Analysis News

Binance (BNB) on Libra: At first glance – it is OK!

The R & D department of Binance has published its Facebook cryptocurrency Libra report. Researchers have added technical details to what has already been announced. They also described 3 horizons of Libra’s influence on crypto: short term, medium term and long term.

Bitcoin is better than Apple

Binance stresses that Libra Network blockchain was developed by a Swiss foundation and a consortium led by Facebook. The initial basket of currencies will include USD, EUR, JPY and GBP. But weights unknown. A Proof-of-Stake (PoS) blockchain with a BFT consensus algorithm and a two-token system is used. Smart contracts will be maintained after the transition from permissioned permissionless model.

Ufff … Such terminology does not mean simplicity, as was stated when publishing Whitepaper (Libra is for the world!) Although it turns out to be not so scary when you look at it. In addition, Libra took care of the education of users and published its Lexicon (glossary).

BFT consensus (Byzantine-Fault-Tolerant) is a relatively new consensus algorithm that allows inter-operability with other blockchains on the same consensus. By the way, Binance Chain also uses BFT.

The two-token model means that, in addition to the payment token, a management token (LIT, Libra Investment Token) is used to interact with the hundred of investors who will join Libra Association. If they are unable to pay $ 10M per node, but have a large social impact, the entry threshold for them will be lowered. Such organizations are already among the announced: Kiva, Mercy Corps, and Women’s World Banking.

In the first days of Libra launch in 2020, only ready-made smart contracts will be possible – to reduce the likelihood of error. And later on the permissionless model, the functionality of smart contracts will be expanded.

In fact, Libra is not a stablecoin, since it is not pegged to one currency, but to a basket of independent and freely convertible currencies. In the future, other assets may be included in the Libra reserve fund, according to Binance. The chance to get into Libra Reserve is higher for those assets that are independent of other assets and circulate freely in all markets. Therefore, for example, Apple shares (AAPL), which are sold for dollars, are inferior to Bitcoin, which is traded worldwide.

Tomorrow, the day after tomorrow, always

The most interesting part is the forecast of Libra impact on the markets in short term, medium and long term. In short term in 2019 with launched testnet developers and members of the Association will get used to the network and explore the possibilities. It was noted that among the participants there are no financial companies. Non-financial ones are more willing to find ways to break the existing financial system. Libra will not have an adequate opponent to launch mainnet in 2020, and the prospect of transforming a permissioned model into permissionless encourages participants to enter early to take advantage of the “first-mover”.

In the middle term, Binance expects a positive impact both for Facebook and for the crypto industry as a whole. Benefits, already accumulated over the years by Facebook, will positively effect on Libra. This is almost standard “Facebook authentication” and a popular application framework React Native. Now digital payments from Facebook can also be perceived positively. If companies, platforms and marketplaces accept this token as the “default currency”, this will allow Facebook to act as a key player in e-commerce. In addition, it will reduce costs for companies and individuals, both in the creation and in the conduct of business.

As for the crypto community, here Libra promises more adaptation and reach. As well as the opportunity for companies not to wait for the decisions of regulators, and for their part to promote crypto in the wallets of customers (it is not by chance that eBay has already joined the Association). In addition, the expected increase in competition among stablecoins (most likely, they will simply become extinct – Coinstelegram note). But in trade with a traditional crypto like Bitcoin, an increase in trading volumes and an increase in overall market capitalization can be occurred. And the main thing after all is the massive introduction and training in handling crypto. This is all for the benefit of the industry.

The impact on long-term – even more significant and deserves a separate article. Stay tuned!

Intermediate conclusions

On the basis of what is stated, it is obvious that Binance report on Libra is extremely positive. It looks like Binance exchange would like to enter Libra Association. In any case, BNB is now showing a continuation of the uptrend, while Bitcoin is ready for correction.