When Libra was first announced in June 2019, it was pitched as a global digital currency pegged to a basket of bank deposits and short-term government securities. These assets were to be denominated in a range of historically stable international currencies, including the dollar, pound, euro, Swiss franc and yen.
The Libra Association was to maintain this basket of assets and change the balance of its composition if necessary. In doing so, it could offset major price fluctuations in any one foreign currency so that the value of a Libra stays consistent.
The Association is a not-for-profit which also oversees the development of the token and the governance rules of the blockchain. Each founding member paid a minimum of US$10 million to join. Members gain one vote in the Libra Association council and are entitled to a share of the dividends from interest earned on the Libra reserve.
The original coalition of 28 corporate backers quickly dwindled. In October of last year, PayPal announced its withdrawal from the Association as government regulators scrutinized the plans. EBay, Visa, Mastercard and Stripe left a week later.
In an attempt to keep the project on target for deployment later this year, the Libra Association recently released a new update of the Libra whitepaper. There are several key changes. The most prominent is offering single-currency stablecoins in addition to the multi-currency coin.
“While our vision has always been for the Libra network to complement fiat currencies, not compete with them, a key concern that was shared was the potential for the multi-currency Libra Coin (≋LBR) to interfere with monetary sovereignty and monetary policy if the network reaches significant scale and a large volume of domestic payments are made in ≋LBR” states the Association. “We are therefore augmenting the Libra network by including single-currency stablecoins in addition to ≋LBR.”
A second change to the Libra white paper is forgoing the future transition to a permissionless system while maintaining its key economic properties. “Regulators raised thoughtful questions about the perimeter of control for the Libra network” states the Association. “In particular, the need to guard against unknown participants taking control of the system and removing key compliance provisions.”
In October last year, Facebook CEO Mark Zuckerberg said that Facebook “will not be a part of launching the Libra payments system anywhere in the world unless all U.S. regulators approve it.”
In a further blow to Libra, some of the biggest names remaining in the Association have joined a new project. Dubbed the “Celo Alliance for Prosperity,” the project was unveiled on March 11, with key Libra backers Coinbase Ventures, Andreessen Horowitz, Anchorage Mercy Corps and Bison Trails Co joining the ranks of its founding members.
The team behind Celo is a startup called cLabs. cLabs co-founders Rene Reinsberg and Marek Olszewski founded a machine learning startup out of MIT that was acquired by GoDaddy, while the third co-founder Sep Kamvar developed the first efficient algorithm for adding personal context to the internet search process, leading to his company being acquired by Google.
“I think the similarity with Libra is that we share a similar mission,” said Chuck Kimble, Head of Strategic Partnerships at Celo, earlier this year. “We both want to help create prosperity, but I think there are many differences. Ours is decentralized. It’s a completely decentralized collective of mission-aligned organizations. There’s no central governing body to determine how Celo will evolve, and people will be able to vote on how Celo evolves.”
With 50 founding members and an estimated reach of 400 million people, the Celo Alliance already had several prominent members and infrastructure support from projects including Carbon, MoonPay, Ledger, GiveDirectly, Grameen Foundation, Maple and Polychain Capital.
The underlying protocol has been in development since 2017. It’s described as an open, distributed cryptographic protocol designed to interact with a family of cryptocurrencies, including ones pegged to fiat currencies like the US Dollar. The Celo protocol is a proof-of-stake smart contract platform based on Ethereum, powered by Celo Gold, the network’s governance token and reserve currency.
Last week, institutional custodial solution Anchorage announced its support for the Celo native token. In a blog post CEO Diogo Mónica said Anchorage would be the official custody provider for Celo Gold. Anchorage will provide storage, staking, and other advanced network functionalities for Celo Gold.
The first application being built on the protocol is a social-payments system centered around mobile phones. Polychain CEO Olaf Carlson-Wee describes it as "Whatsapp for money." The platforms would make it possible to send value from phone number to phone number without the need for a blockchain wallet address.
Andreessen Horowitz says that one of the reasons they backed the project is because, "Celo is building both the underlying infrastructure and a consumer mobile wallet, it is taking a full stack approach. This means they’re building a complete product or service that can bypass legacy infrastructure and limitations, and more importantly, provide a better end-to-end experience — enabling Celo to take the best features of crypto and pair them with a more seamless user experience."