Although the concept of digital currencies dates back to the 1980s, they grabbed the world’s attention in early 2009 when the first decentralised cryptocurrency Bitcoin came into existence.

Since then we have seen an exponential rise of cryptocurrencies in circulation – in November 2019, there were 4,800 of them. Ethereum, XRP, Tether, Litecoin, EOS, Binance Coin, Stellar and Tron, to name but a few, joined Bitcoin in the list of the most popular cryptocurrencies. We have also witnessed the accelerated development of a brand new ecosystem comprising cryptocurrency mining devices, dedicated exchanges, tailor-made wallets, blockchain apps and innovative ventures like initial coin offerings (ICOs).

Cryptocurrency was also the buzzword of 2017. In that year we experienced an unprecedented boom, as massive speculative investments pushed the value of cryptocurrencies to all-time highs. In the case of Bitcoin, its price surged from a few hundred US dollars to nearly USD 20,000. A swift correction of the market followed in 2018, with cryptocurrencies collapsing, losing 80% from their peak values. Government bans on trading, numerous cases of hacks and thefts from cryptocurrency exchanges, as well as fraudulent activities related to some cryptocurrencies were to blame. At that point it seemed as if the love affair with cryptocurrency frenzy was over.

Yet, not a year passed by and the cryptocurrency market made it into the headlines again, when in mid-2019 Facebook - the world’s largest social media platform - revealed ambitious plans to revolutionise the global financial system through its own cryptocurrency. Baptised Libra (a reference to the basic Roman unit of weight, once used to mint coins), it pledges to provide an easy, cheap and secure way for people around the world to transfer money online.

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It not only targets Facebook’s impressive client base of over 2.2bn individuals who make daily use of one of the company’s flagship products – Facebook, Instagram, WhatsApp and Messenger - but also more than 1.7bn people without a bank account. In a similar way to other cryptocurrencies, Libra will exist only in a digital form and use blockchain technology – meaning that all transactions will be recorded on a software ledger that confirms each transfer. It will also have some unique features.

To avoid price volatility, Libra will be a collateralised cryptocurrency (a format known as stablecoin) whose value is pegged to real assets – a basket of currencies and government securities. To ensure transparent and accountable governance, it will be managed by a Geneva- based non-profit organisation – Libra Association – gathering some 100 companies from the technology, payment, telecommunications and e-commerce sectors – all with the same vote. This organisation will act as a de facto central bank of the new digital currency. To protect data privacy, Facebook vows to share customers’ account information and financial data with third parties only in limited cases and not to use this data to improve ad targeting – the social media’s golden goose.

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