The Super Experiment of the Internet of Money: Analysis of Facebook Libra

Editor's Note: This article comes fromZero One Finance (ID: Finance_01)Editor's Note: This article comes from

Zero One Finance (ID: Finance_01)

Summary

• , Author: Zero One Think Tank, Digital Asset Research Institute, reprinted with authorization by Odaily.

• Note: Since Facebook released the Libra white paper on June 18, there has been a wave of discussion on digital currencies around the world. At the same time, my country is also stepping up the launch of the central bank's digital currency. What impact will the launch of Libra have on traditional finance and the entire digital research ecosystem? What attitude should we take to face the impact of libra?

• Summary

• Libra hopes to "build a simple, borderless digital currency and financial infrastructure that serves billions of people". "Our world truly needs a reliable digital currency and financial infrastructure that, combined, must deliver on the promise of the 'Internet of Money'."

• Libra breaks the boundaries of sovereignty in the traditional sense, is not subject to independent supervision by any sovereign country, and does not have exclusion for users. Facebook hopes to use Libra to establish a new global payment system to achieve a wider and deeper financial inclusion.

Libra adopts a "like currency bureau + basket of currencies" system to maintain the stability of the currency value, while the distributed governance structure composed of members of the Libra Association reduces the monopoly that may be formed by a certain party while ensuring the security and stability of reserve assets.

The high efficiency and security of the Libra blockchain come from two core technologies, one is the optimized "Byzantine Fault Tolerance" consensus mechanism, and the other is the Move language specially designed for the transaction and management of digital assets.

Although from a technical perspective, Libra may make substantial progress in promoting the application of digital currency and enhancing the public's awareness of digital currency, but this digital currency that transcends national borders may encounter many obstacles in the promotion process in the future .

In 1999, Friedman predicted in an interview that "the Internet will develop a reliable electronic currency in the near future, through which people can complete the transfer of assets without knowing each other."

In 2019, Facebook's digital currency project Libra (also known as Libra) officially released a white paper and launched a test network. Facebook is trying to "build a simple, borderless digital currency and a financial infrastructure that serves billions of people," The combination of the two must be able to fulfill the promise of the 'Internet of Money'," Friedman's original prediction seems to be becoming a reality.

On June 18, 2019, the white paper of Libra, a digital currency project led by Facebook, was officially released. On the same day, the project’s blockchain test network was also officially launched. The plan announced by Libra is different from previous reports.

The digital currency marked by Bitcoin has been developed for ten years and has derived thousands of variants, but the instability of value is one of the important reasons why these digital currencies cannot be widely used. The Libra coin is essentially a stablecoin whose value will be determined by a combination of low-volatility assets, including cash and government monetary securities provided by stable and reputable central banks. In this way, even if the exchange rate of a certain currency fluctuates, the value of Libra will remain stable. Take the exchange of US dollars and Libra as an example. When a user exchanges US$1 for Libra coins, the US$1 will be remitted to Libra's reserve assets for exchange rate conversion and exchanged for Libra coins equivalent to US$1.

The Libra reserve is not controlled by Facebook, but by the Libra Association, which is composed of multiple member institutions. Facebook plans to increase the number of member institutions of the association to 100 by 2020, and each member institution will pay $10 million in exchange for voting rights in the association to determine the reserve asset portfolio behind Libra and the exchange rate of Libra.

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1. New experiment of "world currency"?

"Why can't we use our mobile phones to send money as easily and quickly as we send messages to friends?"

"Why not create a currency that is stable, safe, and usable all over the world?"

At the beginning of an introduction video, Libra first raised these three questions. Its mission is to "build a simple global currency and financial infrastructure" and create a "world currency" that everyone can use.

Can Libra shoulder the mission of establishing a "global currency" or "world currency"? Let’s review the brief history of the development of “world currency” for more than 200 years:

When the famous scientist Newton was the director of the British Mint in his later years, he spared no effort to explain the importance of gold to the cabinet and demanded a unified price for gold. In 1717, the British Parliament passed a resolution setting the price of gold at 3 pounds 17 shillings and 10 pence per ounce. In 1817, the British formally legislated to confirm the gold standard system. Since then, other countries have followed the British practice. By the middle and late 19th century, the gold standard system had been widely adopted around the world, so gold became the world currency.

