The potential outcomes of Libra

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Steve Sokolowski
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The potential outcomes of Libra

Post by Steve Sokolowski » Fri Jul 05, 2019 6:26 pm

In the past few posts, I've discussed why stablecoins represent the greatest threat to cryptocurrency that has yet appeared. In One more bubble, I described why other assets will be a better bet after the next cryptocurrency bubble passes. In Curiosity/Motivation/Logic and why stablecoins are the future, I reviewed how the lack of motivation to learn new things, an unfortunate trait of most people, predisposes them to do whatever is easiest. Whatever is easiest will include accepting facebook's currency rather than searching to see whether better alternatives exist. Thus, I will conclude the trilogy by discussing the potential outcomes of Libra.

Libra is the most significant factor that will affect the outlook for the financial system long into the future, and it is also the most important issue in the prices of coins over the next decade. So far, with the notable exceptions of bitcoin and litecoin, most coins have practiced a libertarian philosophy. If Bitcoin Cash, Bitcoin SV, or Ethereum, for example, were to become the world currency, there would generally be greater freedom and privacy than now exists with the banks. Even if bitcoin or litecoin were to become the world currency, there would probably still be an improvement, because whereas banks require a significant amount of money and work to start, entities not subject to money transmission regulations could set up Lightning Network nodes. But if Libra or a government coin becomes preeminent, the financial system will regress, opening up additional roadblocks to achieving a fair society.

Let's examine the three possible outcomes.


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Outcome 1: Libra fails due to disuse

Perhaps the most obvious potential outcome is that Libra is released, and people don't use it. In this scenario, facebook releases the coin, all of the partners coordinate a hugely successful launch, and months later they find that few people are using their apps to pay for things. Or, if Libra is made the only way to pay for facebook advertising, then people buy it minutes before they spend it on advertising and use it for no other purpose. Eventually, facebook's partners stop hosting the supernodes that are the only ones allowed to mine blocks, and throw in the towel.

The major negative impact associated with this outcome is that since Libra is not intended to be an open network, the network can cease to exist if the partners go bankrupt, as nobody else will be able to freely run nodes. This is a different situation from almost every other coin, which usually retains some value because people can still use it even if the peg (if there is one) is lost. In the event of Libra's failure, people will lose money because it will simply be unable to be spent.

On the other hand, this outcome is neutral or positive for the existing coins. This result means that it is almost certain that Amazon's or twitter's coin, which would undoubtedly follow Libra, will not succeed either.

The most probable cause for the failure would be that people lack sufficient curiosity, motivation, and rational thinking to use facebook's currency. In that case, I already pointed out that existing cryptocurrencies are being hindered by a lack of CML, and Libra's failure would imply that the existing coins will continue to exist for people to make money through others' game-playing and speculation that leads to continuing bubbles. It would also imply that cryptocurrency will never be used widely by humans. It will not truly take off until AIs and superhumans with neural implants take over as the dominant species on Earth.


Outcome 2: Libra is blocked by government regulations

Another possible outcome to the Libra situation is that facebook's plans are blocked by government regulators. Before the currency can launch, some bureaucrats review facebook's plans and figure out which laws can be used against the company to investigate, hinder and delay. It's important to recognize that there are so many laws on the books everywhere that it's possible to arrest anyone at any time, provided that the prosecutor wants to. That's why, for example, on Live PD viewers often see the cops pull cars over for trivial reasons, like not using a turn signal. I've never personally witnessed anyone pulled over for failing to signal, but cops who suspect there are drugs in the car will come up with some excuse to execute a stop. facebook is undoubtedly in violation of thousands of laws all the time, and the company's life can be made difficult regardless of whether they are adhering to the letter of the law in this particular instance or not.

The requirement for Libra to be blocked by government regulators is not that there is a lack of reason for it to be blocked (facebook clearly seems to be a bank without registering as one), but that someone in the government needs to take an interest in blocking its launch. I don't see why that would happen before it becomes too late. The only people in power who have expressed concern are Democrats, and it matters little if the House passes a law prohibiting corporate stablecoins. The most powerful politicians, particularly Mitch McConnell, are so corrupt that campaign donations from the right people will get the few votes needed to ensure the Senate never does anything of the sort.

