That's quite a high bar for rival payment methods to clear, but I think the main problem for corporate currencies like this will be rivalry from government issuers. Governments jealously guard the right to issue currency, as they rightly perceive it as one of their biggest holds over citizens. Any sufficiently powerful currency would attract their scrutiny.
I do think payments are ripe for disruption though - when money is sent over a free global network between pre-vetted partners (i.e. bank customers) there is no reason the transaction fees should be high, even internationally. I'm not clear how a blockchain based currency is going to help facilitate that, but would love to see a revolution in payments which made them simpler and not tied to archaic concepts like sort codes and account numbers, and reduced the fees charged to customers and merchants for payment networks or card issuers which don't do the hard KYC work (banks and payment processors do that).
The problems here are in verified identity tied to real people, not how to perform transactions quickly, or things like anonymous trust-free transactions which nobody actually wants.
It is also a reality in Brazil. Last month the government and the banks released a standard money transfer protocol (PIX) which superseeds the other protocols (similar to ACH in USA). Cheap, instant payments 24h a day regardless of the bank are a reality here today.
Hence I don't see FB having much success in Brazil with this product.
Really?! They just need to tie whatsapp payments with a novi wallet, perhaps offer a few bucks as bait and suddenly they get millions of users.
Never underestimate the power of a monopoly position.
As for international transfers, the Central Bank is looking at simplifying existing regulations in order to allow international transfers as late as 2023
As an EU citizen living in the UK, it boggles my mind that "EU Faster Payments" was not implemented as part of the eurozone, if not the EU as a whole.
As far as I know there's nothing technically preventing this, anyone has an insight into why it isn't a thing?
Most/all Dutch banks have adopted it already.
https://www.europeanpaymentscouncil.eu/what-we-do/sepa-insta...
Banks wanting to make more money?
What are the problems with sort codes and account numbers? Are you after binding the account to your identity like Australian PayID?
The only legitimate reason I can think of would be cynically drafting on the hype cycle. But I've been reading David Gerard's book Libra Shrugged [1] and it looks like the actual answer is that "blockchain" has a quasi-religious belief system built up around it, and the people involved are members of the faith.
One of the stunning things for me about "blockchain" revolutionary hype is how long it has gone on without significant accomplishment. It started only a bit after the iPhone, which has had a huge impact on things, including payments. It's hard now to imagine a world without the internet in one's pocket. But if every blockchain stopped working tomorrow, few would notice. Contrast this with M-Pesa [2], a different approach to digital money. It started at around the same time but has had huge uptake. A recent report in Kenya [3] says M-Pesa has 30 million accounts, which is approximately the number of people in Kenya age 15 or over. To me, that's what successful digital money looks like.
[1] https://www.amazon.com/dp/B08M8DGKY4/ [2] https://en.wikipedia.org/wiki/M-Pesa [3] https://ca.go.ke/wp-content/uploads/2020/07/Sector-Statistic...
I think that there is a lot more money in the world right now than 20 years ago and definitely than 400 years ago.
A lot of it is just dumb (people inheriting money or getting it for other reasons than intelligence or financial acumen: singers, athletes, etc.) and some it is exploratory/inherently risky (VC) or both. So a bubble can last much, much longer and be much, much bigger.
We're probably going to see more of these.
I guess at this point I should probably just say that I regret not being smart/connected enough to be at the collecting end of one of these hype trains :-)))
This seems more likely to me than someone at Facebook saying "We need a our own money system," evaluating blockchain against a centralized design, and deciding for technical reasons that Facebook Money should be a blockchain project.
This is pretty much how it happened. A Bitcoin fan started at Facebook, started from "how do we use a blockchain here" then came up with something to use a blockchain for, and recruited some executives who thought similarly.
Most of what's weird and dumb about Libra/Diem is because it was started by four bitcoiners, from bitcoin ideas. It turns out that ideas from a cryptocurrency that was started in order to evade government control don't play well in the heavily regulated environment of Other People's Money.