However, with the continuous development of the commodity economy and the increasing frequency of international trade, gold is increasingly unable to meet the increasing needs of commodity circulation. In 1914, when the First World War broke out, the warring countries concentrated their gold on raising military expenditures, and issued bank notes that could not be cashed into gold, while strictly prohibiting the free export of gold. The gold standard gradually collapsed with the outbreak of World War I, and the era of world currency 1.0 came to an end.

World Currency 2.0 - US Dollar

From the 1960s to the 1970s, in contrast to the gradual recovery of the world's economies after the war, the United States was deeply mired in the quagmire of the Vietnam War. The continuous increase in overseas military expenditures reduced the gold reserves of the United States. Coupled with the impact of the two oil crises, the currency of the United States The inflation gradually intensified, and the dollar crisis broke out several times. In July 1971, the seventh dollar crisis broke out. The Nixon administration announced the implementation of the New Economic Policy on August 15 of that year, and the United States announced that the dollar would stop being exchanged for gold. The signing of the Agreement marked the depreciation of the U.S. dollar against gold; in February 1973, with the further depreciation of the U.S. dollar, major developed countries turned to the floating exchange rate system one after another, the Bretton Woods system began to disintegrate, and the U.S. dollar changed from the sole reserve currency to the main reserve currency. But it still plays a central role in international trade.

In 1974, the United States signed an agreement with Saudi Arabia, announcing the sale of arms to Saudi Arabia and guaranteeing its homeland security. In return, Saudi Arabia accepted the US dollar as the only pricing and settlement currency for oil exports. In December of the same year, the United States and other OPEC members also signed agreements one by one, thus establishing the "petrodollar system" and consolidating the dominant position of the dollar in the international monetary system. Today, the U.S. dollar is still the "world currency" to some extent.

From credit currency to digital currency

Since credit currency (banknotes) can be printed in large quantities quickly and at low cost, and the market lacks effective supervision of currency issuers, credit currency may be issued in excess, and such excess issuance will increase inflation and financial order risk of imbalance. Although the U.S. dollar is currently the most important foreign exchange reserve of all countries in the world, the centralized U.S. dollar as a world currency actually contains certain risks. The United States can use the super issuance of U.S. dollars to obtain resources from other countries at low cost, and can also target any country Sanctions are imposed in U.S. dollars.

In 2008, a mysterious crypto geek who went by the pseudonym "Satoshi Nakamoto" brought Bitcoin into the public eye for the first time. People often associate Bitcoin with the 2008 financial crisis. This decentralized digital currency without a specific issuing entity is considered to be a new form of currency that is not controlled by any government or financial institution, and even has the basic conditions to become a world currency. In the economic model of Bitcoin, a distributed database composed of many nodes in the entire Bitcoin network confirms and records all transaction behaviors, and uses cryptographic design to ensure the security of all links in Bitcoin circulation. But Bitcoin is not perfect. First, the price of Bitcoin often fluctuates violently; second, in the impossible triangle of the blockchain (decentralization, security, and efficiency), Bitcoin gives up efficiency, resulting in high transfer fees and slow transfer speeds. These factors make Bitcoin unsuitable for daily micropayment scenarios.

In order to solve various problems in the development process of blockchain and digital currency, various blockchain projects emerge in an endless stream, and the types of digital currency have exceeded 2,000. Although blockchain or digital currency has some potential to solve the availability and credit problems of financial services, as stated in the Libra white paper, "existing blockchain systems have not yet been widely adopted. Existing blockchain The lack of scalability and the volatility of digital currencies have so far caused existing digital currencies to perform poorly both as a store of value and as a medium of exchange, thereby preventing their widespread use in the market.”

2. Three ideals

From the white paper, at least three ideals of Libra can be seen: improving the existing currency system, realizing inclusive finance, and creating a new global payment system. Of course, the breakthrough of Facebook's own business model may also be the driving force behind its launch of Libra.

Improve the existing monetary system

As a major component of the world monetary system, sovereign credit currencies issued by central banks of various countries have obvious sovereign boundaries, and users also have many restrictions in the process of using them. The vision of Libra is to become a simple, borderless, low-volatility digital currency.