This outcome would likely prolong the uncertainty over the effect of corporate stablecoins, delaying until another corporation releases a coin somewhere else that won't be blocked. However, for every day that no corporate stablecoin exists, the odds of its success decline, because the existing coins will continue to increase in development and usage.


Outcome 3: Libra succeeds

Libra's success, the third outcome, should be feared by all. The success of Libra not only portends gloom and doom for the existing coin networks, but it also fortells fundamental changes in corporate power and civil liberties.

While big corporations like Amazon have slowly become bigger and have dominated specific areas of life, it is still possible to survive if one of the corporations bans a person from their services. Amazon does issue permanent bans for some addresses, where they will refuse to deliver packages. I'm not sure what the reason for these bans typically is, but a New York Times report a few years ago profiled someone who had simply requested too many returns. Fortunately, Amazon is usually not the cheapest vendor for most products, so the government still has more power than the corporations do.

If facebook is able to successfully promote Libra, and Libra becomes widely used internationally, then facebook will become the first company in history that is more powerful than the countries in which it operates. The government will not be able to take actions such as restricting who can run or use Libra, or what Libra's reserves should be, without sending shockwaves through the economy and placing congressmen risk losing reelection. It also won't be able to impose significant regulations in other areas upon facebook, because Zuckerberg could simply turn around and use Libra to bully the government into getting his way.

Unlike the US government, which is only in the early stages of sliding into dictatorship, facebook has been a dictatorship from the very start. If facebook decides to implement a new policy, and you violate that policy, they can not only ban you from the platform, but track all your financial transactions and ban you from using Libra too. There would be no court to appeal to. The poor, who can't afford the phones and Internet connections to use Libra, would be stuck paying for expensive conversion services using cash dollars or some other paper token.

Plus, other companies would either try to launch their own stablecoins, or pile into facebook's coin to achieve world domination. All of the existing cryptocurrencies would be obsolete overnight.

--------------------------------------------


What are the probabilities of these outcomes? I'd place them as follows:
  • Outcome 1: Libra fails due to disuse: 35%
  • Outcome 2: Libra is blocked by government regulations: 10%
  • Outcome 3: Libra succeeds: 55%
Libra is more likely than not to succeed, and the outcome will be very negative if it does. Success implies unelected rich white men controlling our lives and setting policies that do not take most of the world's viewpoints into account. There's a reason why my posts are hosted here rather than on a place like reddit or facebook - because these men make arbitrary rules that change with no notice and which do not enforce policies that provide me any benefit. Imagine a world where, instead of getting reddit accounts banned for trivial violations such as accidentally suggesting people upvote a good post, trolls can get people removed from the world financial system for accidentally sending money to a merchant one didn't know was blacklisted - with no appeal. Abusive reporting of trivial rule violations would occur on an epic scale.

Libra's success would imply that libertarian cryptocurrencies will become irrelevant as low-CML people follow along with whatever the corporations market to them. The people who suggest that bitcoins will be worth millions of dollars someday should fear this outcome. The high probability is one of the major reasons why I don't feel comfortable with a high level of exposure to cryptocurrencies after this bubble, which will probably peak and be in decline before Libra launches. Perhaps the impending launch of Libra will itself be the cause of the decline.

There isn't much time left to stop facebook and its consortium leading the world down this path. Once the coin gains popularity, it will be too late. If they succeed, the outcome will be a reduced quality of life for everyone. Unfortunately, I have little faith that any organization today has the power to stop them.
Last edited by Steve Sokolowski on Mon Jul 08, 2019 2:47 pm, edited 1 time in total.
Mlangford75
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Re: The potential outcomes of Libra

Post by Mlangford75 » Fri Jul 05, 2019 11:43 pm

Write a letter to the greatest President ever; Donald J. Trump.

Good chance that he owns Bitcoin (REAL Bitcoin BTC) and is very open in his criticisms of Facebook
ajs
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Re: The potential outcomes of Libra

Post by ajs » Sun Jul 07, 2019 10:54 am

Libra will certainly be interesting to follow, and will certainly have an impact on crypto and fiat currency. Frankly it does not worry me as much as the Amazon version that will likely be right behind it. Amazon has proven to be a better run company that really does provide services people need, and it's level of aggressiveness is astounding.

