Ethereum Cofounder: Libra Is Too Closely Connected To Corporations To Succeed
Ethereum cofounder Gavin Wood believes projects with an open governance structure will outperform Libra stablecoin, which is too closely connected with large corporations. This Wood wrote in a column of the Wired.
Wood writes that companies that rely on decentralized protocols, allowing users to participate in management processes, will become new technology giants. This implies the concept of Web 3.0, which is a technological response to political problems, he says.
From this point of view, Facebook is moving in the right direction. It will not manage stablecoin - this will be done by the Libra Association consortium, which currently includes 21 companies. However, Facebook does not fully understand the scale of the changes that the industry needs. A person’s personality should not affect his ability to use technology. Therefore, Facebook, as well as traditional banks, act as gatekeepers that can limit access to the financial system.
The corporations behind Libra will be able to control all operations with stablecoins. In this regard, Libra in the eyes of Wood is not much different from traditional banks. Wood believes that open platforms will surpass Libra simply because they are developing much faster and "protect the interests of ordinary citizens, not hegemons."
Ripple senior vice president Marcus Treacher stated the similar claims against Libra in September. He said that Libra is a “fenced garden” or an ecosystem with a closed management structure. The term “fenced garden” was previously used by technology companies to describe the control they have over their software.
Last week, professor at Georgetown University Chris Brummer drew attention to the fact that Facebook, without any notice, changed the white paper of the stablecoin Libra. The company changed the list of Libra Association members and edited the part of the document that relates to the payment of dividends to early investors.
In a previous version of the document, it was said that funds from the reserve fund would be invested in low-risk funds. The income from these deposits will be used to cover the operating expenses of the Libra Association and the payment of dividends to the holders of the Libra Investment Tokens (LIT) tokens, which will be the early investors of the project. From the text of the new version of the document, the mention of dividends was removed.
Brummer believes Facebook has taken this step because of a potential conflict of interest that could arise from the presence of dividends. The stability of Libra is ensured by the stability of the assets operated by its reserve fund. Since early investors will be interested in a high return on investment from the reserve fund, they may lobby for the inclusion of more risky assets in its portfolio. This can lead to a decrease in trust among ordinary users.