After the disintegration of the Bretton Woods system, the world monetary system entered the era of floating exchange rates dominated by the US dollar. In 2009, since the appearance of the first Bitcoin created by Satoshi Nakamoto, the existing monetary system has gradually been affected to a certain extent. Bitcoin denationalizes the currency advocated by Hayek, and in the true sense, it has changed from an ideological theory to a huge social practice, proving the possibility of a non-sovereign currency.

Within the existing monetary system, there have also been efforts to promote a super-sovereign currency. At the G20 meeting in 2009, Zhou Xiaochuan, then governor of the People's Bank of China, proposed to "create an international reserve currency that is decoupled from sovereign states and can maintain long-term currency stability, so as to avoid the inherent defects of sovereign credit currencies as reserve currencies."

Libra, issued based on the blockchain, breaks the boundaries of sovereignty in the traditional sense, is not subject to independent supervision by any sovereign country, and has no exclusion for users. From this point of view, Libra has many similarities with super-sovereign currencies. Economist Zhu Jiaming believes that Libra is the first time to clearly explain the super-sovereign currency from theory, technology to implementation plan; 2019 may be remembered by history as the first year of super-sovereign currency due to the emergence of Libra .

Realize Inclusive Finance

Libra will be built on a secure, scalable and reliable blockchain, backed by a reserve of assets endowed with intrinsic value, and governed by an independent Libra Association to promote the development of the financial ecosystem and create a more inclusive financial system.

Inclusive Finance refers to improving appropriate and effective financial services for all social classes and groups in need of financial services at an affordable cost.

Libra claims: Working together, technology companies and financial institutions have also developed solutions that help empower the global economy. Despite these advances, there are still many people living outside the world. There are still 1.7 billion adults in the world who have not been connected to the financial system and cannot enjoy the financial services provided by traditional banks. Among them, 1 billion people have mobile phones and nearly 500 million people have access to the Internet.

Libra and the financial services it can provide, based on the blockchain network, can eliminate the existence of third-party financial intermediaries to a certain extent and simplify the entire financial service process by virtue of technical characteristics such as decentralization, borderless, and non-tampering. , creating a new possibility objectively: financial services do not need to be independent of financial services, the business itself carries financial services, that is: business is finance.

"We believe that open, instant and low-cost global money flows will create enormous economic opportunity and business value for the world."

“A system is successful if it enables any individual or company in the world to access their funds instantly and in a fair and affordable manner. Success would mean, for example, that people working abroad can transfer money Send money back home, and college students can pay their rent as easily as they can buy coffee."

“No matter where you live, what you do, or what your income is, moving money around the world should be as easy, cheap, and even more secure as sending a text message or sharing a photo. New product innovations and new players in the financial ecosystem will help It aims to reduce the difficulty of obtaining capital for everyone, while providing a smooth and seamless payment experience for more people."

Payments are one of the largest businesses in the global financial system. China is currently the most developed and leading country in mobile payment in the world. The latest data shows that in the first quarter of 2019, the scale of China's mobile payment market reached 47.7 trillion yuan. But regardless of Alipay or WeChat, the existing payment system is built on the bank clearing network. In other words, the existing payment systems are essentially the payment ports of the banking and financial system. Today, when the Internet and financial networks are still separated from each other, payment information needs to be transmitted between the two networks. However, Alipay and WeChat Pay only provide payment gateway services between the two networks, and have not fundamentally changed the payment model. Alipay's underlying clearing network is still an inter-bank clearing system.

Libra's payment network is a clearing system based entirely on the blockchain and is not restricted by traditional financial networks. Since Libra's underlying clearing network is global, users holding Libra can conduct point-to-point direct transactions with each other anywhere in the world. Of course, Libra's underlying network based on distributed ledger technology has more advantages than the existing centralized clearing network in terms of security and protection of users' personal wealth and freedom.

In terms of cross-border payments, Libra may also be promising. According to World Bank data, the current global cross-border payment market continues to grow at a rate of no less than 5% in US dollars. According to a report released by Accenture Consulting last year, cross-border payment transactions through banks alone reach 10 billion to 15 billion transactions each year, with a scale of more than 25 trillion US dollars.

