Libra as the great Crypto normalizer
Before Tinder was a thing, confessing that one met their SO online was a big nono. If one said they met online, it was clear that the confessor spent many hours looking at random dick pics, before they found their mate. Tinder changed that. Its innovation was that it required that pictures were from a Facebook profile. Since most of the people also use their facebook to communicate with their grandmas, the number of dick pics in Tinder decreased radically.
The world of crypto today is reminiscent of the old days of online dating. Some people strike it rich, others do okay, but most are seeing endless scams and disappointments. The same anonymity of the Internet that invited every weenie in the world to your PMs now allows every scam into your wallet. Everyone is scared, with the exception of hedge fund managers, but they are also the ones who look at dick pics while soliciting medium-kinky pay sex on craigslist.
The use of Facebook-guaranteed real identity reduced the instances of bad behavior on online dating and normalized Tinder as a socially acceptable place to meet a mate. The same real identity in Libra will normalize the world of crypto.
Libra is to Crypto Scams, as Tinder is to Dick Pics. All powered by Facebook’s real identity.
In its current incarnation, Libra does not require the wallet to be directly tied to the real identity, but that’s a technicality. Once all the members of the libra coalition start processing the new currency, they will require some sort of real identity to operate. Trade on eBay, call an Uber, even listen to your playlist on Spotify will require a tie with the existing identities, as they do today, and using libra will just connect them.
In this scenario, Libra wallet becomes a centerpiece of a userID graph, tieing together many disconnected user namespaces.
This explains why Facebook was so fast to embrace Libra — it’s not really the monetary aspect that is important to them, but the user identity. Facebook has long been the main provider of identity resolution and intends to stay that.
From a crypto-anarchist point of view, this is obviously unacceptable. However, the use cases and the market size of the crypto-anarchist economy seem to be limited to the dark marketplaces and they already seem to be saturated. The normie world is interested in crypto mainly for the P2P aspect of the network, the ability to remove the intermediaries.
The intermediaries today perform 3 main functions:
- They are the gateways to the historical information
- They execute state transitions and verify that state transitions adhere to defined rules
- Based on historical information and some risk assessment based on the defined rules they extend credit to the market participants.
For the last 10 years, the crypto community was excited about the second point. All the gods of cryptography will guarantee that you won’t spend something you don’t have. In this narrow sense, you don’t need trust to do business on the blockchain.
This leaves the other two functions of the intermediaries — being a source of historical data and creating credit.
The first is the oracle problem. Oracles are the sources of truth on the outside world, accessible from the smart contracts. Last five years the whole crypto world was trying to build oracles, to bridge the real world and the crypto world. Obviously everyone ran into the problem of all good information being locked away in secure vaults, accessible only by their owners and hackers. Even getting good access to sports scores was a problem, and that’s with sports betting usually being the low hanging fruit of tech economy. Augur, the prediction marketplace, tried to sidestep this by crowd-sourcing the truth and rewarding accurate information, essentially saying that millions of lemmings cannot be wrong. What Augur ended up discovering that with about a thousand lemmings are enough to turn it into a marketplace of fake news, easy to manipulate.
In the Libra world, the oracles are part of the Libra consortium and run the validator nodes. While the members of the consortium don’t have all the information of the world, combined and tied together through the identity graph they provide troves of information that can be combined to underwrite credit. Moreover, if Libra is successful, more members will join the consortium. Imagine FICO scores being available on the blockchain.
In addition to being oracles, the combined economic power of the members will allow enforcing non-blockchain behavior. With your wallet tied to your identity, you have very few options than to stick to your promise to repay a loan. Because if you don’t — your credit cards will stop working, your uber will drive past by, your friends will know you are a loser, and your Spotify will forever play sad country.
This future is both liberating and dystopian. The dystopian angle is the panopticon and an explicit ‘social credit’ system, like in China, but on a grander, decentralized scale. The liberation will come from simplified access to capital. This will be the main reason consumers will embrace Libra — getting money will be easier than getting laid on Tinder.