Facebook’s Libra Coin: How to get started with Libra cryptocurrency?

Facebook’s Libra Coin has been making waves ever since its formal announcement and whitepaper release on June 18, 2019. The cryptocurrency will enable users to make purchases at retail outlets or transfer money to others at a very low fee through blockchain technology. Blockchains are either permissioned or permissionless with respect to the ability to participate as a validator node. In case of a permissioned blockchain network, the permission to run the transaction is distributed by means of a validator node.

Conversely, access is provided to anyone who meets the technical requirements to run a validator node in a permissionless blockchain. To find out more about the difference between permissioned and permissionless blockchain networks, you can read our article on how to choose the right consensus protocol for permissioned blockchain networks.

Libra will be initially launched as a permissioned blockchain network. However, it aims to become a permissionless network eventually. The Libra Association will take care of maintaining the network and will be working with the Libra community to figure out the best way to implement the transition from permissioned to permissionless. This research will begin within five years of Libra’s launch.

In this article, we will take a closer look at Libra cryptocurrency and its working mechanisms.

What is Libra Coin?

Libra Coin is essentially a permissioned blockchain-based payment system. It makes use of the Libra, which is a stable currency that is backed by various stable assets such as bonds, government-backed securities, and national fiat currencies. However, it will not be pegged against a particular national currency. The overarching goal behind the creation of Libra is to revolutionize the digital economy by bringing financial technology and banking services to the world population especially the unbanked.

The main features that can be seen in Libra Coin are as follows:

• It is built on top of a secure, scalable and reliable blockchain network.
• In general, it is a stablecoin which is backed by a large reserve of digital assets.
• It is governed by the independent Libra Association.
• It uses the Libra – Byzantine Fault Tolerance (BFT) consensus mechanism.
• Smart contract coding is performed by means of “Move” programming language for better security.

In the following sections, we will take a closer look at these features and how they have been implemented in Libra.

The Libra Blockchain

The blockchain network that we see in Libra cryptocurrency has been coded from scratch, as the Facebook team wanted it to follow certain specifications, which include-

• Must be able to scale to billions of accounts.
• This will require high transaction throughput, low latency, and an efficient, high-capacity storage system.
• High security to guarantee the safety of funds and financial data.
• Extreme flexibility for powering the Libra ecosystem’s governance.

Facebook’s Libra blockchain will be developed on open source code that encourages developers and the research community to check for design and security flaws. The company will also launch a “bug bounty” program to provide an incentive for finding any vulnerabilities in the platform. It uses a Byzantine-Fault-Tolerant (BFT) consensus approach and uses Move Programming Language to implement custom transaction logic.

Move is a programming language that has been designed to implement custom transaction logic and smart contracts on the Libra Blockchain. The language prioritizes security and safety above all else. It can prevent assets from being cloned and enables “resource types” that restrict digital assets to retain the same properties as physical assets.

Through the use of Merkle tree data structure the transaction data on the Libra Coin is protected and stored securely. Compared to other blockchain platforms that view each blockchain network as a large chain of nodes or blocks. The Libra blockchain network is considered as a single data structure capable of recording both transaction history and its present state.

Transaction Structure and Fees

Usually, a transaction that takes place through Libra will have the following elements-

• The account address of the transaction sender.
• A public key that corresponds to the private key is used to execute each blockchain transaction.
• A script coded in Move to execute the transaction along with the arguments (if needed).
• The gas price or the fees associated with the transaction.
• The gas limit of the transaction is the maximum amount of gas that each transaction can consume before it halts.
• It should include an unsigned integer that’s equal to the sequence number in the sender’s Libra Account.T resource.
• After each transaction, the sequence number is incremented by one.

The LibraBFT Protocol

In LibraBFT, the nodes that are responsible for producing blocks are called validators. These validators make progress in rounds. Each round has its own designated validator called a leader, who is in charge of proposing new blocks and obtaining majority votes from the rest of the validators to get the block approved. The process flow that can be observed is given as follows-

• The round begins. Each round can be considered as a communication phase that is initiated by a randomly selected leader.
• The proposals made by the leader are organized into a chain using cryptographic hashes.
• The leader proposes a block.
• If the block gets validated, the validators sign off on it and transfers their votes to the leader.
• As soon as the leader has gathered enough votes to reach a quorum, the votes are aggregated into a Quorum Certificate (QC).
• The QC is then broadcasted to each and every node in the network.
• If the present leader fails to form the QC then the other validators in the node will issue a timeout and move on to the next round. As soon as this happens, the current leader will be replaced.
• In due time, enough blocks and QC’s will expand its chain in an orderly manner and a block then matches the commit rule of the crypto protocol.
• Each time the block matches the commit rule, the chain of uncommitted blocks becomes committed.

Libra introduced the BFT approach to enable consensus protocol among all the validator nodes. Every transaction in the node is executed in the order in which they exist in the network. BFT brings trust in the networks as they are designed to operate correctly when some validator nodes, upto one-third of the network, are failed or compromised.

The Libra Association

This Libra Association is the governing entity of the Libra blockchain. The Libra associations is considered as an independent, not-for-profit membership organization that is headquartered in Geneva, Switzerland. It serves two main primary functions: validating transactions on the Libra blockchain and managing the reserve Libra and to allocate the funds for the social causes.

The Libra Association is in charge of maintaining the basket of assets. They are also authorized to make any modification to the balance of its composition to offset huge price fluctuations in any foreign currency and keep the value of Libra consistent.

The Libra Currency

The Libra Currency is symbolized by means of a Unicode character consisting of three wavy horizontal lines ‘≋’. Its value will always remain stable, which is why it is said to be a good medium of exchange. The value of each Libra Coin is governed by a collection of short-term government securities and bank deposits of stable international currencies like the dollar, euro, yen, pound and Swiss franc.

Users will be able to cash their money and store it as Libra currency. They will then be able to spend this currency in various ways like online shopping, merchant payment etc. Users can also trade in local currency for Libra and vice versa via wallet apps, including third-party apps, Facebook’s Calibra wallet and local resellers like grocery stores.

How to Get Started with Libra Cryptocurrency?

Many potential users are hesitant about Libra Coin due to safety concerns. However, the Libra association has addressed these concerns by using the same verification and anti-fraud processes that banks and credit cards use. Libra will also have automated systems that will proactively monitor activity to protect and prevent fraudulent behaviour along with “live support” to help users who lose access to accounts. If a user loses any money through fraud, Facebook has agreed to offering refunds to the user.

In order to start using Libra Cryptocurrency, users will first have to download Calibra, a digital wallet, that will allow them to send the currency to anyone with a smartphone. After its introduction, it will be available in Messenger, WhatsApp, and even as a standalone app. This digital wallet will act as a bank account and you will be able to set it up through Facebook. You can fill the wallet with your own national currency and then use it to buy products and services on Facebook, as well as many other partners, like Lyft or Shopify. Each time you cash in dollars or your native currency, the money will go into the Libra reserve and Libra Coins will be minted based on the specific amount that you deposited. These coins will then be transferred to you. When someone cashes out money through the Libra Association, the cashed coins gets burned and the equivalent currency gets deposited in their local currency bank. Unlike pegged stablecoins that are tied to a specific currency like USD, Libra Coin manages its own value that should cash out to the same amount of a cashed in currency over time.