Projects such as Ripple have already practiced blockchain cross-border payments and achieved certain results. But compared to Libra, Ripple cannot make daily payments and can only improve the efficiency of cross-border payments. That is to say, after users can complete cross-border payments through Ripple, they still need to convert their Ripple and other encrypted digital currencies into legal tenders before they can be used in real-world scenarios. Libra does not need to do this, because it is a currency that exists for daily payment scenarios, and can be used directly after completing cross-border payments. This is also one of Libra's advantages over other blockchain cross-border payment projects.

Libra is yet another transformative experiment in payments. Prior to this, Facebook had already made many attempts in this field.

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Source: Zero One Finance and Zero One Think Tank based on public information

Facebook is so obsessed with payment, maybe it hopes to build a complete closed-loop ecosystem and get rid of the current revenue model that relies too much on a single business. In a sound ecosystem, payment is the most frequently used and most important infrastructure.

The basic attribute of Facebook is "social". With its strong social attributes, Facebook has accumulated a large number of users and data. According to the financial report data for the first quarter of 2019, the number of daily active users of Facebook in the first quarter exceeded 1.56 billion, an increase of 8% year-on-year; the number of monthly active users was 2.38 billion, which also achieved an increase of 8%.

Figure: Facebook daily active user growth (unit: million)

Source: Zero One Finance and Zero One Think Tank based on data from Facebook’s financial report

Advertising is currently Facebook's main monetization channel and source of income. Financial report data show that Facebook’s revenue in the first quarter of 2019 was US$15.08 billion, of which advertising revenue was US$14.912 billion, accounting for 98.9% of the company’s total revenue. Mobile advertising revenue accounted for 93% of overall advertising revenue, up from 91% in the same period last year.

Figure: Changes in Facebook advertising revenue and proportion

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Source: Zero One Finance and Zero One Think Tank based on data from Facebook’s financial report

The revenue model that relies heavily on advertising revenue is also becoming a potential risk for Facebook. At present, almost all of Facebook’s revenue comes from advertising, and the proportion of other businesses such as online games is decreasing year by year. Emerging businesses such as Oculus will not be able to bring in huge revenue in the short term. Although Facebook’s advertising business performed well in the first quarter of 2019, as the company stated in an analyst conference call, “the company will face huge advertising resistance in the second half of the year.”

Facebook, which lacks payment scenarios, cannot effectively realize the huge users and data it owns, and many business attempts are limited. Taking the game business as an example, the model of driving game business development based on social attributes has been proved to be feasible and effective by Tencent. According to the 2018 Tencent financial report data, Tencent’s mobile game business revenue in 2018 was 77.8 billion yuan, an increase of 24% year-on-year, accounting for 41% of the annual revenue, and it is an important source of Tencent’s revenue. According to Metcalfe's law, the network value is equal to the square of the number of network nodes. Facebook with billions of users obviously has a very high value and dependence on each user node in the Facebook network. Theoretically speaking, based on such a strong social gene to develop game business, Facebook should be able to promote user participation and drive potential players to join compared with the AppStore, which lacks social elements, but why the game business has not become an important part of Facebook's revenue ?

Experts believe that the obstacle to Facebook's expansion of the game business is the lack of payment channels. Bloomberg once reported that the lack of payment tools will become a key obstacle for Facebook to generate revenue through mobile games, and it can only rely on the payment channels of Apple and Google, which will correspondingly reduce its profits in the game business.

And Libra gave Facebook an opportunity to gain new business growth. The biggest significance of Libra to Facebook is that it is expected to help Facebook enter the payment field and make it a more robust and diverse Facebook ecosystem. Facebook currently has a sufficient user base, and the introduction of the Libra payment system will provide more possibilities for Facebook to realize value in various scenarios such as games, e-commerce, and news. At the same time, the existence of many giants in the Libra Association will also bring new opportunities for Facebook in terms of users and expanding partners.

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3. How to stabilize: a basket of currencies + currency-like bureau system + distributed governance

As a currency used for everyday payments, it first needs to be stable. The original vision of Bitcoin was to be used in peer-to-peer payment transaction scenarios, but now it has become a value storage tool and has become what people call "digital gold". The reason for this is not only the flaws in the transaction performance of the underlying blockchain network, but also the sharp fluctuations in prices are also one of the key factors that restrict encrypted digital currencies such as Bitcoin from becoming daily payment currencies.

