By now you’ve probably heard about Libra, the global digital currency that Facebook recently announced plans to develop. This past summer, the internet went ablaze trying to explain what Libra “really” is. A true cryptocurrency? (Depends on which nerd you ask.) A potential threat to the global financial system? (Jerome H. Powell, chair of the U.S. Federal Reserve, thinks so.) An innocent attempt to bring innovative fintech options to developing nations where banks are ripping people off . . . so can everybody please just chill? (That’s Facebook’s own take, paraphrased from a slightly exasperated-sounding July blog post by David Marcus, the Facebook executive spearheading Libra.)
Libra might be all of these things, or none. We won’t know until 2020, when Facebook plans to launch it, if it launches it at all—House Financial Services Committee chair Maxine Waters, Democratic senator Sherrod Brown, Treasury Secretary Steven Mnuchin, and even President Trump all seem keen to kill Libra in its crib, and France recently announced plans to block it . But it’s important to grasp the goal of the project, if only because it reflects a dramatic escalation in ambition for a company that already claims one-third of the planet’s population as users. If Facebook succeeds even modestly with its plans for Libra, everyone could be affected.
To understand Libra, start with this: Facebook has already won. Boasting 2.7 billion monthly users across four world-eating platforms (Messenger, Instagram, WhatsApp, and Facebook itself), Mark Zuckerberg’s social networking business is the biggest on Planet Earth. Threats to the company now come from within. Illicit data harvesting by Cambridge Analytica; election interference by Russian operatives; a genocide in Myanmar sparked on Facebook’s watch: These aren’t run-of-the-mill business problems; they’re empire problems. And they stem from the kind of systemic instability that all empires—including the Rome of Zuckerberg’s oft-cited hero, Caesar Augustus—inevitably face.
Facebook needs to get its house in order, fast, while still positioning itself for further growth. (Even Caesar Augustus didn’t rest on his laurels.) Braiding its three messaging platforms together into a WeChat-style super-app—which Zuckerberg said in March that he plans to do—could help, by pivoting Facebook away from the unintended chaos of public feeds (the “town square,” in his words) and toward the relative calm of private messaging (the “living room,” where end-to-end encryption puts a convenient limit on how much responsibility Facebook can take for the content of those messages). What then? Historically, Facebook has fueled its own growth via conquest: I came, I saw, I bought WhatsApp for $22 billion. But China’s WeChat—the closest thing Facebook has to a natural enemy—is invulnerable on its home turf, where Facebook is banned. And Snapchat, which Facebook tried to acquire in 2013 and reportedly again in 2016, is seemingly neutralized, thanks to Instagram’s ruthless copying of the “Stories” format. (Snap is turning itself around, slowly re-adding users after losing 3 million of them in 2018—but even its peak user base of 203 million is a mere drop in the bucket compared to Facebook’s.) As a social networking business, Facebook wants to endure, Pax Romana–style—but there are no networks left for it to kill, create, or absorb that would help solve its problems.
Except one: the world’s oldest social networking technology. It’s already used everywhere on earth, and there’s no opting out. It’s called money. If Libra succeeds, Facebook will never die.
Think about it—what is money, really? Once the modern world stopped pegging the value of paper currency to the price of gold, “money” became little more than a consensual hallucination—an agreement among people that intrinsically worthless tokens of information have value just because everyone believes it. In other words: a social network!
Eric Lonergan, an economist, hedge fund manager, and author of a 2009 philosophical book on the subject (titled, simply, Money), certainly sees it this way. “Facebook’s business is analogous to the economics of money,” he says. “My use of dollars is not a function of whether I like dollars or not—its value resides in its use by others. That’s how social media works.” The idea seems academic, but even the real-world financial wonks at Bloomberg admit it’s true: “The thing that keeps the system [of money] afloat is mostly a set of rules and norms about who gets to keep lists of numbers of dollars,” opinion columnist Matt Levine wrote in June. Those “lists of numbers” don’t represent anything of value, like bars of gold; they literally are the value, just like the numbers of likes on an Instagram post. (You don’t think they represent “real” hearts, do you?) Sarit Markovich, an economist and computer scientist at Northwestern University, says it outright: “Money is definitely social networking.”
Of course, what makes money so valuable isn’t just its socialness, but the fact that it’s linked to the real world. You can exchange likes by the thousands on Facebook—with anyone on earth, in any country, instantly—but you can’t get them “out” and exchange them for food. What if you could? Dollars, likes—they’re both digital abstractions. If Facebook could engineer a social network (something it is quite skilled at!) in which tokens behaved more like dollars than likes (tricky, but doable—Bitcoin proved that), and got a critical mass of people to use it (remember those 2.7 billion users?), many of them might come to depend on that network to meet their real-world needs.
