Erik Voorhees thinks Libra may become the ‘whipping boy of crypto’

In a mammoth 20-post thread on Twitter, ShapeShift CEO Erik Voorhees celebrated the fact that the “biggest companies in the world are now launching cryptocurrencies”, but is concerned that Facebook’s new Libra coin will become the “whipping boy of cryptocurrency”.

The exchange boss started out by stating that Libra may or may not be a cryptocurrency depending on the context. He said: “Relative to PayPal or to the US dollar, Libra is very much a cryptocurrency. Relative to Bitcoin or ZCash or DAI, Libra is not all that crypto-y.”

Voorhees believes this shows that “digital assets and blockchains have *many* attributes – optimising for certain ones can detract from others”. He said:

“Lots of blockchain projects will be created and played with while the world rebuilds the financial system upon this new technology. Different assets will serve different markets, at different times, in different ways. Libra will serve the mass market, and be the single largest bridge toward decentralised finance that has ever been built. Prior to this, the largest bridge was Coinbase, which has played an integral role in crypto’s rise.”

The good

Starting with the good aspects of the launch, Erik said one positive is that Libra is built on an actual blockchain, where most of the important components are open source and can be built on in a permissionless way.

He went on to say that “Libra made the (great) decision to NOT back itself solely with USD”. According to Voorhees, this has profound implications as Libra could arguably become a “medium-term replacement to any single government fiat currency”.

He lavished praise on whomever bravely navigated Facebook to create a currency above the US dollar, saying “kudos to you” as “that took balls, and probably a lot of work”.

Voorhees believes Libra has the potential to go from “a little decentralised” on day one to “moderately decentralised” within a few years of launch. He thinks the plan is clearly to gradually decentralise with time, but that the proof would be “if they can actually do it”.

“Libra has a good chance of helping hundreds of millions of people avoid middlemen fees and increase their wealth and financial sovereignty.”

The bad

Kicking off the negative side of Facebook’s launch, he wrote that Libra “is clearly not a pure cryptocurrency”, saying that “nobody should expect privacy by using it” and “nobody should expect the true borderless standard of most cryptos”.

As an example, he predicted that the coin will never be allowed to be used in places like Iran.

He believes the governing consortium may also have the power to “explicitly block/prevent txs” and that “you won’t find unstoppable finance here”.

He reiterated that “traditional cryptos are far superior” and it is unthinkable that Facebook would create a truly unstoppable coin in its first phase.

On the topic of its stability mechanism, Voorhees said that backing the coin with a basket of government fiat and government debt (bonds) is “a bad move” as “any currency based on fiat will fail relative to hard assets (Bitcoin, gold)”.

“Politicians debase currency as their modus operandi, and thus if Libra maintains fiat backing, it will tend toward zero long term. BTC and ‘real’ cryptos will crush it long term.”

He predicted that over the short/medium term, the relative stability derived by fiat/bond backing will enable Libra to capture market share and onboard literally hundreds of millions of people. However, he does think that long term, Libra “will be moving partially away from banks, and partially toward truly decentralised finance”.

Whipping boy of crypto

Voorhees believes that the social media giant’s native coin will come up against many of the legal/regulatory challenges that real cryptos and crypto companies do today. But on the positive side, he thinks Facebook “has the resources (and hopefully the balls) to fight some of the battles”.

He added: “Libra may also become the whipping boy of cryptocurrency. As the politicians of the world get irate at having their fiat supremacy challenged, they will call on FB to answer for it. These struggles, playing out over the coming years, will be fascinating.”

In a positive conclusion, he said that Libra has a chance of succeeding, and if Facebook is brave and tactical over many years, it may eventually move away from a fiat basket toward either a real basket of BTC and/or gold.

He said: “Ultimately, Libra’s relationship with those of us in crypto will be mixed. It will be a love/hate relationship, and that’s okay. Libra is challenging the status quo of fiat more than it challenges true crypto, and will pull millions toward sound-er money long term.”

“Anything that causes normal people to consider new forms of money (apart from their default position of ‘my nation, my currency’) is a good thing. Libra will crack open further global discussion about what money is, and that sunshine will hurt fiat and help all sound monies.”

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