Libra hopes to become a stable digital currency asset and be used in various daily payment scenarios on a global scale. In order to accomplish this goal, gaining user trust and maintaining value stability are problems that Libra must solve.

According to the white paper, Libra adopts a "currency-like bureau + basket of currencies" system to maintain the stability of the currency value. That is: the value of Libra is effectively linked to a basket of fiat currencies, and each Libra coin issued uses real reserve assets as a guarantee. If users want to create new Libra coins, they must use legal tender to purchase Libra at a ratio of 1:1, and transfer the legal tender to the reserve. At the same time, many competitive exchanges and other liquidity providers around the world provide exchange support.

Linked to a basket of currencies: the value of the anchor asset is stable

When it comes to "a basket of currencies", the most famous one is the SDR (Special Drawing Rights) of the International Monetary Fund. SDR combines various currencies in a certain way to form a new synthetic currency unit (or valuation standard) through the "basket of currencies", and maintains relative stability through the exchange rate relationship between various currencies. As an important international reserve asset other than gold and the US dollar, SDR is not a real currency. To some extent, it is more like an IMF issued by the International Monetary Fund, enabling countries with SDR quotas to purchase the required "one-off quota" from other countries through SDR when they need foreign exchange or solve problems such as international trade deficits. All kinds of foreign exchange in the basket of currencies.

In addition, anchoring with a single currency will also increase the risk of Libra's own value stability. Even as strong as the U.S. dollar, it is no longer very sound today. Linking to a basket of currencies can reduce the impact of single currency price fluctuations on Libra through the hedging relationship between currencies.

Similar to the SDR, the Libra Association will change the composition of the basket in due course according to changes in the market situation. This also further maintains the stability of the "basket of currencies".

Quasi-currency bureau system: real value support

The currency board system is a system that combines the exchange rate system and the currency issuance system. The main features include: the local currency is linked to the anchor currency, maintains a fixed exchange rate, and is fully convertible; legally stipulates that currency issuance must have foreign exchange reserves or The full support of hard currency; the currency issuer has no independent monetary policy and cannot control the amount of currency issued. The operation in the financial market is completely passive. This is the most obvious difference between the currency bureau and the central bank.

The "linked exchange rate system" currently implemented in Hong Kong, China is essentially a currency board system linked to the US dollar. HSBC, Standard Chartered Bank and Bank of China are the three major note-issuing banks of Hong Kong dollars. When issuing Hong Kong dollars, they must deposit a sufficient amount of U.S. dollar reserves at the exchange rate of 7.8 Hong Kong dollars in exchange for the Hong Kong Monetary Authority's interest-free liability certificate in order to issue equivalent Hong Kong dollars. When the Hong Kong government issues coins, it must also have a sufficient amount of Hong Kong dollars or foreign exchange as reserves in order to obtain the issuance permit.

Libra operates in a similar way to a currency board system. The issuance of each Libra coin needs to be supported by real and sufficient asset reserves. These reserves currently consist of a range of low-volatility assets such as cash and government currency securities provided by stable and reputable central banks.

In order to improve efficiency, users will not have direct access to the reserves, but authorized dealers will participate in a large number of fiat currency and Libra transactions, and the reserve funds will increase or decrease accordingly. If users want to create new Libra coins, they must use legal tender to purchase Libra from authorized dealers at a ratio of 1:1 and deposit it in storage, and vice versa.

Comparing the currency board system, it is not difficult to find that these authorized dealers play a similar role in the Libra system to the note-issuing bank, while the multiple regulated electronic exchanges and dealers around the world that can be traded publicly are similar to general commercial banks.

Libra's asset-backed issuance model using this currency board system has not only been verified in reality, but has also become mainstream in the stablecoin market of encrypted digital currencies.

Stablecoins are a product of the encrypted digital currency market. As mentioned above, the current prices of encrypted digital currencies represented by Bitcoin and Ethereum fluctuate violently, making daily transaction payments impossible. Coupled with the strict supervision of digital currencies in some countries, including China, the digital currency market lacks The legal currency deposit channel, so the stable currency came into being.