As to blockchains, that's because this is the hype of the last few years, is it not?
As to currencies, IMO the vision of the people hyping bitcoin was that your pizza place would accept BTC (and not after converting their USD price to BTC) because their supplies would be happy to do as well. A single currency for the world would be interesting, but as economists have pointed out, devaluing your currency is a way to escape economic crises, but e.g. Euro countries can't do this any more, hence the problems the PIIGS countries had.
I get the VC appeal of blockchain, but Facebook already has the money to fund it. Outside tech circles I don't think slapping a blockchain label on a product will make it more appealing.
I kind of hope the word "blockchain" should soon make it less appealing especially in tech circles.
It's a term without an accepted definition. A lot of useless branding is expected. Just you wait until IBM gets their hands on .. oh, they already did.
Both the Bitcoin-like zero trust ledger and the m-of-n trusted notaries model have useful use cases. While more descriptive terms would have been great, arguing definitions only goes so far.
The reason for the blockchain: Libra was founded by four bitcoiners (Morgan Beller, David Marcus, Kevin Weil, Christian Catalini) who wanted something like bitcoin, but not volatile, and run by sensible people, i.e. them.
2) it is tied to non profits as well! The whole point is to fund this project by companies, no a company
3) we will support single currencies (a USD coin, for example)
4) that’s what we’re working on!
3) So if I want to send money (from say GBP) to someone in Japan, what would happen? Is the FX exchange seamless or will I need to use some intermediary coin?
3) That's a complicated answer that involves more than just the blockchain (as you need to convert fiat from/to digital currency) so it depends on the VASPs (the wallets) not on DIEM.
However, Facebook makes extensive use of shadow profiles of people who aren't even Facebook customers. They could certainly add Diem blockchain data to those, as they will have access to said blockchain via Novi, their Diem wallet.
David Marcus and Mark Zuckerberg have both stated that data from Novi will not go to the Facebook advertising engine. However, Zuckerberg and Facebook's track record on such promises is that they consistently do this anyway. Then Zuckerberg apologises, then he does it again.
Just by looking at Facebook's past behaviour, you can assume that an important purpose for Diem is to collect personal information. Because everything they do is to collect personal information.
That being said, there is a lot of work being put in making sure that FB doesn't have access to Novi user data. Of course, sometimes one employee's mistake can lead to infringement of a claim, so to avoid that good frameworks have to be put into place.
As I understand, that number is presently zero. (Please correct me if I'm wrong on this.) And unhosted wallets won't be allowed - all consumers will need to transact via a Diem Association member. So Diem usage really is 100% Novi for the known future.
Are you really really sure that some of the things Facebook (and Google) does aren't done just to spite us ;-)?
Missing in the US.
At least Europe has had those for a long time already, using normal banks.
I just checked - paying 10EUR from my UK account to the EUR area takes 2-4 days (I'd need to pay 15GBP for an "urgent" next-business-day transfer) (same rate as TransferWise) whereas if I want to send 10kEUR I'd pay 250 GBP (!) for a "no-fee" (!!) transfer than with TransferWise (a.k.a. scam). Paying from EUR to EUR account (cross-border) costs about 0.1% (0.38 EUR fee to send 350EUR) which isn't too bad.
Suffice to say, room for improvement.
Euro transfers have become instant and 24/7 thanks to the SEPA Instant Credit architecture:
https://www.europeanpaymentscouncil.eu/what-we-do/sepa-insta...
You can transfer up to 100k EUR in less than ten seconds; works overnight and during weekends and holidays.
In the UK, at least Revolut supports this already:
https://blog.revolut.com/sepa-instant-euro-transfers-now-ava...
NatWest app says £0.00 fee and some FX rate but when I compare with TransferWise, the difference is £250, which means that the "FX rate" implicitly contains the fee.
Maybe not "fraud" legally but I don't want to support such non-transparent business practices.
