Libra seems to be sucking all of the air out of the crypto world. Right now, Libra and all of its spinoffs have to be leading the competition for the not-at-all-coveted Crypto Tulip of the Year Award for 2019.
I don’t really understand Libra in much detail. Since I don’t do Facebook, it’s pretty irrelevant to me, and I plan to keep it that way.
But, if Libra is opaque to me, OpenLibra is opaque-squared.
Basically, it’s a fork of the Libra code that is “Not run by Facebook.” As far as I can tell, OpenLibra will use Libra as its asset (which is supposed to be tethered to some kind of “stable” basket of assets), but will have its own codebase. The plan seems to be to replicate the work to create and maintain the software, aiming to have exactly the same results. And the value will depend on whoever manages Libra’s “reserve” of assets, not to mention whoever manages the assets in the reserve.
Why is this worth the trouble?
There isn’t a huge amount of information explaining the OpenLibra project.
The web page has a brief manifesto that outlines the perceived “dangers” posed by Libra’s governance, i.e., perceived ownership by Facebook and its collaborators.
- “will be distributed but not decentralized.
- Will require permissions to interact with.
- Will not have privacy guarantees.
- Will be run by a plutocracy.”
Obviously, being controlled by a monopolistic corporation is anti-democratic, to say the least. These folks will take the profits and run the system to produce profits for themselves. Not a good deal for the customers.
Finally, the OpenLibra manifesto complains about the real possibility of “Surveillance finance. One’s ability to engage financially (e.g. borrow in Libra) will potentially be determined by their social graph and online activity.”
So, long story short, there are certainly potential problems with Libra.
How is OpenLibra a solution for these problems?
As far as I can tell, the main point of OpenLibra is to open up both the “permission to use” and the control of the software. The latter is necessary to guarantee the former.
The OpenLibra is intended to be a fork of the proprietary Libra code, compatible in every way, including, it seems, running “smart contracts” that transact in Libra. In fact, the main point seems to let you use Libra without the permission of the Libra Foundation (i.e., the corporate masters).
In short, OpenLibra “trusts” everything about Libra except Facebook’s management of it. OpenLibra aims to have a more Nakamotoan ‘decentralized’ governance, while gaining all of the value created by the permissioned Libra system.
“In Libra we trust, in Facebook we don’t.” (Lucas Geiger quoted in )
Phrased that way, this sounds parasitic, and seems to be trying to get a free ride.
OpenLibra seems to mainly address concerns about governance. We may wonder how well it will address those problems, given the history of governance of cryptocurenccy. (How long will it be until there is a fork of the fork?)
But aren’t there many other problems with Libra?
The most peculiar thing about OpenLibra is that they seem to be rather complacent about using the Libra currency itself, apparently trusting in the tethering to the “reserve”. OpenLibra is entirely dependent on Libra for its value. They worry about Facebook controlling access to the system, yet apparently do not worry about the mysterious and opaque management of the reserve.
I don’t really understand how this can work, or why anyone thinks it is a good idea.
There are other risks. For one thing, maintaining a fork is risky. Even if there aren’t bugs (which there will be), OpenLibra may be vulnerable to hacking simply because there aren’t enough participants, or simply because the network is open.
There are other unknowns. Regardless of any technical compatibility, there is no guarantee that OpenLibra contracts and transactions will be accepted equally with Libra. I can imagine contracts that are written to say “this is only valid if executed on certified Libra systems”. Running that on OpenLibra might or might not “work”, but might not be honored by all the parties.
Why would such contracts be written? All it will take is one buggy contract on OpenLibra that results in theft or losses. The Libra network would want to protect itself by simply invalidating anything on the OpenLibra network.
Or, if Libra succeeds in gaining regulatory approval, it could well include a requirement to only honor transactions on the permissioned network. OpenLibra transactions could be banned as illegal, violating the rules of the Libra network.
I’m not totally sure these scenarios make sense, because I really don’t understand how OpenLibra would interact with Libra, or how Libra itself will work. But I think you can see the point that technical interoperability is necessary but not sufficient to ride on top of Libra. (Have they talked to a lawyer?)
This is all getting to be quite a tower of speculation. Libra is pretty unknown, and looking pretty iffy. OpenLibra is a poorly defined, very iffy layer on top of Libra.
It’s iffy all the way down.
It’s Crypto Tulips all the way down!
- Christine Kim (2019) ‘Members’ of OpenLibra Disavow Project Days After Its Devcon Unveiling. Coindesk, https://www.coindesk.com/members-of-openlibra-disavow-project-days-after-its-devcon-unveiling
- Christine Kim (2019) New Libra Fork Will Create Permissionless Stablecoin Free of Corporate Control. Coindesk, https://www.coindesk.com/new-libra-fork-will-create-permissionless-stablecoin-free-of-corporate-control
- OpenLibra. OpenLibra: An open platform for financial inclusion. Not run by Facebook. 2019, https://www.openlibra.io/.