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Ben Thompson, a well-known technology blogger: Facebook, Libra and “prolonged war”

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The Translation Bureau is a compilation team of 36氪, focusing on science and technology, business, workplace, life and other fields, focusing on foreign new technologies, new ideas and new trends. Editor’s note: Facebook’s Libra plan was born and ignited a heated discussion in the industry. What is this thing? What does it mean for all parties? What is the core of it? Who is the right comparison? Can Facebook be made in the end? Ben Thompson, a well-known technology blogger, made a very thorough analysis. The original title is: Facebook, Libra, and the Long Game. When I made a mistake (I’m wrong with Facebook’s blockchain plan), why This is usually the one you can imagine: confirm the deviation. In other words, I have a preconceived idea of ​​what a company’s motives are, and then we will look at the news from this perspective, and not critically think about which parts of the news actually prove that my assumptions are not valid. So when the Wall Street Journal reported last month that Facebook was building a cryptocurrency-based payment system. I wrote in a Daily Update: Explain first: This is not a bitcoin competitor. Why not? The whole point of Bitcoin lies in the distribution; the power of Facebook comes from centralization. In fact, this may be the only and most important perspective to test Facebook’s work in this area: the company will not give up its dominant position, only to strengthen it. That’s why I don’t care too much about the implementation details (Editor’s Note: See the Facebook Libra white paper for full analysis https://36kr.com/p/5218756): You can think of the following as Knowing the premise – that is, no matter what role the user has to play in the network, Facebook will have ultimate control. I am the first part of this excerpt: No matter how much Facebook emphasizes all the positive things in the Libra project, it is unrealistic to expect Facebook to put significant resources into a thing that will weaken its position. The mistake I made was the default, which meant Facebook’s open control. The frustrating thing is that this is a mistake, which should have been obvious in my original analysis, and it is clear when I explain the larger perspective of the Internet through aggregation theory. Libra is what Libra appears in a blockchain-based cryptocurrency: transactions are recorded on a shared ledger and verified by a “miner” who independently calculates the encryption problem, and then a consensus is reached on the legality of the transaction. And should be permanently added to the ledger. But in reality it is much more complicated: although there is a limited set of “verifiers” (ie miners) sharing the transaction history (ie blockchain) in the (individual) blocks linked together, Libra is actually exposed The current status of the ledger. This actually means adding new transactions can be faster and more efficient—more like adding a row to a spreadsheet instead of rebuilding the entire spreadsheet from scratch. In other words, there is a trade-off between trust and efficiency: in the case of cryptocurrencies like Bitcoin, anyone can “rebuild the spreadsheet” and expose the blockchain completely, while the average user must trust Libra. Verifier. On the other hand, Bitcoin can only process about 7 transactions per second due to the communication and verification overhead required to complete each transaction; Libra is expected to reach 1,000 transactions per second. The verifier, who is the verifier? Hey, Facebook is one, but it’s the only one: Libra’s “founding members” currently include merchants, venture capitalists and payment networks, which can meet 28 of two of the following three standards: a market value of more than 1 billion. USD or customer cash flow exceeds US$500 million. More than 20 million people contact each year. Ranked among the top 100 industry leaders by third-party associations such as Fortune or Standard & Poor’s. These “founding members” must invest at least $10 million and serve the network. Provide computing power.In addition, there are separate requirements for non-profit organizations and academic institutions that rely on budgets, resumes, and rankings; perhaps there is no need to limit the minimum investment amount. Libra plans to grow to 100 founding members next year. To understand the Libra Association, this is an important point: although its members (and also the verifier) ​​do control the Libra protocol, Facebook does not control the verifier. By extension, this means that Facebook does not control Libra. Libra Vs Facebook coins To understand the difference, consider another route Facebook can take: the so-called “Facebook coin.” In this case, Facebook has full control over the protocol, and it is certain that this will give Facebook a unique advantage in the availability of Facebook and the general “Facebook currency”: efficiency and scalability will be Maximize the realization, because Facebook and its own natural coordination can be greatly improved, because Facebook does not have to reach consensus on all the transactions on the system