Yes banks charge commission (where TW usualy has a cost advantage but anyway, it's a money maker for banks and calculation of the fx rate to be used at a given moment is not something simple)
2.5% is a rather expensive fee for a GBP-EUR transfer, especially on £10,000! Some banks offer as low as 0.4% (on top of the real mid-market rate), probably even less on large transfers.
From experience with bank accounts from 4 different European countries those instant transfers definitely don't work everywhere and are often accompanied by an extra fee.
Edit: And this is 2020. I highly welcome some innovation in this field - five years ago..
There's sometimes a nominal fee across countries (mandated to be "no more than a local transfer"), but in many cases they are free.
SEPA in my experience has never taken longer than 1 day unless it's SOFORT-related, which in my experience takes a bit to confirm (but the merchant knows you issued a transfer so they can rely on that).
Unless you count cryptocurrencies nobody actually uses.
> 1. Is there a reason this is tied to the blockchain
For FB, you're 100% right. FB could have likely just used a relational DB in the short term. However, if you don't want to tie this to a single company (your second question), then a blockchain does make it easier for multiple entities to agree on the state of the db. I would argue that modern Proof of Stake protocols are starting to be competitive with Proof of Work in terms of security, in large part because unlike Proof of Work, they allow for both positive _and_ negative incentives for incentivizing behavior. For example, we've yet to see the types of double spend attacks on newer PoS chains (e.g. Cosmos) like the ones we saw on Ethereum Classic a few years ago.
> 2. Is there a reason this would be tied to a company
No, and in fact, this is what makes most permissionless blockchains so valuable. The problem is that most of them are not useable enough for what Facebook wants to accomplish. I say most because, in my view, Celo (https://celo.org and https://valoraapp.com) does. It's permissionless, programable, highly scalable, has a built in stablecoin and identity protocol, and most importantly, uses new zk-SNARK cryptography to let mobile apps sync trustlessly and near instantly. It also offsets 100% of its carbon emissions by buying carbon credits using block rewards.
> 3. Why a "new currency" ("stablecoin")?
I agree 100% and already the market is starting to tell us that USD pegged stablecoins are the most interesting of stablecoins.
> 4. I'm sure there are many issues with fraud/reversible transactions/KYC/anti-terrorism/anti-money-laundering that would need to be resolved somehow
Yes! This is an interesting read on the topic: https://www.coincenter.org/how-i-learned-to-stop-worrying-an...
(1) build a giant sucking data-miner atop all consumer commerce;
(2) print their own money in such quantities that governments can't tell them what to do any more;
(3) establish themselves as providers of the digital identity standard for the world, so that you need to go through Facebook to use money at all.
There are those who have proposed Libra-like basket currencies seriously; Yanis Varoufakis seriously proposed that the Libra 1.0 plan would be a great idea - if done by a public institution such as the IMF, and not by a private company. https://archive.is/YKgQ9
And has recently come out with a book on Libra. I haven't finished it yet, but it's great so far: https://davidgerard.co.uk/blockchain/libra/
The video shots of small merchants and everyday people, with voiceover "what if everyone is invited to global economy" was bothersome to watch. I don't like their underlying characterization that the lack of frictionless banking and payment systems are what's holding back Africa and poorer parts of the world. It's just not true.
For most of the "banked" in the US, doesn't Zelle cover all that for transfers within the US?
I thought stellar was similar to what the parent comment describes, but it’s also not proof of work (which makes need for blockchain unclear).
For all intents and purposes, Zelle is the bank software, and it’s free. Zelle is backed by a bunch of banks - the majority of US checking accounts have access to use it at no cost.
Not sure how interesting Keybase is now, but it does allow sending money to other Keybase users directly through chat.²
From a user point of view, it doesn't look like an additional service.
Zelle doesn’t feel as convenient as regular bank transfers in Europe or UK. Some problems I experienced:
- You have to sign up separately. There’s no guarantee a recipient has enabled it.
- It’s tied to an email address for some reason. (Euro/UK bank transfers just use the regular IBAN.)
- There was a long delay in receiving and sending money when one of the Zelle accounts was new. (My transaction was stuck for at least 24h in a “pending” state.)
