The Ambitious Plan Behind Facebook’s Cryptocurrency, Libra

David Marcus wrestled with a question he’d been pondering since his previous job as president of PayPal.How would you build the internet of money?A friction-free global digital currency would be a boon for the many people with mobile phones but no access to banking. And who better to develop something like this, he wondered, than Facebook, with its global reach and massive user base? Marcus, then head of Facebook Messenger, thought he had an answer. He texted his boss and told him it was time to talk about Facebook creating a cryptocurrency, saying that he had a clear view of how to do it, in a way that would earn trust even from those skeptical of Facebook. Marcus spent the next few days writing a memo that laid out his ideas.

Facebook CEO Mark Zuckerberg quickly endorsed the plan, saying the approach synced with his ideas. Zuckerberg had long sought an in-house currency for Facebook—remember Facebook Credits?—and the lofty aspiration to empower consumers in the developing world reprised a familiar theme of serving the next 2 billion. (Think internet.org with digital money instead of broadband.) Besides, competitors like Apple, WeChat, and Google were making inroads into global finance.

So just like that, Facebook began marshaling resources for what Marcus describes as the most ambitious cryptocurrency plan since Bitcoin. Within several months, Marcus was out of Messenger and recruiting a team of the company’s top engineers to work in a secure location on the edge of the Facebook campus, with access limited to those with special badges. He also hired a selection of top economists and policymakers. More than 100 people were gearing up for a dual challenge: building a global currency on top of blockchain technology, especially for those underserved by banks, and convincing people to adopt it despite the fact that Facebook built it.

The result is Libra, a new crypto coin and payment infrastructure. Its aspirations are set out in a white paper released Tuesday. Mission: “a simple global currency and infrastructure that empowers billions of people.” It begins with a new cryptocurrency designed for payments ranging from micropayments to remittances without fees (“as easy to send money as an email”) as well as enabling more exotic “smart money” use cases like dynamic contracts, which could enable blockchain-based loans or insurance. The value of the coin will be pegged to a market-value basket of several trusted currencies, with individual Libras worth about a buck. It’smoney, not an investment vehicle. Libras will be fully reserved; basically, every time a user trades traditional currency for Libra, that money will go into the reserve, and stay there until the customer withdraws money from the system.

And here’s Marcus’ big idea: To deflect the well-justified wariness of Facebook’s every move, Facebook has open-sourced the technology, and will cede control of the blockchain to a neutral Libra Association—kind of a Switzerland of digital coinage—that will of course be based in Switzerland. The Libra Association will consist at first of up to 100 founding members including Facebook, each of which will invest at least $10 million to fund the association’s operations, and receive interest earned off the reserve. (Libra’s NGO members are exempted from the investment requirement.) Each member will be empowered to operate a node on the blockchain, and have a voice in determining changes to its code and managing the reserve. (This limited access is called a “permissioned” blockchain.) “Facebook will have one seat on the council that oversees the foundation but will have no more rights, no more governance, that isn’t the exact same as what everybody else has,” says Kevin Weil, a top engineer who left his role as Instagram’s product chief to work on the project.

The intended parallel is to the first breakout cryptocurrency, where the creator has no control of the system. “Think of Facebook as Satoshi [Nakamoto, the creator of Bitcoin] and Libra coin like Bitcoin,” says Fred Wilson, head of Union Square Ventures, a venture capital firm that has signed up as a partner.

Of course, Facebook has plenty to gain if this works out. Ceding control of its invention makes Libra worthmoreto Facebook than keeping it close: The currency may be more widely circulated and more trusted. The notion of a borderless payment system fits perfectly with Zuckerberg’s focus on messaging; even before the Libra rulebook is fixed, Facebook developed a digital

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