency’s future utility as a store of value, or even as a medium of exchange. There’s no denying that cryptocurrency and blockchain technology has become a major force in shaping our current financial system. They might, as well, be a part of it instead of closing doors on an opportunity which could probably give them a decisive edge along the way.

If you’d like to know more about cryptocurrency, blockchain and minning, you can pick up the Living Book HERE

Why Airdrops Might Be the Next Big Thing for Cryptocurrency

A lot of governments are trying to regulate or censor cryptocurrency but closing doors on them only leads to new and innovative pathways to get around these obstacles. In fact, people can fly over these obstacles and drop them out of the sky – an airdrop.

Airdrops are free cryptocurrencies and tokens waiting to be claimed. As part of their initiative to spread the word, blockchain companies and startups have set aside a portion of their crypto-assets to do several of those –basically free coins for the taking.

 

Airdrops as an Effective Marketing Tool

Businesses use different strategies to get customers, but there is one particular method which always seems to make an impact regardless of the industry they’re in. Giving something valuable for free would almost always elicit a positive response from potential customers.

In the context of blockchain businesses, an airdrop is the equivalent of giving away product samples or gift cards to encourage buyers and users to take the next step. It might be as simple as coming back to learn more about the cryptocurrency or ICO (creating traffic to the website) or spreading the news about an airdrop. If the project seemed very promising, they might choose to join the ICO or buy more tokens to qualify for upcoming airdrops.

Airdrops have already been used for quite some time to raise awareness about a blockchain project or startup. They’re becoming more widespread as blockchain businesses move away from online and social media advertising and adopt censorship-free promotions. People can get information about airdrops from airdrop hosting sites like Airdropalert.com, Airdrops.io, ICOdrops.com, and forum sites like Bitcointalk.

 

Airdrops Target Specific Users

Despite recent advances in A.I., paid advertising is essentially a hit-and-miss strategy. Airdrops increase the likelihood of user engagement because they only target specific users. People who come to airdrop hosting sites might have learned about them through word-of-mouth, or they might have stumbled upon airdrops out of their own curiosity.

The target audience are most likely users with some experience dealing with cryptocurrencies. They’ll have their own Bitcoin, Ethereum, or wallets that support multiple currencies, and have already used them for quite some time. The other part are newcomers who wants to learn more about cryptocurrencies and get some free coins.

The chance of having successful adoption for every airdropped cryptocurrency or token is a lot better than if they were spent on paid advertisements which are a lot more expensive and don’t guarantee success. Think of it in terms of how Costco built their business. They didn’t (and still don’t) spend a lot of money on commercials or advertising. This ensures they keep their prices competitive with other large bulk discount stores. Instead, they use free samples of cheese, condiments, salad dressing etc as an incentive to increase sales and transactions in the store. Essentially airdrops allow crypto companies to become the next Costco.

 

How Airdrops Work

Airdrops use a different cryptocurrency or token (usually Bitcoin, Ethereum, or ERC20 tokens like EOS) as giveaways to promote their own. Blockchain startups and ICOs rarely publish airdrops on Google or Facebook, if at all. They’re usually listed in airdrop hosting sites where users can check the status of the airdrop and provide links to these sites.

There are basically three ways to airdrop.

Taking snapshots of the blockchain. Blockchain projects will set a date for taking snapshots of the blockchain. If you happened to make a Bitcoin or Ethereum transaction during the snapshot, you might soon find some free cryptocurrencies or tokens sitting in your wallet. In most cases, people are aware about the airdrop and learned them through airdrop hosting sites.

Requiring users to sign up for the airdrop. Some airdrops will require information about the recipients, especially their wallet addresses, emails, telegram, or twitter accounts. It’s basically a marketing strategy to get more users onboard and start a community. Unfortunately, not all airdrops are real or have value; some are used as a ploy to get information from users. Steer clear from airdrops asking for sensitive personal information or private keys.

During a hard fork. Blockchain projects can create free coins by forking an already existing blockchain. They usually have a community working on a blockchain project based on the original. Users get an equivalent amount of “free coins” depending on how much they own prior to the fork. They’ll get free cryptocurrencies tradable for fiat every time the blockchain forks. Bitcoin has had three forks since 2017: Bitcoin Cash, Bitcoin Gold, and Bitcoin Private.

Some airdrops will incorporate a referral system where users get additional coins free for every successful invite. Others require users to have a specific amount of cryptocurrencies or tokens to become eligible for the airdrop. Dapps which are set to launch on the EOS blockchain once EOS migrates from the Ethereum blockchain will give away tokens based on the amount of EOS tokens users have.

 

Conclusion

Cryptocurrency companies will always have a plethora of ways to market and promote themselves. But whatever strategy a company chooses, airdrops should like be included in that strategy, especially with the constant updates to advertising rules on Facebook and Google.  In fact, online and social media advertising might no longer be a huge traffic driver even if these companies choose to lift the restrictions on cryptocurrency. Try as they may, there seems to be no limit on the number of ways cryptocurrency communities can innovate and stay censorship-free.

The Taxman Is Catching Up On Cryptocurrency

Revenue agencies around the world are scrambling to figure out a way to tax cryptocurrency as governments are beginning to realize they are losing out on a vast source of revenue.

We’re now seeing how cryptocurrency would fit into our economy, and more people from institutions and the mainstream society starting to acknowledge them as a store of value and as a medium of exchange. Consequently, this would also mean tax obligations for miners, buyers, traders, merchants, and everyday users.

Here are things we need to know to prepare ourselves for the tax season. We’ll cover some important issues, fundamentals of taxation and how they would apply to our cryptocurrencies. But before we start, here at CryptMin and CryptEdu, we encourage you to always pay your taxes and report your capital gains to the government. It’s never fun having the taxman after you.

