On Tuesday (June 18), the day that Facebook unveiled Libra, its new global cryptocurrency, CNBC’s Brian Kelly, who is also the founder and CEO of crypto hedge fund BKCM LLC, explained the “huge difference” between Libra, which he thinks of as digital fiat, and Bitcoin, which he thinks of as digital gold, and said that this was the reason that he does not consider Libra to be a real cryptocurrency.
In a segment titled “Facebook Goes Full Crypto” on CNBC’s “Fast Money” show, the host, Melissa Lee, asked Kelly to explain why he does consider Facebook’s Libra to be a real cryptocurrency (like Bitcoin or Litecoin).
Kelly started his “crypto class” with a super simple explanation of how Libra works from the point of view of a user:
- You exchange some of your local fiat currency (say, dollars) for Libra tokens
- You can then pay for goods/services using your Libra tokens
- Whenever you want, you can convert some/all of your Libra tokens back to fiat currency
This all sounds fine, but Kelly says that one unspoken truth here is that as a user you need to trust the Libra Association to do everything behind-the-scenes correctly and honestly. In contrast, he says, a real cryptocurrency, such as Bitcoin, is trustless. As Satoshi Nakamoto explained in the Bitcoin white paper (which is titled: “Bitcoin: A Peer-to-Peer Electronic Cash System”), Bitcoin is “an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party.”
According to Kelly, the main difference between Libra and Bitcoin is that Libra is trying to be essentially digital fiat (although he used the term “digital dollar” because he was addressing mainly a U.S. audience) and so it has all the “characteristics” of traditional fiat currencies, whereas Bitcoin is “digital gold” (and it is “probably a lot better than gold”) and unlike Libra does not need a trusted third party, and to him “trustlessness” is what makes crypto “revolutionary”. He said that this is why we can say that Libra “keeps the existing system” while Bitcoin “does away with it.”
Kelly went on to say that Libra is not substantially different from systems such as PayPal or Venmo; it’s the “next iteration of them”.
Meanwhile, David Marcus, who is the Co-Creator of the Libra currency and the Head of the Calibra project (a custodial wallet for Libra) at Facebook, thinks that it is wrong to compare Libra and Bitcoin since they do not belong to the same category:
Many want to pit Libra vs. Bitcoin. In my mind these two are not in the same category. BTC is a decorrelated (investment) asset. Libra is designed to be a stable medium-of-exchange. I have been, and remain a fan of BTC, but for very different purposes.
— David Marcus (@davidmarcus) June 19, 2019
One of the people who replied to Marcus’ tweet was Dr. Saifedean Ammous, an economics professor and the author the book “The Bitcoin Standard”:
Libra is a payment network. The medium of exchange is whatever you use to back it. Bitcoin is itself a medium of exchange, as it has value & a monetary role without being backed by anything. The other differences with Libra are:https://t.co/eNRypQx4yN
— Saifedean Ammous (@saifedean) June 19, 2019
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