Libra: Benefits vs.

Risks
BENIFITS

1. Inexpensive Payments and sound store of value :

Libra can become the cheap alternative to cross border payments as the planned
infrastructure can save costs.This is rooted in Libra being a so called Stable coin.Libra
is expected to become a stable store of value minor exchange rate risk.In certain
developing countries and newly emerging economies it can serve as better alternative
to the fiat currencies i.e the currencies used in those countries currently like INR in
India.The problem concerning Libra is that in many developed countries there are
many existing payment solutions which fast and inexpensive which pose an barrier to
entry for Libra but with the brand behind it,Libra has certain advantages and has an
edge over them. In the developing countries Libra has comparatively very less
barriers,so is easy to enter and grab a market there.

2. Financial Inclusion :
In many countries most certainly the underdeveloped or developing countries,there is
a significant percentage of unbanked people so for them taking loans is not
possible.Libra solves that problem as it can grant loans too so people don’t have to go
through that hassle of loan procedure.Libra aims at financial inclusion of people
which helps the country as well as the population.Although the question still remains
how to build awareness regarding it in the underdeveloped and developing countries.

3. Unit of account :
The libra association includes large finance and tech companies like
Facebook,Mastercard and Visa which suggests that it can be used as unit of account
for these companies.

4. Fast and stable Payment :

Payment through Libra is fast and transactions can be done at the click of a button.It
is a stable as unlike other crypto currencies ,it will backed up by real assets and fiat
currencies so the speculations about fluctuations can be put rest.Crypto currencies like
Bitcoin can fluctuate even due to speculations but Libra will solve that problem as it
will be backed up by real assets and fiat currencies.

5. Permissioned Blockchain :
Unlike other crypto currencies which are not backed,Libra uses permissioned
Blockchain.Permissioned blockchain was used because there will only be around
hundred or few hundred nodes controlled by members which is lot easier to deal with
in comparison to permission less blockchain which has a lot of nodes and anyone can
add it.
 RISKS
1. Data Security and Privacy concerns :
A cloud of doubt hovers around Facebook and everything associated with it since
Facebook has been involved in various scandals.Although it has been specifically
stated that members of Libra association will not use the transaction data for
commercial purposes but the speculation still remains if the commitment will be
honoured.

2. Risk of Bank run :

This risk factor arises as Libra can be seen as a global mutual fund.If we assume a
high market penetration of Libra then the fund could become highly capitalized.As
Libra will mostly deal in liquid assets,so at the time of crisis due to speculation and
fluctuations, it is speculated that a run on Libra funds is not unlikely.

3. Risks of Default :
The Libra reserve also includes assets like Government bonds,so there will always be
a risk of default.If the bonds default,the value of the Libra reserve will decrease in
terms of fiat currencies.To prevent that risk,Libra association has stated that the
government bonds will be issued by stable economies for example US-government
bonds whose likelihood of default is minimal.

4. Conversion Fees :
There will be authorised resellers who will act as intermediaries between client and
libra association.This could cause a substantial conversion fees.Since there hasn’t
been any significant information provided in the whitepaper about the how the
resellers will operate in this ecosystem,so there is a speculation about the substantial
conversion fees.