Facebook will be fully informed, because it can control all the entry points of this trust The trade-off in efficiency has put it on the opposite side of Bitcoin: in Bitcoin, you don’t need to trust anyone—you can verify the entire blockchain—but at the expense of transaction efficiency. On the other hand, Facebook coins need to fully trust Facebook, but the transaction processing efficiency will be higher. The most obvious example is WeChat payment: WeChat handles transactions, saves money, is the only authoritative source of who has what, and because WeChat is ubiquitous and the efficiency of this model, WeChat payment (with Alipay) has become China’s default payment. mechanism. Not surprisingly, WeChat does not use any blockchain-based technology. Why is this happening? Because the whole paradigm of a blockchain is to distribute ledgers between multiple parties, doing so is as efficient as simply storing the entire ledger in a single database managed by one party. Trusting Vs efficiency then leads to the analysis error I mentioned earlier: because I was bound by the idea of ​​Facebook blocking transaction data, I missed the Wall Street Journal reported last month that Facebook is using some blockchain technology (regardless of definition) Whether there is ambiguity or not, this is an obvious signal, no matter what Facebook announces, it will not be completely controlled by Facebook, because if the target is Facebook to control Facebook currency, then the blockchain will be the purpose of this. Stupid way. Well, the best way to understand Libra is that it is a kind of distributed ledger, which should be a compromise between a fully public blockchain and an internal database: this means that the whole system is much more efficient than Bitcoin, but The necessary level of trust is also spread across multiple entities, not a single company: the trade-off is that Libra is not completely licensed, although Libra’s white paper does say that this is its long-term goal: to ensure that Libra is truly open and always considers users. For the best interest, our goal is to make the Libra network unlicensed. The challenge is that, to date, reliable solutions that can support billions of people around the world and the scale, stability and security required for transactions without a license network, we don’t think it exists. One of the missions of the association will be to work with the community to research and advance this transition, starting in the five years following the public release of the Libra blockchain and ecosystem. Is this possible? Time will tell the answer. If you reverse the “trust” axis of the above picture, the current situation is probably like this: when it comes to “distrust” and “efficiency”, there is a high probability that there will be some kind of efficiency frontier: that is, Reducing any necessary trust requires reducing the efficiency. In my opinion, the safest assumption about Libra’s future is that efficiency will be the ultimate priority, which means that the more Libra is used, the more difficult it is to transition to a license-free mode.The credit card challenge Despite this, even though Libra is still under the control of a still-expanded but still limited certifier, its “selling point” may be much better than a company-controlled Facebook coin. Now, how do users trust Facebook? Why do other big companies want to use a single enterprise-controlled currency? Keep in mind that the situation in developed countries such as the United States is very different from that in China: credit cards have their own flaws, especially in terms of fees, but they have been widely accepted by merchants and widely used by consumers. China has completely crossed the credit card; this means that WeChat payment (and Alipay) is competing for cash: in this case, the relative advantage of WeChat payment relative to cash (large scale) can overcome any problems with centralized control. On the other hand, Facebook Coin’s theoretical comparative advantage is much smaller than that of credit cards, which means that widespread barriers—such as full trust in Facebook—may be insurmountable: therefore, Libra’s inherent trust alliance, Although it will lead to reduced efficiency: because Libra is not under Facebook control, and actively incorporating companies like Spotify and Uber will provide access to Libra outside of Facebook, the introduction of payment networks such as Visa and PayPal will promote this. Classes are used, but at the same time Facebook is also increasing the chances of using Libra instead of credit cards. Aggregation and Protracted War I have confirmed that it is too cynical to completely ignore the benefits that Libra advertises: for example, remittances have been an example of how cryptocurrencies have been well-founded for a long time to generate social benefits – the current system is mainly drawn from the public. Commission, and these people are the most unacceptable. Moreover, although I basically use credit card spending, the reality is that credit cards are much less popular among the poor in developed and developing countries: a digital currency that ultimately has a smartphone It is possible to significantly expand the market, which is good for consumers and service