 

Tax Laws Are after It

Despite what people tell us in social media and cryptocurrency websites about privacy and anonymity, dealing with cryptocurrencies can leave behind footprints for the CRA or the IRS. Blockchain transactions are public records – everybody sees it, including your taxman.

The truth is blockchain transactions are more transparent than our traditional banking system. The key difference is the use of public keys instead of real names, which makes every transaction pseudonymous. However, since no two public keys are alike, once it gets tied to a real person’s name or company, authorities can easily track every transaction that was ever made with that public key. (Note: some “underground” cryptocurrencies encrypt their true addresses on the blockchain ledgers like Monero and Zcash, and thus more difficult to track.)

Some places where the CRA or the IRS can get a hold of your identity are cryptocurrency exchanges, online wallets, cloud mining sites, mining pools, and the social media. Although gateways are largely unregulated these days, it’s only a matter of time before governments and regulators will require each one of them to disclose information they have about their customers upon request.

Coinbase, for instance, are required to conduct KYC on their customers before they can start buying, selling, or trading on GDAX. Same is true with cloud mining sites when accepting payments from customers using their credit card or bank account. Genesis Mining does so whenever customers buy their mining contracts. They’ll have their customers’ public keys as well for payouts.

From the governments’ perspective, these are all treasure troves when looking for information about people who owes them money. Depending on the exchange, cloud mining company or the country they’re in, government agencies can have access to these customer data.

They could also set their sights on social media, particularly content creators in YouTube, Facebook, or Twitter who display their public keys for accepting donations, or even online stores who take cryptocurrency as payment for goods and services. And while customers and everyday users might get away with it by putting them in cold storage (mobile, hardware, or paper wallet), sooner or later, regulators will find a way to catch up on them as well.

 

Conflicting Views on Cryptocurrency

The IRA and CRA treats cryptocurrencies just like any asset. Their value may fluctuate from time to time, but until they go out and are sold in exchanges for fiat, holding these currencies is not a taxable event. A Capital gain tax will apply when selling cryptocurrencies in exchanges. However, determining the exact price on the date of acquisition is necessary to properly assess how much capital gain the seller is obliged to pay taxes for during the re-sell.

As you might expect, getting the numbers right on a person’s capital gain is going to take a lot of work and making sure every transaction in cryptocurrency exchanges are properly documented. It’s possible, for instance, that Coinbase would be asked to disclose their records for taxing purposes on each buy and sell and the dollar valuation on each individual transaction to see how much capital gain a customer has.

When using it to buy goods and services, or trading them with other cryptocurrencies, bartering laws will apply. This is where it gets a little tricky when you consider capital gains on your cryptocurrency for every purchase. For instance, you bought a thousand dollars’ worth of Bitcoin and decided to buy furniture with it when the value goes up by 50%.  The next month, you buy your furniture with Bitcoin which is currently priced at 1,500 USD. According to law, you’ll also have to pay for the gain tax as it is with bartering goods. In essence, you’re paying tax twice for buying furniture with Bitcoin – gain tax on Bitcoin and GST/HST on the furniture. And since you’re exchanging your digital asset on a short-term gain, it will be taxed just like a regular income which is the highest for capital gain tax.

Businesses will have to deal with the same problem when accepting cryptocurrency payments. If clients chose to pay with Bitcoin, which by definition is property/digital asset, they’ll have to report it as income (see the confusion?). This carries a lot of risk for business owners due to the volatility of cryptocurrencies. They might end up paying taxes on the sale despite the fact that the value of cryptocurrencies have already gone down.

 

Tax Implications for Miners, Traders, and Buyers

Regulators are catching up on cryptocurrencies fast. There will probably come a time when every cloud mining company, exchange, and wallet service in every country will be required to keep records about their customers in order to run their business. In this case, we need to prepare ourselves to avoid getting burned when the tax bill arrives.

Cloud mining companies can take advantage of tax deductions by writing off electrical and maintenance expenses in running their cloud mining facilities. This is a lot better than dodging regulations and taking a lot of risk of being caught and paying huge penalties or even losing the whole business. Technically speaking, cloud mining companies don’t pay out their customers – it’s a rental service. Whatever payout their customer receives depends on the mining pools they choose to join in and the currencies they want to mine with the hash power they bought from the cloud mining service. They might also take a cut from the mining rewards as a service charge on top of the rental fee or contract price (all depends on the cloud mining company). This is considered a taxable event, and laws regarding cryptocurrency transactions will apply.

Mining pools also take their share of the mining rewards as their service fee, usually around 1-4%, and hence, it is a taxable event according to laws on bartering, i.e. cryptocurrency for mining service. Exchanges and traders will be hit the hardest, especially day traders and swing traders. Under existing tax laws, short-term capital gains (assets acquired below one year) will be taxed as regular income. This applies, not only when cashing out and locking in their profits with fiat, but when buying other cryptocurrencies with it, e.g. buying Bitcoin with Ethereum.

Everyday users might also have to deal with this when buying or using cryptocurrencies for everyday transactions. Some complications may arise for buyers and business owners as mentioned earlier in this article.

Tax laws regarding cryptocurrencies still needs a lot of refinement; implementing it at its current state can be problematic and cause a lot of confusion. Sooner or later, our governments might come up with better tax laws regarding cryptocurrencies and begin the process of pursuing anyone who gets their hands on them. When the time arrives, we would have already prepared for such eventuality.

Interested in mining? Learn the basics of cryptocurrency mining at CryptEdu.com or start  hassle-free cloud mining at Cryptmin.com today.