- The daily transaction limits are very low. My NYC rent doesn’t fit even in two Zelle payments! (In Europe, the standard limit for an instant SEPA bank transfer is 100k, and it costs nearly nothing.)
For these reasons Zelle feels very unbaked, and doesn’t replace a proper interbank fast payment system like SEPA in Eurozone.
Of course Bitcoin was ideal for this but it went off the rails for the banking the unbanked dream when it refused to scale from a blistering 7 transactions per second and the associated high fees. Ethereum fees aren't great either, but my understanding is that massive increases in throughput are coming with sharding etc. in Ethereum 2.0. Monero would be perfect for this, but I don't know if the world is ready for true privacy and fungibility in their e-coin.
https://bitinfocharts.com/comparison/transactionfees-btc-eth...
You can check any bitcoin dashboard (such as https://bitbo.io); the current transaction fee is 1 satoshi/vByte for a transaction. The average bitcoin transaction is ~250 bytes. 1 satoshi = $0.00019273. A transaction that can wait an hour costs about $0.05.
The "bitcoin doesn't scale" thing really isn't a thing. Lyn Alden addresses this in her "7 Misconceptions about Bitcoin" article [1]:
"In other words, suppose that the Bitcoin network is limited to 250 transactions per minute, which is low. Those transactions could average $100 or $1 million, or any number. If they average $100 each, it means only $25,000 in transaction value is performed per minute. If they average $1 million each, it means $250 million in transaction value is performed per minute. If Bitcoin grows in use as a store of value, the transaction fees and inherent limitations prioritize the largest and most important transactions; the major settlement transactions.
Additional layers built on top of Bitcoin can do an arbitrary number of transactions per minute, and settle them with batches on the actual Bitcoin blockchain. This is similar to how consumer layers like Visa or Paypal can process an arbitrary number of transactions per minute, while the banks behind the scenes settle with larger transactions less frequently."
Lightning Network is a layer 2 protocol on top of bitcoin; transactions settle in seconds and the fees are tiny—about 1 satoshi—(a fraction of a penny) per hop. Not only are they cheap, they're private as Lightning runs over Tor.
The UI/UX of the current crop of Bitcoin/lightning wallets for iOS and Android, such as BlueWallet (https://bluewallet.io) is quite good.
I can send money to friends via PayPal or Venmo completely free. What’s missing?
The reason it isn't free is that there are loads of anti-money laundering laws that require paperwork on both ends. Sure Cryptos avoid this problem, but just means it'll get regulated or banned.
Could you expand on that?
> and I'm pretty sure that not even the most law-abiding citizens want all their transactions to be public.
I believe some blockchain provide anonymous transactions (based on zero-knowledge proofs for instance).
Yes: so that Facebook can do as it wishes and not have to follow government financial regulation.
Yes, this could help us to faster get rid of ads as a monetization model.
But in any case, that's at most the "next" step. First one is, literally replicate what banks do right now (possibly including minimum transaction fee on small transactions - depends on local banks / regulations) except with non-backwards tech.
https://www.coindesk.com/billion-dollar-returns-the-upside-o...
the main point is that Bitcoin is decentralized, there are many nodes in China, Iran, etc. that is why it has so much value
You need an all digital currency to keep transaction fees cheap, and to speed up transactions especially accross countries.
Just think about it, today's currencies are backed by physical paper. At some point, if A paid B, B should receive the physical paper money for the exchange. This is known as liquidity, and it's the major reason why money transfers over the internet today are expansive and slow.
> Is there a reason this is tied to the blockchain?
Yes, blockchain is key. Look at what all modern currencies in use have in common? They are backed by a very powerful entity, mostly governments with real power (weapon and authority on actual land and people). This isn't a coincidence, whoever controls the currency has huge power, imagine being able to make money as you please and give it to yourself or others.
You can't trust any single party with such power. Governments are the closest thing people can trust today, often because they have no choice, and sometimes because there's ton and ton of scrutiny, checks and guards in place around them.