That dependence is Facebook’s endgame—the key to the long-term dominion it seeks. “If you’re a social network, whatever you’re doing has to be about getting people to stay as long as possible in this virtual world that you’ve built,” says Will Graylin, a former global co-GM of Samsung Pay. Libra’s stated mission to “empower” the world’s un- and underbanked population may very well be sincere. But there’s no #deleteyouraccount for the dollar. If Facebook can bring a digital currency into existence on its own terms and see that it gets massively adopted, it’ll have a shot at achieving corporate immortality.
But how? After all, Facebook won’t technically control Libra. That will be the job of the Libra Association, a nonprofit “member organization” based in Switzerland and ultimately composed of 100 companies. (Currently, Facebook has 27 signed up, including Uber, Mastercard, and Andreessen Horowitz.) The House of Zuck will only have one vote at this big table—an arrangement designed to engender trust in the system despite Facebook’s checkered past. Fun fact, though: In a June interview with tech news site The Information, Facebook’s Marcus confirmed that the Libra Association’s current top executives (including its head of product) are all on Facebook’s payroll. And while Libra’s code is open-source, Facebook’s engineers are doing the bulk of the work of building the system.
It seems odd that Facebook would expend so much energy on a product it won’t own—and that would require so much regulatory finesse just to get off the ground. (Senator Brown, in his remarks to Marcus after hauling him in front of the Senate Committee on Banking, Housing, and Urban Affairs, said it would be “delusional” to trust Facebook with launching Libra.) But if Libra does launch, Calibra—the digital-wallet subsidiary that will be 100% owned and controlled by Facebook—will become the on-ramp for almost everyone who wants to use the currency. “We’ll build Calibra into Messenger and WhatsApp, and all of the basic functionality will be there [at launch],” says Kevin Weil, Calibra’s vice president of product, who spoke to me about the project in July. Technically, anyone can develop a wallet to handle the open-source Libra currency. But Facebook expects its default option to be, um, quite popular. “I expect the vast majority of people are going to use [Calibra] from within [existing Facebook apps], just because billions of people use those products every day,” Weil says. (Facebook wouldn’t comment on its plans, if any, to roll out Calibra within Instagram.)
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And then? What a web browser is to the internet, Calibra, and by extension, Facebook, will be to digital money: the “do everything” thing. The app will start off “really, really simple,” according to Weil—just a wallet to hold and send Libra coins. But Libra is no Bitcoin—it’s actually got more in common with Ethereum, a less-infamous but more conceptually sophisticated cryptocurrency platform designed to make money not just digital but programmable by anyone writing code that runs on the system. Which means Calibra could soon handle all kinds of finance-related tasks, from paying bills to managing “smart contracts”—say, a rental agreement, but written in code instead of legalese so that apps like Calibra can automagically execute its terms. (Imagine a smart sensor in a no-pets Airbnb detecting that you’d snuck your dog in for the weekend and deducting the nonrefundable cleaning fee in Libra.) In February, it was reported that Facebook had acquired Chainspace, a blockchain startup specializing in smart contracts. Its employees, Weil says, “have been instrumental” in working on Calibra.
So, while Libra (the currency) and Calibra (the default software for using it) aren’t the same thing, in practical terms they’ll be so commingled that they might as well be synonymous. And that’s the whole point. It’s why Facebook can’t content itself with ginning up a credit card like Apple, elbowing into the payments-processing business alongside Square, or even inserting itself into the DNA of a large country’s economy, like WeChat has done in China. Social networking—Facebook’s core competency—is, essentially, world building. The world of money suits Facebook’s needs perfectly: It’s huge, intrinsically social, and participation is mandatory. The only trouble is that it wasn’t built with Facebook in mind. Libra is.
Hot takes have proliferated since Libra’s announcement: Facebook wants to be its own country. Facebook wants to be a “shadow bank.” Facebook just wants us to trust it again. The truth may be simpler. Facebook wants to keep doing what it’s always done best—social networking—except in a form that’s both as big as possible, and as close to permanent as possible. It wants to secure a too-big-to-fail, billions-strong user base that nothing short of an extinction-level event could weaken its grip on. Libra is Facebook’s shot at getting there. And it might be the only one left for it to take.
A version of this article appeared in the October 2019 issue of Fast Company magazine.