Jameson Lopp, a prominent Bitcoin (BTC) developer and the Chief Technology Officer (CTO) at CasaHODL, a leading cryptoasset management service focused on “maximizing personal sovereignty”, recently analyzed a 26-page technical document - which outlines the specifications for Facebook’s crypto project, called Libra coin.
According to Lopp’s assessment, the technical document’s use of the word “resources” suggests that Facebook may be planning to launch more than just a basic fiat-supported stablecoin. Specifically, Lopp pointed out the following statements from the Libra project technical writeup:
The Libra protocol allows a set of replicas—referred to as validators—from different authorities to jointly maintain a database of programmable resources.
In a manner that is somewhat similar to how delegated proof-of-stake (DPoS)-based blockchains are managed, the Libra project will have a set of validator nodes that will be responsible for verifying transactions involving the social media giant’s cryptocurrency.
Notably, Lopp claims:
There’s no mincing of words here—the system will be controlled by a set of authorities [validator nodes] in a top-down fashion.
Libra Project to Use Move, Its Own Smart Contract Programming Language
Lopp also found it “interesting” that the Libra project will involve the use of its own high-level programming language, known as Move. As noted in the Libra whitepaper, Move will be used to “define the core mechanisms” or fundamental operations that the cryptocurrency’s blockchain will perform - including determining “currency and validator membership.”
Striking Similarities to EOSIO Protocol’s “Decentralized Autonomous Corporation” Model
As detailed in the Libra project whitepaper, the core blockchain mechanisms, defined using Move, will “enable the creation of a unique governance mechanism.” It appears that that this model may also share some similarities with the EOSIO protocol’s “decentralized autonomous corporation” model.
That’s because, initially, the Libra blockchain will only have validators (or block producers) that are charter members of the Libra Association. These members include well-known corporations including Visa, Mastercard, Paypal, and giant venture capital firm Andreessen Horowitz (a16z), among others.
“Building on the Reputation of Existing Institutions”
As noted in the project’s technical document, Libra’s “unique governance mechanism [will] build on the stability and reputation of existing institutions in the early days but transitions to a fully open system over time.”
According to Lopp:
It [seems] like the Libra Association will be a federation that can evolve with the help of a voting system and some sort of pre-existing reputation.
Libra Membership to Be Based “Only on the Member’s Holdings of Libra”
As mentioned in the Libra whitepaper, “over time, membership eligibility will shift to become completely open and based only on the member’s holdings of Libra.”
These types of protocol rules are quite similar to those followed by cryptocurrencies that use the proof-of-stake (PoS)-based consensus algorithm, Lopp noted.
Although it remains unclear exactly how Libra’s consensus mechanism will work, the project’s technical specifications state that “validators take turns driving the process of accepting transactions.”
When a validator acts as a leader, it proposes transactions, both those directly submitted to it by clients and those indirectly submitted through other validators, to the other validators. All validators execute the transactions and form an authenticated data structure that contains the new ledger history. The validators vote on the authenticator for this data structure as part of the consensus protocol.
As Lopp observed, this type of governance protocol is somewhat similar to how the Byzantine Fault Tolerance (BFT) algorithm works - although Facebook and other organizations involved in the cryptocurrency’s development would most likely “tweak” the basic BFT consensus model (as many other existing crypto projects have already done).
Libra Protocol Currency’s Data Structure More Like Ethereum, Ripple
After analyzing the extensive document, Lopp believes that the data structure of the Libra protocol’s currency will more closely resemble that of Ethereum (ETH) or Ripple’s suite of financial products.
Notably, the Libra paper claims that the protocol “does not link accounts to a real-world identity.” However, it’s not clear whether this would also apply to the Libra “coin” itself, Lopp pointed out.
There Is No Standard “Blockchain” Used By Libra Protocol
The Libra whitepaper also clarifies: “There is no concept of a block of transactions in the ledger history.”
In response to this statement, Lopp wrote:
There is no actual blockchain data structure in the Libra protocol—blocks are more of a virtual, logical construct that are used by validators for the purpose of coordinating confirmed snapshots of the system state.
Lopp’s analysis of the Libra whitepaper also led him to believe that the Libra coins are (most likely) the “only resource type that will be allowed in the system when it launches, and other resources” might get added at some later point.
As pointed out by Lopp, the Libra paper mentions that “the voting power [of network participants] must remain honest both during the epoch as well as for a period of time after the epoch in order to allow clients to synchronize to the new configuration. A client that is offline for longer than this period needs to resynchronize using some external source of truth to acquire a checkpoint that they trust.”
Notably, these types of rules appear to be borrowed from the Cardano protocol - as the cryptocurrency’s governance mechanism also uses epochs to determine when the platform’s native cryptocurrency, ADA, and transactions involving it will be processed.