The current issuance models of stablecoins can be roughly divided into three categories:

a. Legal currency reserve mortgage model, that is, by mortgaging legal currency, a stable digital currency anchored to the value of legal currency is issued;

b. Digital asset mortgage model, that is, by pledging digital assets on the smart contract of the blockchain, a digital currency that anchors the price of legal currency is issued. However, due to the large fluctuations in the price of digital assets themselves, it is generally necessary to ensure that each stablecoin has sufficient collateral behind it through risk control mechanisms such as over-pledging and compulsory liquidation;

c. Algorithmic central bank model (also known as the "minting right" model), that is, no collateral is required, and the open market operation similar to the central bank is performed through a pre-set algorithm mechanism to adjust the supply of stable coins, so that the price of stable coins and the anchor of legal currency Certainly.

The current stablecoin market is dominated by the fiat currency reserve mortgage model. Although this model runs counter to the idea of ​​blockchain decentralization, and its representative project USDT has been subject to doubts and a crisis of trust, it still cannot change the reality that more than 95% of stablecoins are currently issued through this model.

Therefore, although the idea of ​​​​Libra's full reserve mortgage issuance is not too new, it is the safest and easiest method to be accepted by users. However, compared with general stablecoins, Libra has several important innovations:

a. Libra anchors a basket of currencies rather than a single legal currency such as the US dollar;

b. Mortgage of low-risk asset portfolios is not limited to US dollars;

c. Issued by an association formed by 100 (currently 28) senior financial entities.

At the same time, in order to maintain the stability of the exchange, Libra will cooperate with many competitive exchanges and other liquidity providers around the world, so that users can be sure to sell any Libra coins at a value equal to or close to the reserve at any time, thus protecting Libra. The stability of the exchange channel.

Above, a basket of currencies ensures the stability of anchor assets, effectively linked to a basket of currencies to ensure the stability of Libra's value, sufficient reserves to maintain the real value of Libra, and cooperation with many exchanges and liquidity providers to ensure stable acceptance channels, coupled with passive The flexible monetary policy avoids users' worries about inflation and random additional issuance, so as to achieve Libra's relative stability.

Facebook has been plagued by issues such as data security and user privacy leaks. The "Cambridge Analytica incident" that occurred in the first half of last year left Facebook still in the vortex of a crisis of trust.

In order to avoid the resulting impact, the white paper clearly states that Libra will be operated by the Libra Association, an independent non-profit membership organization headquartered in Geneva, Switzerland. Members of the association will be composed of verifier nodes of the Libra Association network, aiming to coordinate and provide a management framework for the network and asset reserves, and to lead funding that can generate social impact and provide support for inclusive finance.

The Libra Association will be a regulatory entity consisting of 100 independent members in the future. Facebook will maintain a leadership role in the Libra Association until the end of 2019 and will become an ordinary founding member in the future. The white paper emphasizes that all decisions will be made by the council of the association, and important policy or technical decisions require more than two-thirds of the members to vote for approval. At the same time, the reserves will be held decentralized in a custodial network with investment-grade credit ratings to limit counterparty risk.

4. Technical Core: Mechanism and Language

In addition to the white paper, the Libra blockchain also provides several technical documents detailing more technical details, such as the consensus mechanism and new programming languages. The source code of Libra has been made public on Github, and an official test network has also been released. online.

Judging from the white paper, the Libra blockchain will be officially launched in 2020. The member institutions of the Libra Association will expand to 100, and each initial member institution will be responsible for running a verification node. All member nodes jointly maintain the Libra blockchain. network. The consensus among these nodes is coordinated by an optimized "Byzantine Fault Tolerance (BFT)" mechanism called LibraBFT. Each node will repeatedly exchange and verify information with other nodes to ensure correct confirmation among trusted nodes. information and identify problematic nodes. Similar to all blockchain networks using the BFT consensus algorithm, the nodes in the Libra blockchain network can reach consensus at a faster speed and ensure a higher throughput of the entire network, but can only tolerate up to one-third of the problems Nodes exist, that is, when the number of malicious nodes reaches 34%, an attack can be launched.