I believe the likely outcome will be a delay due to regulation blocks and government posturing, and will be eventually be released and will reside in the grey area between success and failure to adopt, that is it will work and some folks with use it, but it will not create the dystopian company run world of Sci-Fi. (I will admit that maybe this is my wishful thinking.) In reality, it does not create much different a system than Visa, Mastercard, and AmeX already have in place for transferring money around the world. (I am not investing in those companies).

If correct, the impacts on crypto and fiat might be different than you predict.

During the delay, Libra will increase awareness among the low CML folks of crypto currency. If we are lucky, the main wallet folks who support crypto will jump to support Libra, which will mean that any Libra user will now have a lower CML hurdle to overcome to shift to decentralized coins, as they will have already made the leap to digital asset. (If we are unlucky, the wallets will be Facebook (or Amazon or Uber or ...) controlled and single purpose.) This might increase Crypto use.

During the delay, governments will be sharpening their weapons against things like this, which will also affect Crypto. Possibly very negatively, but once worked out and mature, might lead the way for legitimate groups to open ETFs, improve how cryptos are taxed, and illuminate the grey area around them. (For example, the issues you have with Banks might go away.) While this regulation will likely prevent the massive swings and speculation in the space, it well might increase main stream adoption.

Once sort of adopted, it will really hurt current crypto and companies whose main focus is on spending/money transfer (like Ripple, Visa, Western Union, etc) but will impact less crypto who is trying to balance utility with store of value, which will simply shift more to be an investment vehicle with money transfer ability. Coins with smart contract capability will fail or succeed on the basis of a killer application coming to dAPPS (and it won't be just gambling and games but those will support it). Coins reaching out to developing nations, e.g. Cardano and the like will be in an adoptive race against Libra, but I believe the countries, and companies being targeted by them will prefer the governance model provided by Cardano over the totalitarian of Zuckerberg (or Bezos).

May you live in interesting times. (Which I offer in a more hopeful way than the original curse was intended.)

Thank you for your trilogy of opinions on the future. I have read them multiple times and will read them again.
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moonshot
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Re: The potential outcomes of Libra

Post by moonshot » Sun Jul 07, 2019 2:23 pm

I agree with ajs that Amazon would be the bigger threat of the two. Amazon intersects the real world along many different vectors. Facebook could disappear tomorrow and the average person's life (not working at Facebook) would probably not change very much and might even be better quality. In time another service would rise to take its place, just as Facebook replaced GeoCities, MySpace and AOL. WeChat is already as big as Facebook, for instance. Hopefully a better decentralized alternative running on blockchain will replace all of the corporate/centralized options in the not too distant future :D
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moonshot
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Re: The potential outcomes of Libra

Post by moonshot » Tue Jul 09, 2019 11:53 am

Apple cofounder Steve Wozniak says most people should 'figure out a way to get off Facebook'
https://www.insider.com/apple-cofounder ... ook-2019-7
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Steve Sokolowski
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Re: The potential outcomes of Libra

Post by Steve Sokolowski » Tue Jul 09, 2019 12:01 pm

moonshot wrote:
Tue Jul 09, 2019 11:53 am
Apple cofounder Steve Wozniak says most people should 'figure out a way to get off Facebook'
https://www.insider.com/apple-cofounder ... ook-2019-7
It's not hard to get off facebook. You just stop posting there and remove all information except for a very basic profile that contains your name and age. I did it and my life is no different than before.

I'm not worried about the privacy issues with current facebook profiles, although some people are. Instead, I just feel that facebook has been a negative invention that has set society backwards - by promoting hate, replacing true connections with online "friends," and by sucking up a huge amount of time that could be better spent on other things.
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moonshot
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Re: The potential outcomes of Libra

Post by moonshot » Tue Jul 09, 2019 1:40 pm

I just feel that facebook has been a negative invention that has set society backwards - by promoting hate, replacing true connections with online "friends," and by sucking up a huge amount of time that could be better spent on other things.

Couldn't agree more.
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