Facebook Inc.’s foray into digital currencies risks reversing gains in privacy and user sovereignty won by computer-networking pioneers, according to Mihai Alisie, one of the co-founders of Ethereum, the blockchain of choice for most business and finance projects.
Facebook has received pushback from politicians including President Donald Trump and regulators since announcing its plans to develop Libra, a digital asset backed by cash and short-term securities, that could be sent between the company’s more than 2 billion customers with the help of blockchain.
A key aspect of distributed computing systems that make up a blockchain is the inability of any one party to censor transactions or control who can and can’t be a part of the network.
No person or corporation owns the underlying systems, similar to how the internet is free for anyone to use. Facebook threatens these blockchain tenets with Libra, said Mihai Alisie, a co-founder of Ethereum, according to Bloomberg.
“This has implications on so many areas, from the economic to the political to the technological to surveillance and data privacy,” he said in an interview. Facebook has prioritized growth over user privacy, as was seen in the Russian election meddling, he said. “It’s a very well-oiled machine of surveillance,” Alisie said. „It is actively manipulating the behavior of people on a global scale.”
Calibra will build and maintain the company’s digital wallets and work on the Libra cryptocurrency. Facebook’s officials said Calibra will store this financial data on separate servers, and won’t share it with Facebook. But Alisie is concerned the information flow will go in the other direction. „Will Facebook share personal data with Calibra? Based on what I’ve read, I think that will be the case,” he said.
Alisie said Facebook is asking regulators to pass judgment on it not in its current state, but in five years when it promises to be decentralized. That’s intended „to mislead the regulators who have learned in the last few years that blockchain is not something that can easily be regulated,” he said. „It should be treated as an entity trying to create a centralized currency.”
Ethereum was built to allow anyone to design applications that work on top of the network with no one being able to affect the protocol. The debate now with Libra is similar to net neutrality, Obama-era rules that banned internet service providers like Verizon Communications Inc. and Comcast Corp. from blocking or slowing traffic on their networks. The Trump administration has reversed those rules.
„People should be aware this is a danger very similar to net neutrality,” Alisie said. „Is it smart to have this infrastructure layer owned by a company?” The innovation blockchain brought about is that it gives power to individual users because they no longer need to rely on third-parties like Facebook or Verizon, he said. „This is not an upgrade, this is a downgrade for what blockchain means,” Alisie said.
„Though Libra has met with fierce resistance from central banks and supervisory authorities and might never see the light of day, in many other cases tech firms (both start-ups and established big players) have successfully captured bits and pieces of universal banks’ traditional value chain. This trend may only intensify in the coming years. In this environment, European banks remain squeezed.”