The current Libra blockchain design can be regarded as a kind of "consortium chain", which is the "permissioned blockchain" mentioned in the white paper. Libra's development team calls the current "non-permissioned blockchain" (ie The "public chain") model is not yet the best choice for a blockchain that needs to support billions of people. However, Libra's development team did not abandon the public chain model, but plans to start considering the transition to the public chain model five years after Libra goes online, which means that in the future, everyone can connect to the Libra blockchain as a node for transaction verification. , From this point of view, the future Libra blockchain consensus mechanism is likely to choose Proof of Stake (POS).

Move language designed for digital assets

Among all the technical documents released by Libra, the most attractive is the new programming language called "Move", which according to the development team "can be customized in the Libra blockchain. Transaction logic and 'smart contracts'". After reading the relevant documents of the Move programming language, we believe that the Move language is a programming language specially designed for digital assets. According to the technical documents, this language has three uses, namely, issuing digital assets such as digital currency and processing blocks. On-chain transactions and management verification nodes.

Another feature of the Move language is the "First-class Resources" mentioned in the technical documentation, that is, "first-class resources", where "resources" and "Value" in the Ethereum programming language are the corresponding concepts , the difference is that "values" can be copied at will, while "resources" can only be consumed. Metaphorically speaking, "resources" are like water in a bottle that dwindles as we drink it, and "values" are like sentences in a notebook that we can remember in our heads but never disappear . The smart contract written in Move language combines "resource type" with traditional linear logic, so the "resource type" of digital assets on the Libra blockchain also conforms to some characteristics of linear logic, such as digital assets cannot be copied or created out of thin air disappear.

The "first-class resource" concept of the Move language also contains a basic principle that "digital assets are first-class citizens", so we say that the Move language is a programming language designed for digital assets. In fact, digital assets can be stored and allocated as variables in smart contracts, and can also be used as parameters or return values ​​of functions and processes. The static type of the Move language allows the compiler to check out " resources", thus enhancing the security of smart contracts.

Currently, the Move language can only be used in built-in smart contracts, such as issuing Libra, processing transactions related to Libra, and managing verification nodes. "It is expected that developers will be given permission to create contracts after a period of time."

5. Prospect: It is not only technology that needs breakthroughs

In order for Libra to fulfill its ideals, it is not only technical breakthroughs that need to be made, but also many problems at the institutional and commercial levels that need to be resolved.

Politicians are not optimistic

However, the Libra Association does not formulate its own monetary policy, but only "manufactures" and "destroys" Libra coins according to the needs of authorized dealers. This is obviously different from the central bank's ability to formulate its own monetary policy. The Libra Association created Maybe a new kind of central bank model.

However, two days after the release of the Libra project white paper, politicians in many countries and regions have expressed their attitudes. On the whole, there are more voices opposing or demanding the regulation of Libra. How to face the different types of regulation that may appear in various countries in the future, and how to survive and develop in the current powerful and complex sovereign currency system is a major challenge for Libra.

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Difficulties faced by global cross-border payments

First of all, from the perspective of payment, the blockchain-based Libra payment process is very different from the Internet-based mobile payment. The mobile payment represented by Alipay looks very convenient on the surface, but actually requires a series of The support of financial infrastructure.

Figure: Basic process of cross-border payment

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Although it is reported that the Hong Kong version of Alipay has used blockchain technology to achieve real-time transfer of cross-border transfers between Hong Kong and the Philippines, and the cross-border payment business of WeChat Pay has also been compliantly accessed in more than 49 countries and regions. Supports 16 currencies for direct transactions, but they still need to rely on third-party institutions for clearing and settlement, while Libra does not rely on third-party payment and settlement institutions. All transactions are completed directly on the blockchain, which can achieve transaction records It is transparent and permanently reserved and cannot be tampered with, and it is also easy to monitor and track.

In theory, Libra has certain advantages in making payments (or cross-border payments), but the reality is that in countries with a relatively complete currency system (such as Alipay and WeChat Pay are widely used in China), it is difficult to persuade people to start from a habitual payment method. It is difficult to switch from one payment method to another, and when a basket of currency reserves is allowed, if people convert one currency into Libra, but then convert Libra into US dollars, it will bring currency mismatch and exchange rate Risks, as well as financial regulatory issues, and regulation is still a link that cannot be bypassed.

Other issues still to be resolved