providers. In other words, Libra has the potential to significantly reduce the friction in currency flows; of course, this potential is unlikely to be the only Libra family – friction reduction is usually one of the selling points of digital currency – but thanks to Facebook’s support, The Calibra Wallet is both a standalone app and built into Facebook Messenger and WhatsApp. Using Libra may be much simpler than using other cryptocurrencies. Simplifying the user experience is as important as eliminating intermediaries in reducing friction. In addition to caring about who is going to verify the deal, trust has another element: confidence in the value of Libra will remain stable. That’s why Libra will have a full capital reserve in a basket of currencies. In the long run, this does not rule out Libra becoming a completely independent currency, but now users and businesses can believe that Libra’s value is stable enough to be used for trading. If all of these bets are rewarded – users and businesses will trust a consortium rather than Facebook; Libra is cheaper, easier to use, more convenient, and more flexible than credit cards; and Libra itself is a reliable value store Means – then the reduction in friction will be achieved on a scale. That’s why this bet can bring back to Facebook (and the second point I missed in the previous analysis): The impact of digital currency on money is like the impact of the Internet on information, that is, long-term trends will Focus on the aggregator. When there is no friction, control moves from the gatekeeper’s control supply to the aggregator who controls the demand. To this end, through the expansion of Libra, through the establishment of the first wallet that will almost certainly become this currency, and bring its incomparable convenient payment network, Facebook is gambling that it will provide for the flow of digital currency. The best experience is not to control Libra, but to empower Libra’s majority of users.Can you do it? If Libra’s success does come, it may go through several stages, and each stage will face different challenges and competitors: the most obvious use case for the Facebook Calibra wallet application is peer-to-peer payment, which means its competitors will It will be an application such as PayPal’s Venmo. Facebook’s biggest advantage will be to leverage its web and chat apps. The second use case is to use Libra to trade with merchants, and merchants can benefit from lower relative credit card fees and greater access to the market (ie, potential users without credit cards). Please note that Libra’s founding members do not have a bank, and banks are the most expensive to extract credit cards; on the other hand, Visa and Mastercard, like PayPal, are happy to catch Libra. The biggest leap will come to the end: Libra is a real currency, not just a trading intermediary. This will be a function of the size of the first two use cases and is a concern of governments. However, this is another advantage that Facebook gives up to directly control Libra: although regulators can limit wallets like Calibra (which will fully comply with the “Knowledge of Customers and Anti-Money Laundering Regulations”), it is much more difficult to control Libra – – especially if it does not require a license mode at all. Given the reasons I listed above in detail, considering Facebook’s size, it’s easy to see how Facebook can evolve in that final state. Just as Google has long boasted that the more people use the Internet, the more revenue Google can generate. Obviously, you can say that the more people use digital money, the more they do for a dominant digital company like Facebook. Benefits, whether through advertising, trading, or making its network valuable. But this is also one reason to question it: Google’s idea of ​​letting everyone use the Internet to make more money has been seen as a pleasant agreement with the incentives that justify the free and reasonable nature of Google’s services; today, Everyone has better understood the potential for reducing the concentration of friction and making money, and began to pay more attention to the power of these aggregators. This is especially the case with Facebook: although the company wants to design a system that doesn’t need to trust only Facebook’s system – again, Libra is not a Facebook coin, but has been widely considered to be Facebook’s plan. Unless consumers can get the benefits, it’s probably enough to stop Libra from escaping. Even more so in the Calibra wallet: Facebook promises not to mix transaction data with profile data, but it requires user trust, and Facebook may have lost it. Nonetheless, this does not mean that digital currency will never succeed: I think Libra is closer to a viable balance between trust and efficiency than Bitcoin, at least when it can be used for transactions, not just storage value; It is who can make this currency start. Facebook’s courage and ambition can certainly not be underestimated, and the company’s network is the biggest reason to believe Libra can do; and Facebook’s brand is the biggest reason to think it can’t. Original link: https://stratechery.com/2019/facebook-libra-and-the-long-game/translator: boxi. .

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