And still, when currency is physical, it is also slightly harder to make more for yourself without trail.
Now if currency was digital, it be so easy to abuse, so anyone who had single central control could easily cheat everyone else. You'd not just be in control of the currency like the government is, you'd also become in control of the ledger. That means, that single central entity does not only control the digital currency (how much of it and who it gives it too), but it also controls the exchange of it (keeps track of who has how much of it and who transfer it to who else). That's incredible power, they could just seize your money without scrupule for example.
Blockchain is about solving this issue. If the currency and ledger is controlled by a distributed blockchain, then you don't have a single central entity with all this power. Instead the power is distributed to whoever wants to participate in it.
Now this is still an area of research in some way. Proof of work was one way, and it suffers from the fact that compute majority wins, and the compute majority could actually be owned by a single entity (which owns a ton of compute resources making up the majority).
Proof of stake is the new idea, it says that everyone who wants to be a part of controlling the currency and ledger has to put a deposit amount of their own money. If they are found to have cheated or acted wrongly, they never get that money back, otherwise they get it back and a little bonus for their effort.
In this scheme, you could still have a single actor taking full control, but they'd need to have a ton of money, more money then everyone else's combined stake. So it's much harder to do so.
> Is there a reason this would be tied to a company, instead of being run by e.g. a charity?
To some extent, it doesn't matter who starts it, if it ends up being a distributed open source piece of software, that is run by people from all around the world on different machines not all controlled by one entity, then it has become something out of the hand of whoever started it. Charity or Company, neither in my opinion could be trusted with a single central solution, but they can both try to kickstart an open source distributed blockchain ledger and currency, as long as it does in fact distribute control in a way that single or minority can't control it fully.
> I'm sure there are many issues with fraud/reversible transactions/KYC/anti-terrorism/anti-money-laundering that would need to be resolved somehow
This is probably one of the biggest issue currently, in a weird way, trying to solve the problem of no single central authority also makes it difficult for the government of any country to enforce rules and regulations over it.
Basically, I think the underlying idea is valuable - low-cost, fast, reliable, accessible money transfers - clearly something missing right now in this world, even for the "global rich" (citizens of first-world countries), let alone for the "unbanked". It could even scale even more to a money store but that's basically being a bank, which is related but somewhat orthogonal (e.g. both Revolut and TransferWise started as mostly money-sending services and are now moving towards the "bank" stage).
So, my thoughts / questions are the following:
1) Is there a reason this is tied to the blockchain? For most purposes, blockchain without proof of work is just a glorified git repository, and I'm pretty sure that not even the most law-abiding citizens want all their transactions to be public.
2) Is there a reason this would be tied to a company, instead of being run by e.g. a charity? I understand why Facebook / Apple might be more successful with launching this than e.g. TransferWise (they can utilize their platform to push this (or any other) idea to a massive userbase), but really there's no underlying reason why you'd want this to be run by a non-financial company (and an ad ("use people's data to manipulate them") company) and many reasons why you wouldn't want to comingle your financial data with the likes of Facebook / Google / Apple.
3) Why a "new currency" ("stablecoin")? I understand that it might have some desirable properties but I'm pretty sure that most people would be negatively surprised if their "stable" coins started losing value (in terms of their local currency). Also, I'd say that most people don't even care/think about "FX rates" etc. and those that do are mainly currency traders / "speculators". So I envision the "ideal" system to be basically just an app displaying "sending 100EUR to person A in country Z will cost you 0.3% and the payment will arrive in 20 minutes" and the other person seeing "person B sent you 8919 INR".
4) I'm sure there are many issues with fraud/reversible transactions/KYC/anti-terrorism/anti-money-laundering that would need to be resolved somehow.
I think this is an ideal case scenario for a charity - an almost-government (non-profit, "for the people") organisation handling an area of "social tech" that global governments aren't tackling (because they aren't incentivized to) but fundamentally all the pieces of technology are there.
If anyone is interested in funding / founding such an organization, let me know.