Libra Coin: How Technology-backed Trust is Surpassing Institution-backed Trust in Finance
Modern currencies unlike traditional currencies & financial services are not backed by institutional, legal and regulatory trust. Instead, these digital financial services or currencies (cryptocurrencies) use modern technologies to create trust. However, whether or not these technology-backed financial systems are effective compared to traditional finance is a matter of serious debate.
If we consider the case of the Libra Coin, it’s a cryptocurrency that uses advanced technologies like blockchain to create a trustless medium for e-commerce trading. Trustless because users are not actually required to trust anyone, a middleman or a third-party, in order to make a successful trade.
When you trade, i.e. perform a monetary transaction, in a traditional financial system, you trust your bank or credit card company to verify the transaction credential and then process the transaction in a secure manner. At the same time, you also trust the centralized entity with your personal data and money. Modern technologies like blockchain remove the need for trusting a middleman in order to make a financial transaction. Instead, you trust the technology, smart contracts in this case, to keep your transactions and data secure.
Why Trust is Important in Financial Transactions
Trust is the most important factor in the financial system. People will only buy from someone that they trust. Similarly, they will only use a financial service that they can trust with their money. This is because people need to know that the financial transactions they are making will be processed in a fair and secure manner, that they can trust the financial institution or entity with the safe execution of their monetary transactions.
Financial intermediaries like banks guarantee protection for the customer data, money and transactions. In exchange, customers/users are required to pay a commission in the form of a transaction fee to these intermediaries.
Because we need to know that our financial transactions are safe, we choose to trust banks and financial intermediaries to take care of them. But, centralized financial institutions like banks are also not 100% safe, as all the power or control lies with a centralized entity, the failure of which can lead to the failure of the entire system and loss of money & data of the end-users. This has happened more times than we care to admit. And this has forced us to re-think the question — do we really need to trust a centralized institution with our money or payments?
Blockchain says we don’t.
Blockchain technology suggests a way of performing financial transactions without having to trust a human intermediary. Instead, we trust the technology, or a computer program to be exact, to securely & discreetly process our transactions.
Besides that, blockchain has many other benefits, including zero duplicates in transactions, immutability, encryption, transparency, reduced cost, and improved speed.
If you’ve ever imagined a world where you do not have to trust a bank or any other financial institutions with your money and could perform transactions in a truly peer-to-peer (direct) and discreet manner, this is it.
Now, blockchain technology isn’t exactly trustless. It just replaces the traditional institution-backed trust system with a more efficient & secure decentralized system where you only have to trust a secure computer program to verify & process your transactions. The lack of middlemen ensures transactions are more discreet, secure, fast and cost-effective.
How Libra Coin uses Blockchain Technology to Facilitate Trustless e-Commerce Trades
The Libra Coin is a digital currency created to be used exclusively in the Libra Ecosystem, which is a one-of-a-kind blockchain platform for creating and promoting advanced digital e-commerce systems.
The Libra Coin uses the power and unique attributes of blockchain technology to allow middleman-free e-commerce transactions. In addition, it provides numerous ways and options for users to make easy & quick cross-border payments to their favorite global brands.
Some of the obvious benefits of using the Libra Coin for digital payments in e-commerce include improved transparency, reduced cost of middlemen, and increased convenience & security.