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Someone asked me, “How did you rate Libra?” I realized with some embarrassment that we hadn’t rated Libra using our own Blockchain Investor Scorecard.
Libra, the new digital currency hatched at Facebook and developed in conjunction with the Libra Foundation, with an all-star lineup of technology partners. Libra, whose existence is both a threat and an opportunity for the U.S. dollar, leading Mark Zuckerberg to testify on Capitol Hill.
With our scorecard, you rate an investment in five categories (like an Amazon or Yelp review), averaging the ratings for various questions in each category. Here’s how a diligent investor might rate Libra. |
MARKET: Can we identify the customer?
- Problem that it solves (4). This is a little murky, because Facebook’s current messaging—a digital currency that help the world’s unbanked—seems more like a PR move. The real purpose, I suspect, is a global currency that will make our financial systems more efficient—and put these technology companies in the driver’s seat. But you can’t say that, especially if you’re Facebook.
- Customers (5). We can clearly identify the customers: Facebook users. They’re imminently reachable, and there’s plenty of them (a third of the planet is on Facebook). Overnight, Facebook and its tech collaborators could become a global economy to rival nations.
- Value creation (3). If a customer adopts Libra, how much value is added? It will be easier to send and receive payments through Facebook and other supporting apps, provided both the sender and receiver want to use Libra. It really will be a new type of money.
- Market structure (3). On one hand, the Facebook market is large and mature. But digital currencies are still emerging and small. Will your grandmother want to use Libra? Maybe, if Facebook can make it easy enough: she spends all day on Facebook already.
- Market size (5). It’s the global economy, stupid.
- Regulatory risks (1). It doesn’t get much riskier.
OVERALL MARKET RATING: 3.5 out of 5 |
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COMPETITIVE ADVANTAGE: Do they have a moat?
- Technology/blockchain platform (3). They’re building a new blockchain, as opposed to using a global standard like Ethereum. For most companies, this is inadvisable -- but this is Facebook, with some of the top tech talent in the world. If anyone can pull of a new blockchain, it’s them.
- Lead time advantage (5). They are the first of the megatechs to launch their own digital currency. That’s gives them both a huge first-mover advantage, and a huge first-mover threat. Facebook may grow even larger, or it may be the giant that takes the arrows for the rest of us.
- Contacts and networks (5). They literally are The Social Network.
OVERALL COMPETITIVE ADVANTAGE: 4 out of 5 |
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MANAGEMENT TEAM: Who’s running this thing?
- Entrepreneurial team (5). Facebook can afford to hire the best, and they did. David Markus [etc…] These are blockchain rock stars.
- Industry/technical experience (5). In a new industry, the team has the requisite “10,000 hours of experience.” This team has already been around the block.
- Integrity (5). Excellent pedigree, no lawsuits. Squeaky clean.
OVERALL MANAGEMENT TEAM: 5 out of 5 |
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TOKEN MECHANICS: What are the crypto economics?
- Token required (5). To solve the problem of a decentralized digital currency, it really needs a token: some blockchain-based unit of value. In order for the money to move beyond Facebook, and be used across a wide variety of platforms and apps, it will require a token.
- Value added (4). The token is similar to other stablecoins (Tether, USD Coin, Dai), but it does have the advantage of being collateralized by traditional money (unlike Dai), and pegged to a basket of currencies (unlike USDC).
- Decentralized (2). The plan is to become truly decentralized, but the initial network will be run by Calibra technology partners—essentially a closed system. While this may help ensure control and integrity of the network at launch, there is a real danger it will never become truly open.
- Token supply (4):Becauseit’s backed by traditional currencies, any new tokens should hold their value (as long as the underlying currencies hold their value).
- Public exchange (5): One of the biggest challenges facing any new blockchain project is liquidity, i.e., getting listed on an exchange so you have enough buyers and sellers. By launching across Facebook and other technology partners, you instantly have global liquidity. Ideal scenario.
- MVP (1): Typically we look for a Minimum Viable Product, some kind of beta or testnet that we can see the blockchain project in action. C’mon Calibra, show us the money.
OVERALL TOKEN MECHANICS: 3.5 out of 5 |
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USER ADOPTION: How will they attract users to their blockchain?
- Technical difficulty (4): A non-technical person will probably understand Libra simply as “Facebook money” and eventually “Internet money.” Facebook has terrific product designers, who will likely be able to hide the complexity, making Libra fun and easy to use.
- Halo effect (4): While Facebook is certainly a well-known global brand, that brand has become tarnished in recent years. It’s currently fashionable to hate on Facebook, but that will fade -- for most long-term users of Libra, Facebook’s involvement will build trust, not take it away.
- Buzz (5): The most hotly-anticipated blockchain project of the decade.
OVERALL USER ADOPTION: 4 out of 5 |
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OVERALL LIBRA RATING: 4 out of 5 stars
Averaging our five categories, we give it a 4 out of 5. It has an all-star management and technical team, the backing of Facebook, and a huge network at launch. There are concerns about the token mechanics, and of course the regulatory uncertainty by governments around the world.
What’s helpful about our Blockchain Investor Scorecard is that it lets you consider all these factors, one at a time. Like a surgeon’s scalpel, it lets us quickly dissect both the good and the bad of a potential blockchain investment.
In the meantime, as I’ve said before, the quickest way to invest in Libra is simply to invest in Facebook stock. Do you believe in Zuck’s pluck? Or is this the end of the Zuck Buck? I’d love to hear your take.
Health, wealth, and happiness, |
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John Hargrave Publisher Bitcoin Market Journal |
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