david wong

Hey! I'm David, a security engineer at the Blockchain team of Facebook, previously a security consultant for the Cryptography Services of NCC Group. This is my blog about cryptography and security and other related topics that I find interesting.

Libra: a usable cryptocurrency posted June 2019

libra

At 2am this morning Libra was released.

and it seems to have broken the internet (sorry about that ^.^")

I've never worked on something this big, and I'm overwhelmed by all this reception. This is honestly pretty surreal from where I'm standing.

Libra is a cryptocurrency, which is on-par with other state-of-the-art blockchains. Meaning that it attempts to solve a lot of the problems Bitcoin originally had:

  • Energy Waste. The biggest reproach that people have on Bitcoin, is that it wastes a lot of our electricity. Indeed, because of the proof of work mechanism people constantly use machines to hash useless data in order to find new blocks. Newer cryptocurrencies, including Libra, make use of Byzantine Fault Tolerance (BFT) consensus protocols, which are pretty green by definition.
  • Efficiency. Bitcoin is notably slow, with a block being mined every 10 minutes, and a minimum confirmation time of one hour. BFT allows us to "mine" a new block every 3 seconds (in reality it can even go much faster).
  • Safety. Another problem with Bitcoin (or proof of work-based cryptocurrencies) is that it forks, constantly, and then re-organize itself around the "main chain". This is why one must wait several blocks to confirm that their transaction has been included. This concept is not great at all, as we've seen with Ethereum Classic which was forked (not so long ago) with more than 100 block in the past! BFT protocols never fork once they commit a block. What you see on the chain, is the final chain always. This is why it is so fast (and so sexy).
  • Stability. This one is pretty self-explanatory. Bitcoin's price has been anything but stable. Gamblers actually strive on that. But for a global currency to be useful, it has to keep a certain rate for people to use it safely. Libra uses a reserve of real assets to back the currency. This is the most conservative way to achieve stability, and it is probably the most contentious point about Libra, but one needs to remember that this is all in order to achieve stability. Stability is required if we want this to be useful for everyone.
  • Adoption. This final point is the most important in my opinion, and this is the reason I've joined Facebook on this journey. Adoption is the largest problem to all cryptocurrencies right now, even though you hear about them in the news very few people use them to actually transact (and most people use them to speculate instead). The mere size of the association (which is planned to reach 100 members from all around the world) and the user-base of Facebook is going to be a big factor in adoption. That's the most exciting thing about the project.

On top of that, it is probably one of the most interesting projects in cryptography right now. The codebase is in Rust, it uses the Noise Protocol Framework, it will include BLS signatures and formally verified smart contracts. And there's a bunch of other exciting stuff to discover!

If you're interested you should definitely check the many papers we've published:

I've read many comments about this project, and here's how I would summarize my point of view: this is a crazy and world-scale project. There are not many projects with such an impact, and we'll have to be very careful about how we walk towards that goal. How will it change the world? Like a lot of global projects, it will have its ups and downs, but I believe that this is a positive net worth project for the world (if it works). We're in a unique position to change the status quo for the better. It's going to be exciting :)

If you're having trouble understanding why this could work, think about it this way. You currently can't transact money easily as soon as you're crossing a border, and actually, for a lot of countries (like the US) even intra-border money transfers are a pain. Currently the best banks in the world are probably Monzo and Revolut, and they're not available everywhere. Why? Because the banking system is very complex. By using a cryptocurrency, you are skipping decades of progress and setting up a interoperable network. Any banks and custody wallets can now use this network. You literally get the same thing you would get with your normal bank (same privacy, same usability, etc.) except that now banks themselves have access to a cheap and global network. The cherry on top is that normal users can bypass banks and use it directly, and you can monitor the total amount of money on the network. No more random printing of money.

A friend compared this project to nuclear energy: you can debate about it long and large, but there's no doubt it has advanced humanity. I feel the same way about this one. This is a clear improvement.

Well done! You've reached the end of my post. Now you can leave me a comment :)

rax

You have completely missed the point of what makes Bitcoin valuable. It has digital scarcity. Why is that valuable? Well, why is gold valuable? Why does even Bitcoin have a price?

It would recommend you to read Nick Szabos article "shelling out"

david

I am definitely not saying that Bitcoin is not valuable as a speculation asset. I am pointing out that for many people (including me) the point of a cryptocurrency was NOT to become a speculation asset, but to become a practical digital currency that anyone can use (in place of their local currency for example).